For and against membership of the Euro
A* analysis and evaluation
For membership of the euro:
Exchanges rates are not expected to fluctuate dramatically. Trade and investment increase, as there is reduced
exchange rate uncertainty. Businesses trying to plan for the future find it easier to make accurate predictions
about what their likely costs and revenues will be. The level of risk and returns on investment becomes easier to
assess, increasing the levels of investment. High business confidence is extremely beneficial for countries in the
Eurozone as international competitiveness will increase with better planning tools for investment…………
Continued on next page
, For membership of the euro:
Exchanges rates are not expected to fluctuate dramatically. Trade and investment increase, as there is reduced
exchange rate uncertainty. Businesses trying to plan for the future find it easier to make accurate predictions
about what their likely costs and revenues will be. The level of risk and returns on investment becomes easier to
assess, increasing the levels of investment. High business confidence is extremely beneficial for countries in the
Eurozone as international competitiveness will increase with better planning tools for investment. Exporters and
importers have greater confidence in the long term value of the exchange rate- this certainty increases the
volume of trade. foreign firms are also attracted by stable exchange rate, acting as an incentive to invest abroad
(FDI) with more certainty over their costs and potential revenues from export sales. The consequence of all three
impacts is increased actual and potential growth for the economy
Falling transaction costs mean fewer barriers to trade, which should increase competition and reduce prices.
Eliminating exchange-rate uncertainty will spur still more trade; it may also lower interest rates, therefore
making it cheaper to borrow to finance new investment. In the European case, the benefits may be greater still
because when each country had its own currency, speculative pressures heightened the risk of costly exchange-
rate movements
Both consumers and firms are able to make significant savings in the cost of transaction, leading to the
development of larger markets for goods and services as a result of not having to convert currencies. Being part
of a larger single market with the same currency will facilitate more trade, domestic investment and foreign
investment as the cost savings are substantial. For consumers in the Eurozone countries, their living standards
will dramatically increase, being able to travel without the cost of converting currencies and being able to import
without currency conversion costs.
A common currency, which has great credibility with it being used to in a larger currency zone, should be more
stable against speculation than individual, independent currencies. This once more facilitates trade, domestic
investment and foreign direct investment.
A common currency makes price more obvious to compare between countries where prices equalise across
borders over time. This is because being part of a greater market all with the same currency will force intense
competition as companies cannot confuse consumers by charging different currencies. Consequently, consumers
will benefit from lower prices, higher consumer surplus and a greater choice.
A* analysis and evaluation
For membership of the euro:
Exchanges rates are not expected to fluctuate dramatically. Trade and investment increase, as there is reduced
exchange rate uncertainty. Businesses trying to plan for the future find it easier to make accurate predictions
about what their likely costs and revenues will be. The level of risk and returns on investment becomes easier to
assess, increasing the levels of investment. High business confidence is extremely beneficial for countries in the
Eurozone as international competitiveness will increase with better planning tools for investment…………
Continued on next page
, For membership of the euro:
Exchanges rates are not expected to fluctuate dramatically. Trade and investment increase, as there is reduced
exchange rate uncertainty. Businesses trying to plan for the future find it easier to make accurate predictions
about what their likely costs and revenues will be. The level of risk and returns on investment becomes easier to
assess, increasing the levels of investment. High business confidence is extremely beneficial for countries in the
Eurozone as international competitiveness will increase with better planning tools for investment. Exporters and
importers have greater confidence in the long term value of the exchange rate- this certainty increases the
volume of trade. foreign firms are also attracted by stable exchange rate, acting as an incentive to invest abroad
(FDI) with more certainty over their costs and potential revenues from export sales. The consequence of all three
impacts is increased actual and potential growth for the economy
Falling transaction costs mean fewer barriers to trade, which should increase competition and reduce prices.
Eliminating exchange-rate uncertainty will spur still more trade; it may also lower interest rates, therefore
making it cheaper to borrow to finance new investment. In the European case, the benefits may be greater still
because when each country had its own currency, speculative pressures heightened the risk of costly exchange-
rate movements
Both consumers and firms are able to make significant savings in the cost of transaction, leading to the
development of larger markets for goods and services as a result of not having to convert currencies. Being part
of a larger single market with the same currency will facilitate more trade, domestic investment and foreign
investment as the cost savings are substantial. For consumers in the Eurozone countries, their living standards
will dramatically increase, being able to travel without the cost of converting currencies and being able to import
without currency conversion costs.
A common currency, which has great credibility with it being used to in a larger currency zone, should be more
stable against speculation than individual, independent currencies. This once more facilitates trade, domestic
investment and foreign direct investment.
A common currency makes price more obvious to compare between countries where prices equalise across
borders over time. This is because being part of a greater market all with the same currency will force intense
competition as companies cannot confuse consumers by charging different currencies. Consequently, consumers
will benefit from lower prices, higher consumer surplus and a greater choice.
