Page 284 - Failure to Triumph - Journey of A Student

On January 1, 1999, the Euro, the new single currency to be used by eleven EU members was
launched. Countries launching the Euro formed the European Monetary Union (EMU) as a step toward
greater political unity.

Advantages of single currency

Cuts Transaction Costs. The need for a single currency is felt because of transaction costs –

the price of changing from one currency to another – are a burden to European business.

Can stand up to International Currency Speculators. Experts feel that Europe needs the
strength to stand up to international currency speculators and stop them from blowing
economic policies off course.

Can Reduce Fluctuations in Currency Rates. A single currency would also reduce
fluctuations in exchange rates between EU members. Thus, to run efficiently, a single
market needs a single currency.

Risks of having a single currency

No Exchange Rate Protection. The major risk from having a single currency is that member
States will have no exchange rate protection from external shocks. It is feared that wealth

would drain away from the periphery towards the European centre.

Can Increase Unemployment. This could drive up unemployment in the weaker members of
the Union, especially as labour mobility in the EU is low.

European Union constitution

First-ever EU constitution signed. On October 29, 2004, the European Union constitution
was signed by the member nations in Rome. The treaty was the result of 28 months of
acrimonious debate between the 25 EU governments on January 12, 2005.

The EU constitution does not replace national constitutions; it coexists with them having its

own autonomy and sphere of jurisdiction.

The EU constitution is to a large extent a consolidation of existing national laws.

The 460-article constitution streamlines EU decision-making by dropping national vetoes in
such areas as justice and immigration and gives more power to the European Parliament.

The constitution creates a long-term President and Foreign Minister to represent the EU on