The Euro Dollar:Past, Present, Future
...e introduction of the euro as a single currency. (European Currency Unit, 2005) The euro was officially dubbed as the form of currency for eleven European countries on January 1, 1999. Greece would later become the twelfth state to adopt the euro as its official unit of monetary exchange.(Euro,2005) However, the roots of the euro's inception can be traced nearly fifty years back to World War II. This war served as a vehicle for the creation of current European Union. Before this war, the idea of political and economic was already alive in the minds of many European visionaries, but it wasn't until after World War II that steps were taken to make this dream a reality. Battered and divided by the effects of this war, Europe began to realize that integration might be a key step in the reconstruction of their dismantled continent. After losing the influence that they had before the war, the countries of Europe frantically sought a solution for regaining that confidence and to find their place among the remaining two great powers of the world, the Soviet Union and the United States of America. (Soto, 1999) After its inception, the euro's exchange rate against other currencies saw a steady decrease. One example is the exchange rate against the US dollar. (see table 2) In 1999, the year the euro was created, it was worth $1.18. One year later in 2000 its worth fell below $0.85 and fell again in the following year. The matter improved in 2002, mainly as a result of corporate scandals that were taking place in the United States. The two currencies saw equivalence on July 15, 2002 and by the end of that year the euro had climbed to $1.04. Today, the euro's exchange rate versus the American dollar is steadily rising. Many economists expect for the euro to continue to gain strength against the dollar and it is predicted that by the end of this year it was be worth $1.60. (Euro, 2005) Today the euro has several currencies attached to it. (see table 1) Some of these currencies have fluctuation bands around a central rate while others do not. The reason for this is twofold. First of all, it allows for the facilitation of the hopeful introduction of the euro in cash form. Secondly it is a safety precaution for areas with weak economies ad the collapse of the euro would mean the collapse of those economies. (Currencies related to the euro, 2005) There are several pros the manifestation of the euro. For example, the elimination of exchange rates between European countries eliminates the risks of unanticipated exchange rate reassessments or devaluations. It also relieves the stress of transaction costs as having a single currency cuts the cost of converting one into another. This is a pro for tourists as well as businesses. Another pro is that by being able to directly compare prices and wages, competition will be increased across Europe. This increase leads to lower prices for consumers and more opportunities for businesses to invest. Another underlying pro to the use of the euro is that a single European currency will strengthen European identity. The euro is also one of the stronges...