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The Impact of the Euro on the Global Economy

Currently, the euro is ranked second in the list of widely used currencies. According to the European Central Bank (2018), the value of the euro continues to increase as the European economy progresses or improves. Nonetheless, granted the weight associated with the euro area within the global economy along with the legacy associated with the previous national currencies that have been substituted by euro, it is not surprising that the euro is ranked second in terms of the widely employed currency internationally (European Central Bank, 2018). This paper discusses the impact of the euro on international economy. The areas covered are comparison of the strength of the euro against that of the dollar, present economic status of nations that adopted the euro, and Europeans countries that formerly were opposed to the euro movement, but are currently having second thoughts.

The euro continues to be stronger relative to the dollar. For instance, as at January 1, 2018, the value of one euro was worth $1.20, which implied that a single euro could purchase extra 20 cents in services and goods relative to what a single dollar could (Amadeo, 2018).  According Monfort (2018), the higher strength of the euro relative to the dollar is anticipated to continue throughout the whole of 2018. When it comes to the economic status of nations using the euro, money market within the euro area is highly liquid and integrated (European Central Bank, 2018). These nations are associated with significantly higher volumes of trading, which in turn have resulted into the spreads of lower bid-ask for extremely short-term maturities (European Central Bank, 2018). Moreover, the euro continues to increase competition within the sector of banking, which has resulted into the strengthening of the prevailing securitisation trends. European Central Bank (2018) asserts that financial instruments, which are securitized, poses significant ease of trade within the global market. Unprecedented magnitude of acquisitions and mergers within the euro using nations is also facilitating the establishment of an enormous domestic market commercial bonds.

Despite the higher strength of the euro relative to other currencies across the globe and significant benefits that nations which have embraced this currency experience, certain nations continue to experience problems even after adopting the euro. According to the Guardian (2018). Italy has been registering a dismal economic performance since the launch of the euro. For instance, in 2016, Italy’s real Gross Domestic Product (GDP) was equating to its value in 2001, thereby signifying a significant stagnation (The Guardian, 2018). Nevertheless, countries such as Croatia, Bulgaria, Poland, Sweden, Romania, Hungary, and Czech Republic, which formerly were opposed to embracing the euro, are planning to adopt this currency as their standard (Euro News, 2017). These nations are beginning to consider embracing the euro a profitable venture. For instance, Croatia’s national bank governor, Boris Vujcic is on record for admitting that euro cannot be ignored (Euro News, 2017). Having a GDP amounting to 4.7 billion dollars along with an economy that registers rapid growth, Croatia still possess its currency, the Kuna, but is expected to join the Eurozone.

In conclusion, the euro continues to dominate the global market and impact the international economy in a positive manner. When measured against the dollar, the euro continues to be stronger and its strength is projected to rise in the coming years. The positive impact of Europe on the global economy has seen nations such as Croatia, Poland, Bulgaria, and Hungary among others, which were previously opposed to adopting the euro, developing interest in this currency. However, other nations such as Italy still continue to experience economic challenges even after adopting the euro. In general, nations that employ the euro as their standard currency continue to register positive economic performance.