Monetary Unification in Europe Essay Example | Topics and Well Written Essays - 1750 words

Monetary Unification in Europe - Essay Example Critics were so skeptical on the Europe’s idea of monetary unification claiming that Europe was not close to optimal monetary union. This idea was just a mere political project, which did not give into account economic fundamentals and was doomed to fail the single currency, and Europe’s failure to see monetary unification as an evolutionary process. Over the past few years, the Euro has tremendously challenged the US dollar, which is globally reserved currency, and within a very short period, it has transformed economic and political landscape in Europe. Monetary experiments has never been such an exciting history as there have been no any sovereign state surrendered its currency to a common central bank currency restraining from monetary sovereignty (Charles, 2010:176). Although the need to unify European currency started a long time ago, we begin to review its recent attempts to attain that goal. Prelaunch, which took place in late 1989, witnessed France extract German commitment to monetary union in favor of German reunification. The same year, Jacques Delor, filed a report introducing European Monetary unification in three stages. It comprised of creation of institutions like European System of Central Banks charged with the responsibility to formulate and implement monetary policies. The phases between 1989 and 2002 gave a name to the common currency that was to unify the European states â€Å"euro†, which replaced the old currency unit, the ecu. The institution laid down steps to accomplish monetary unification first of which was abolishing exchange controls that saw capital completely liberalized in European Economic Community on July 1, 1990. On 7 February 1992, leaders from different European countries signed the Maastricht Treaty with the aim of creating a single common currency but without United Kingdom participating by January 1999. Having the treaty approved proved a challenge since countries such as Germany, France, and Denmark were reluctant (Evgeny, 159). Another attempt derived from Stage II of Delor’s report that led to the creation of European Monetary Institute in 1994 that replaced European Monetary Cooperation Fund with Alexander Lamfalussy as the first president. After sometime, there rose a pool of disagreements that led to adoption of euro as new currency on December 1995 doing away with the name ecu previously used as the accounting currency. Theo Wagel suggested the name. He was by then the German’s finance minister. Date 1 January 1999 was set for the launch of the currency name. With the launch of euro in the European Union, credit institutions were able to process real-time payments. This supposedly helped in serving monetary policy needs of Euro system as well as harmonizing business practices in the EU and promoting money market integration(Gertrude and Peter, 2003:13). Owing to the total number of states, the Euro bloc designed and produced new 7.4 billion notes and 38.2 billion coins for issuance to consumers and business operators on 1 January 2002. This attempt displayed some obsolete results with tasks set to educate European people on the new currency and finally on 15 December 2001 banks commenced exchanging euro starter kits. As a matter of encouraging continuous effectiveness and integration of European currency, banks all over Euro zone, offered same high quality services, interfaces, and single price structure irrespective of their location. Such policies facilitated unification of currency across Europe as banks and other financial institutions operate under similar conditions. In the wake of