In 1986, the Single European Act consolidated the principles of external cooperation and extended the Community`s powers over members. The law also formalized the idea of a European single market. By appointment, the different currencies of the EMU countries will continue to circulate until 2002, but during this transition, each currency will have a fixed value against the euro – and thus the currency of each of the other EMU members. Thus, in addition to its monetary power, each participating nation has given up its ability to influence the value of its country`s foreign exchange currency. (However, the value of the euro`s currencies may vary relative to other currencies. To take advantage of the benefits of closer economic integration, eleven European countries formed the Economic and Monetary Union (EMU) and began using a common currency, the euro, on 1 January 1999. At the same time, each country has ceded its ability to conduct its own monetary policy vis-à-vis the Frankfurt-based European Central Bank (ECB), which is currently pursuing monetary policy for EMU. The ECB`s primary objective is to “maintain price stability” and the Bank is advised of “guidance from … any government of a Member State or other body. The Maastricht Treaty came into force on 1 November 1993 and the European Union (EU) replaced the EC.
The treaty created the euro, which is supposed to be the single currency for the EU. The euro made its debut on 1 January 1999. Denmark and the United Kingdom were negotiating opt-out provisions allowing them to keep their own currency. Impact on the United StatesThe creation of an economic entity that competes with the U.S. economy creates challenges and opportunities for the United States. For example, the euro could pose a challenge to the U.S. dollar`s position as a global exchange rate vehicle and “value reserve.” (While the United States accounts for about a quarter of world production and about one-fifth of world trade, the dollar accounts for more than 80% of foreign exchange transactions and accounts for about 60% of the world`s reserves. A decline in global demand for the dollar could, if this were to occur, reduce the value of the dollar`s currencies, which would drive up import prices in the United States. However, a country`s economic success depends much more on other factors that determine the country`s ability to provide a high standard of living for its citizens than on the use of the country`s currency in international transactions.
As the euro promotes European economic growth and a more efficient international monetary system, all countries – including the United States – will benefit from increased demand and a stronger trading partner. Several cycles of interest rate cuts and stimulus have failed to solve the problem. Northern countries such as Germany and the Netherlands are increasingly dissatisfied with financial outflows from the South. Repeated rumours that Greece would be forced to withdraw from the euro have not failed amid differences of opinion on whether this measure is legally possible, as it is not regulated by the Maastricht Treaty. much of the continent is decimated. The European Single Market was created in 1993 by 12 countries to guarantee the four freedoms: the movement of goods, services, people and money. The research supporting this chapter was carried out by the European Research Council (ERC) as part of the European Union`s Horizon 2020 research and innovation programme (Grant Agreement 2020).