Currency: The Eurozone

The Eurozone has brought an amount of benefits to the countries that have joined it.It is however significant that several of the most prosperous countries have not joined.There are both advantages and disadvantages to the issue, especially as they relate to other regions in the world.In Africa, for example, a central currency has been introduced by the French government.Below is an exploration of the issues, ending with a speculation revolving around whether it is feasible for Southern Africa to adopt a common currency.
According to Vladimir Pikora, the main advantage of the Eurozone is related to the currency risk.Exporters are attracted to Eurozone countries because the common currency mitigates financial losses resulting from changing exchange rates.Pikora however points out that this advantage extends only to Eurozone exporters and traders, while a substantial amount of foreign trade will still mainly occur in the U.S. Dollar currency.This means that currency risk is still an issue.
Further advantages of the Eurozone, as indicated by Pikora relate to the reduced cost of transactions for persons not necessarily involved in business.Persons can for example save on currency exchanges when traveling in the Eurozone.It is also more convenient to travel within a number of different countries without the inconvenience of having to exchange the currency when crossing a border.
The disadvantages mentioned by Pikora occur on a wider scale.Adopting a common currency eliminates domestic monetary policy.This means that interest rates for the entire zone are set by the single controlling entity of the Eurozone, the European Central Bank.This is regardless of individual countries' economic conditions.In this way, varying individual economic situations in the countries create an imbalance in the effect of the single interest rate created for the Eurozone.This is because the economic needs of the whole Eu…

Leave a Reply

Your email address will not be published. Required fields are marked *