Question

In: Finance

What are the advantage of being in the EU and adopting the euro? What are the...

What are the advantage of being in the EU and adopting the euro? What are the chief drawbacks ? Why didn’t some countries like England, Switzerland adopted euro?

Solutions

Expert Solution

Euro is a form of currency that is shared by 19 member countries of the euro zone. It is the second widely used currency after US dollars in foreign exchange trading.

Advantages adopting the Euro

Countries being in the EU and adopting the euro have several advantages. Poor countries among these are backed by the countries like Germany and France and enjoys the lower interest rates. As lower interest rates attracts more investments, thus it boosts up the economy of these poor countries.

Developed countries could benefit from economies of scale by producing goods at low cost and exporting it to less developed countries at low cost.

Competitive advantage to developed countries also benefit them as euro supports in their business expansion .

Drawbacks

Drawback of adopting the Euro is that that country has no power to print their currency and controlling the inflation and money supply.

Some countries like England and Switzerland didn't adopted euro as they don't want to loose power of controlling the monetary policies, curbing inflation, handling national debt, devaluating the currency in certain circumstances etc. These criteria refrain these countries from adopting Euro.


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