Eurozone Integration - Performance and Risk to the National Economies

• Author: Adrian Petre
• Pages: 505-511

Performance and Risks in the European Economy

505

Eurozone Integration - Performance

and Risk to the National Economies

Adrian Petre1

Abstract: Given the theoretical basis of achieving monetary union and the legal framework of euro adoption,

this paper aims to analyze the advantages and disadvantages arising from the adoption of the single European

currency - Euro, and the implications of the single currency on individuals and businesses. Also, in this paper

we highlighted the situation of Romania regarding the in troduction of the single currency and its implications

on the Romanian economy.

Keywords: euro adoption; economic risk; euro effects

JEL Classification: O110

Introduction

Euro is the best candidate for the role of the single currency and can not be replaced with any other

currency whatever the short-term benefits would be. Euro will be especially a credible competitor for

the dollar money market. The creation of euros could accelerate tilting movement of the dollar to the

euro in the long term and gradually. Nearly three years after its launch, the euro has become the

second most widely used currency after the dollar. This situation reflects the legacy of the old

currencies of euro area countries, which were replaced by euros and results also from the economic

weight of the eurozone in the world economy. The deepending of euro internationally is intended to

serve to deepen cooperation based on proximity and convergence in foreign policies of key partners

worldwide.

The Risks and Implications of Euro Adoption

Changeover involves a number of risks, among which the most important results from the persisting

disparities between countries in the budgetary, fiscal and social protection. Besides taking

harmonization measures, countries that have adopted a single currency will be characterized by

dangerous fiscal and social competition to attract investors that would result in loss of jobs in one

country or another. Harmonisation is required also because, once the switch to the single currency,

countries will not be able, as hitherto, to resort to competitive devaluation to boost exports or to

1 Faculty of Theoretical and Applied Economics, Academy of Economic Studies Bucharest, Romania, Address: Piaa

Romană 6, Bucharest 010374, Romania, Tel.: +4021 319 1900, Corresponding author: adrian.petre21@gmail.com.