Advantages and disadvantages of the European Monetary Union

Abstract

The aim of this paper is to review the European Monetary Union’s history and development and to describe its advantages and disadvantages. I chose this topic because the EMU is one of the highest levels of integration forms and still unique in history. The member states adopted a single currency, the Euro, a single monetary policy, and coordinated their macroeconomic policies. Due to this high integration, the Euro may yet become a rival for the U.S. dollar. The size of the EMU’s geographical area is vast and still expanding. As it spreads, the Euro becomes a more and more relevant currency for international trade, causing a big change in the world’s economy. Aside from projecting the Euro's spread, I analyze the special convergence criteria that must be observed by its member states, demonstrating why these criteria are inadequate and why they are so difficult to observe for some countries. It is important to understand the issues facing the Euro and the countries that use or are considering using it as more and more economists discuss the advantages and disadvantages of the European Monetary Union. Many arguments exist for the EMU and many exist against it. Since Hungary, my home country is an EU member state and we intend to join the EMU--although the accession date was postponed several times because our economic indicators did not meet the criteria of the EMU--it is important for us to be knowledgeable about the current situation. Keywords: European Monetary Union, currency, monetary policy