Benefits Of Euro
Earlier days have witnessed the use of the American dollar for cross country trades all over the world. This was a cause of major problems especially for European countries who gave a sigh of relief when the Euro strengthened its position and began to be used as a currency for cross country trade. Although there are various risks, there are more benefits of using the euro as a currency some of which include:
1. Reduced cost of transaction.
The use of the Euro as a standard currency will help reduce the transaction cost associated with the exchange of currencies. This will benefit firms and tourists involved in trade within the European region. According to an estimate, this will be equivalent to about 1% of the GDP, which is a considerable saving.
2. Transparency in prices.
When the euro is a common currency, it will be a lot easier to compare the prices of various products and services in various European countries. This is because no conversions will be required for making comparisons. The firms will be able to source cheap raw material and the consumers will get cheaper goods to purchase.
3. Eliminate uncertainty.
Any kind of volatile swings in the exchange rate can wipe out profitability of exports. This results in a low business confidence of investors. When a single currency is used, business confidence gets improved, leading to improved trade and monetary growth.
4. Improved inflation performance.
The use of the Euro as a standard currency puts pressure on the ECB to maintain low levels of inflation, which is beneficial to the end customer.
5. Bright future of Euro.
With the increased use of the Euro, it can become a currency for worldwide trade.
6. Increased investment.
As firms benefit from low transactions and other related costs, there may be an increased inward investment. This would ultimately lead to the growth and development of the economy.
7. Beneficial for the financial sector.
The use of a single currency i.e. Euro all across the European Union would benefit the financial sector. This is because of the ease of conducting insurance and banking activities with a single currency.
8. Increased cross border trade.
Companies engaged in trade within the European region can work using a single currency. A firm can buy and sell, pay and being paid in a single currency i.e. Euro.
Earlier, businesses were affected by fluctuating exchange rates i.e. the foreign currency amount on any invoice might be altered in value previous to being paid. This resulted in higher export prices, or companies got discouraged regarding their exports within a single market. With the use of the Euro, this risk has been eradicated and resulted in benefits of the businesses.
With the increased use of Euro, all businesses especially in the European region have benefitted immensely. Along with this, strengthening of this currency has given a new hope of having another powerful currency in the world in the future.