The euro is a single currency, the introduction of which was provided for by the Maastricht Treaty establishing the European Union as a single economic zone. The introduction of the euro is associated with various reasons, some of which are economic, others are political.
Consolidation of the region
One of the main reasons for the introduction of the euro was the consolidation of the entire European region. If you look at the world economy from the point of view of its centers, you can see that these are North America (USA and Canada), the Far East (Japan, China and several other countries) and Western Europe (European Union). The presence of a single currency is a very powerful tool for uniting the industrial capacities of the country, and it is also a lever in the competition with other economic regions.
Transaction costs
With the introduction of the European Union, it was decided to remove most of the obstacles to the free economic development of Europe as a region. The European Union should mean freedom of movement of people, goods and capital, which would be impossible with constant transfers from one currency to another. In addition, transactions would inevitably be executed with losses, which would lead to a slowdown in the economic development of all Western European countries.
Eliminate market segmentation
Many goods in European countries before the introduction of the euro area varied greatly in value. This was especially noticeable in the example of some food products, alcohol and tobacco products and banking services. With the introduction of the euro zone, prices, although not completely, nevertheless leveled off quite strongly, since national currencies no longer serve as an obstacle to the free movement of goods between countries. Additionally, there is now no barrier to entry for many businesses: the single euro area has removed this barrier.
Fighting inflation
In the recent past, there were 11 central banks in Europe that worked together to fight inflation, each with its own interest. Now there is the Central Bank, which is pursuing a unified policy. The introduction of the euro not only simplified the banking system and made the financial situation more secure, but also reduced the need for European countries in foreign exchange reserves.
Reserve world currency
In terms of its economic potential, none of the national currencies of European countries could match the Western European region, therefore it could not act as a world currency either. Before the introduction of the euro, the world economy was dominated by the US dollar. Currently, the countries of Europe have created their own currency space, which allows them to influence this situation, since the euro is now a major player in this field. This leads to greater stability not only of the economic system of Europe, but of the whole world, since the financial system has become bipolar.
