The National Directory of Certified Public Accountants

Ask A CPA - Investments & Financial Planning

Will The Euro Currency Effect My Travel To Europe Plans ?

In 1999, 11 European countries qualified under the convergence criteria to use the Euro as their currency: Austria, Cyprus, Belgium, Finland, Germany, France, Ireland, Luxembourg, Italy, Portugal, Spain and the Netherlands. Cyprus, Greece, Slovenia, Malta and Slovakia were later admitted, bringing the total countries to 16. Some countries like Turkey and Romania have expressed a desire to join the EU but have not yet met the criteria to join. Notable holdouts include the Scandinavian countries like Norway, Denmark and Sweden, in addition to England. Though these countries are members of the European Union, they have opted out of using the euro as their standard currency. Some countries, like Montenegro, are permitted to use the euro as their currency but have no representation in the European Union. A key strength of the euro is currency stability. Businesses no longer face risk from currency exchange rates and tourists no longer pay the price of currency conversion. Rising costs (inflation) are kept at bay because countries must maintain a low inflation rate in order to join. Furthermore, because the euro inextricably links the economies of its members, the currency provides a disincentive for countries to go to war with the other. Euro-using countries are unable to set their own monetary policy and instead must abide by the policies outlined by the European Central Bank. This lack of autonomy creates difficulties when countries experience an economic downturn. A specific country, such as Greece, is unable to devalue its currency to keep prices stable and increase exports to raise money. This highlights another weakness; the economic troubles of one country become the economic troubles of all euro members. Not all countries will agree on how to handle these problems either. During the Greek debt crisis of 2010, Germany (regarded as one of the strongest economies in Europe) had very different ideas than Greek leaders on how to extricate Greece from its debt.

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