EUROPEAN MONETARY UNION

European Monetary Union

European Monetary Union

Introduction

In order to develop a single currency system for a number of countries in the Europe region was a big task. The Eurozone went into the crisis after making a single currency for the whole region but this policy failed and led to bankruptcy of many countries. The step that was taken during 1992-1993 was once again taken in the 2000 which proved the same result as no learning was adapted by the authorities from the previous crisis. The report will have a detail look at the history of the European monetary crisis that came many years back, how does the European Economic system works, what are the lessons that can be learned today in order to overcome the financial crisis faced by many of the European countries in the region. The graphical representation will show the effect of crisis in countries like Spain, Ireland and Portugal.

According to Rodriguez (et al., 2008) in the 1970s the decline of the Breton Wood System created disturbances and differences in the financial markets which led many of the European countries in the region to develop a stable monetary economic systemfor the whole region. The first thing these countries created was called the European Community or European Cooperation which was termed as Snake but later in 1979 they founded a European Monetary System (EMS) which played its part in controlling the exchange rate system. Another component of this system was the European Currency Unit in which an artificial unit of account was maintained in which no medium of exchange use to be carried and there were no coins or currencies used to carry on the transaction. It was just an account where a fixed number of European currencies were regulated. The European Monetary system was developed in order to achieve three main aims for Europe: the first aim of this system was to enhance the significance of the Europe region in the whole world and gave the European countries to control their monetary systems themselves rather than relying on the other countries of the world. The second aim of EMS was to make the whole Europe united by eliminating all the barriers of trade, movement of the capital and the fixed exchange rate helped the flow of goods between the countries easy. The third aim of the European Monetary System was to develop a Common Agricultural Policy so that improvements can also take place in the agricultural sector by setting a similar price of agricultural products all over the Europe.

Discussion

The thesis of the report will provide analysis of the financial crisis that raised several years ago and what was the outcome of theses crisis. It will also provide an analysis that does the lessons were learned by the EMU from the EMS crisis and it will also draft the lessons that are learned by EMU from the current debt crisis. The crisis faced during 1992-1993 led to the creation of EMU due to Germany's exist and according too many ...