Background of the issue
A currency union is also abbreviation as a “monetary union”. Two or more groups of countries share a common currency or decide to fix their exchange rate to keep the value of the currency at a certain level called currency union. One of the main goals of forming a currency union is to manage and synchronize each country’s monetary policy.
Currency unions have usually been implemented within the past with the objective of facilitating trade and fortifying economies, whereas conjointly serving to unify antecedent divided states. In the 19 century, the former customs union of Germany helped to consociate the varying states of the German Confederation with the aim of accelerating trade. From 1818 onwards, additional states afterwards joined, initiating a series of action to standardize the value of coins that used in the area. The system was a success and helped secure Germany’s political unification in 1871, followed by the creation of the Reichsbank in 1876 and the national currency the Reichsmark.
Correspondingly, in 1865, France initiated the Latin Monetary Union, which incorporated France, Belgium, Greece, Italy, and Switzerland. The legal tender were made by gold and silver coin , and both of the coins were standardized. The coins were freely changed across boarders to extend the trade. In the 1920s , it was disbanded because of the stresses of war and economic hardships and other political. Other historical currency unions include the Scandinavian Monetary Union of the 1870s based on a common gold currency, and also the ultimate adoption of a national currency by the United States in 1863.
The European currency union in its modern-day shape may be traced thru diverse monetary unification strategies in the course of the latter half of the 20th century. The Bretton Woods settlement, followed with the aid of Europe in 1944, focused on a hard and fast exchange charge policy to save you the wild market speculations that induced the super depression. various other agreements bolstered in addition European monetary team spirit such as the 1951 Treaty of Paris establishing the EU metallic and Coal network (ECSC), later consolidated into the European economic network (EEC) in 1958. However, the worldwide monetary hardships of the 1970s averted similarly European economic integration until efforts were undertaken within the late 1980s.
The eventual formation of the present day European economic and Money Union (EMU) become made possible via the signing of the 1992 Maastricht Treaty. In 1998, the European Central Bank(ECB) was created and the member states built the fixed conversion and exchange rates between them. The utilization of European currency named euro was administered by 12 member states of the EU in2002.
Nowadays, there are in excess of twenty authority cash associations. The most-applied being the euro, that’s used by 19 of the 28 people from the European Union; the U.S and dollar, that is the legit money inside the U.S., Puerto Rico, El Salvador and numerous others; and the Swiss franc that is official in Switzerland and Lichtenstein.