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The EU
Definition:
An economic and political association of
certain European countries with internal
free trade and common external tariffs.…read more

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Benefits of Joining the EU
Export potentials; commercial opportunities from
enlarging the internal market.
Exploitation of economies of scale from
supplying to a bigger market.
Increased FDI; can lead to job creation.
Free trade; access to higher income consumers from
more advanced EU members.
More diverse European labour market.
Access to EU funding for development
schemes.
Cleaner environment; as they will have to comply
to EU environment schemes such as the EU
Emissions Trading Scheme.…read more

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Benefits of Joining the Euro
Stability:
Easier for exporters to plan investment (I increases) also
encourages trade between countries so further economies
of scale.
Price Transparency:
Convenience gains for consumer as they can easily
compare prices from one member state to another.
Encourage competitiveness as firms are unable to hide
behind a changing exchange rate, this should force prices
down with will benefit the consumer.
Transaction Cost:
No need to pay transaction cost when changin currency.
No need to hedge against large currency changes, no
need to keep reserves of money.…read more

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Costs of Joining the Euro
Loss of control of Monetary levers.
Menu cost of changing prices within the
economy to the new currency (Euro).
Job losses within the foreign exchange
department.
If a country within the Euro was to get
into trouble this would have a knock on
effect to the rest of the member states.…read more

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Convergence Criteria
Inflation Rate:
No more than 1.5% than the average of the 3 best
performing members states of the EU.
Annual Government Deficit:
Budget deficit must not exceed 3% of GDP at the end of
the fiscal year.
Government Debt:
Must not exceed 60% of GDP.
Exchange Rate:
Need to have successfully been within the ERM II for 2
consecutive years without devaluation of currency.
Long-Term Interest Rates:
Average yeild of government bonds must not exceed 2%
bond yields of the 3 lowest inflation member states.…read more

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