Nemanja Lojanica

The Global financial crisis and its impact on the EMU states- euro winners and euro losers

 

Nemanja Lojanica, Master student, Faculty of Economics University of Kragujevac

nemanjalojanica@yahoo.com , Preferred panel: The crisis of Europe

 

When the debt crisis threatens to push into recession the richest euro-zone members, the euro is a tangible symbol of great political and economic uncertainty. The aims of forming the European Monetary Union include: creating a more competitive European economy, increasing economic growth and reducing the impact of the dollar and U.S. economy in Europe. Twelve Member States (now there are 17) decided to take part in the European experiment, expecting an increase in economic growth, improvement of market efficiency, price stability, and public finances, the elimination of the uncertainty of exchange rate changes, and exchange rate stability, etc…

The tenth birthday of the euro is marked in low spirits since Europe is dealing with the greatest crisis since its introduction and the biggest drop against the dollar is recorded.  Analysts predict that possible outcomes of the crisis are either the establishment of the monetary union or the collapse of the euro zone. It has been proved during the crisis that the joint currency has many shortcomings and it seems to the critics that euphoria surrounding its introduction was excessive. The political and financial elite, on the other hand, thinks that the introduction of the euro was beneficial for everyone.

During ten years of the preparation for entering the major European monetary “family” all countries have consistently performed cost-benefit analysis, comparing all the advantages and disadvantages of the monetary union. Since the EMU is a unique creation, a theoretical analysis of the effects of monetary integration could not accurately project all the potential effects of the EMU functioning and the advantages and disadvantages for the Member States. Consequently, the necessity of analyzing the EMU functioning during these 12 years arises.