What are the benefits of the euro?
The euro offers many benefits for individuals, businesses and the economies of the countries that use it. These include:
- the ease with which prices can be compared between countries, which boosts competition between businesses, thereby benefiting consumers
- price stability
- the euro makes it easier, cheaper and safer for businesses to buy and sell within the euro area and to trade with the rest of the world
- improved economic stability and growth
- better integrated and therefore more efficient financial markets
- greater influence in the global economy
- a tangible sign of a European identity.
Many of these benefits are interconnected. For example, economic stability is good for a member country’s economy, as it enables the government to plan for the future. But economic stability also benefits businesses by reducing uncertainty and encouraging investment. This, in turn, benefits the public through increased employment and better quality jobs.
How does the euro produce these benefits?
The euro has eliminated the costs of exchange rate fluctuations within the euro area. This protects consumers and businesses within the euro area from costly swings in currency markets, which, in some countries, used to undermine confidence, discourage investment and cause economic instability. Before the euro, the need to exchange currencies meant extra costs, risks and a lack of transparency in transactions between countries. Using a single currency makes doing business and investing in the euro area easier, cheaper and less risky.
By making it easy to compare prices, the euro encourages trade and investment of all kinds between countries. It also helps individual consumers and businesses to secure the best prices.
Benefits worldwide
The scale of the single currency and the size of the euro zone also bring new opportunities in the global economy. A single currency makes the euro zone a more attractive region for non-EU countries to do business with, thus promoting trade and investment.
Prudent economic management makes the euro an attractive reserve currency for non-EU countries and gives the euro zone a more powerful voice in the global economy. The euro is the world’s second most popular reserve currency.
The stability of the euro also makes it attractive for businesses around the world that trade with Europe to accept prices quoted in euros. This saves European businesses from the costs associated with shifts in exchange rates and the cost of converting euros into other currencies. The euro is the currency of choice for almost 40% of global cross-border payments and for almost half the EU’s exports worldwide.
Scale and careful management also bring economic stability to the euro zone, making it more resilient to external economic 'shocks', i.e. sudden economic changes that may arise outside the euro zone and disrupt national economies, such as worldwide oil price rises or turbulence on global currency markets. The size and strength of the euro zone make it better able to absorb such external shocks without job losses and lower growth.
Reaping the benefits
First, the euro zone economy benefits from prudent management. The EU’s economic and fiscal rules, including the Stability and Growth Pact, a central component of Economic and Monetary Union, promote economic stability and growth. Second, the euro is the key mechanism for maximising the benefits of the single market, trade policy and political cooperation. As such, it is an integral part of the economic, social and political structures of today’s European Union.
