The EMU will generate unparalleled benefits for ‘Euroland’ firms, however the implications for other business communities within Europe are complex. The effect of the EMU on the ‘non-Eurozone’ nations of Europe can be viewed from 2 perspectives; that of those countries who have chosen not to join the EMU and those who are seeking ascension into the EMU. The United Kingdom’s absence from the EMU has been a well-publicized and highly debated topic in Britain (BBC, 1998). The UK and Denmark exercised an ‘opt-out’ from the EMU, citing the need to make an independent decision on the ascension issue (Harris, 1999: 91). Each country possesses the economic stability and prosperity to meet the Maastricht Convergence Criteria, however at the deadline for membership in 1998, they felt their economies were not ready for the dynamic and challenging nature of the EMU (Europa Quest (2), 2001). Many feel that is imperative to the success of the organization that the UK join, as they will be required to counter-balance the inevitable attempts to dominate by France and Germany (Princeton Economics, 1998). The reluctance of the UK to adopt the Euro will undoubtedly have ramifications for the British economy, particularly manifesting itself in the form of intense currency pressure. To avoid exchange rate fluctuations, the UK’s central monetary authority will need to impose a very strong financial policy. These currency fluctuations and tight monetary policy are likely to expose UK firms to greater exchange rate risk and higher borrowing costs respectively (Europa Quest (2), 2001). The maintenance of the pound as a national currency will also limit UK firm’s ability to accrue the efficiency gains through intra-community competition, which their Euroland counterparts will experience, thus they will not be able to compete as successfully in international trade (Princeton economic, 1998). Alternatively, the reluctance of the UK to embrace full economic integration into Europe, may prove to be a highly successful protectionist measure of UK firms, should the Euro not produce the economic gains expected (BBC, 1998). Most other European nations seeking ascension into the EMU, are countries generally perceived to have less developed economies (Europa Quest (1), 2001). Detailed negotiations are currently taking place over the possible membership of Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic, Slovenia, Cyprus, Malta and Turkey (IMF, 2000). It is important to note, that prior to the development of the EMU many of these nations pegged their currencies to either the Deustchemark or the Franc, moreover they will now irrevocably fix their exchange rate to the Euro (Europa Quest (3), 2001). This infers any large fluctuations in the Euro, will have dire consequences for these developing economies (Per Jacobson, 1999). The goal of European Union ascension has become the key driving force behind the massive adjustment and reform efforts in these countries. Should these LDC’s be successful with their EU endeavors, the prospects of subsequent currency integration seems high, ensuring that such economies may well achieve future economic stability and prosperity (IMF, 2000). It is essential to remember that entry into the EMU is an awesome task for most of these countries. Moreover it is questionable whether firms will truly benefit from the net gains of ascension, whether the strict convergence criteria is to ambitious and whether adhering to the Maastricht timetable is too greater pressure for the business community to bear (IMF, 2000). EMU members will also need to provide a strong commitment to upholding the inherent values of the monetary union, when negotiating ascension. That is, countries seeking membership within the EMU should makes guarantees of democracy, the rule of law, human rights and protection of minorities as minimum requirements to entry, which would exclude many prospective countries from joining ‘Euroland’.
This essay has endeavored to demonstrate the fundamental economic gains likely to be experienced by the ‘Euroland’ business community with the development of the EMU. Improvements in domestic firm’s efficiency, increases international competitiveness, reduced foreign exchange risks, access to larger financial markets and the utilization of strategic alliances and joint ventures are likely to occur under the EMU framework and accrue considerable benefits to ‘Euroland’ firms. The cost of implementing the EMU to member states business communities are substantial, including the financial expenditures involved in making business communities ‘euro-ready’, contractual problems, loss of fiscal and monetary autonomy and excessive scrutiny of business practices. Whilst the implementation of the EMU will remain somewhat of a contentious issue, it is abundantly apparent that ‘Eurozone’ firms will derive a net benefits from the application of this monetary union. Moreover, the long and involved process of implementing the EMU policy framework has perhaps ensured a more efficient model of economic integration has finally been developed.
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