short essay on SAARC

The South Asian Association for Regional Cooperation (SAARC) is an economic and political organisation of eight countries in Southern Asia. In terms of population, its sphere of influence is the largest of any regional organisation: almost 1.5 billion people, the combined population of its member states. It was established on December 8, 1985 by India, Pakistan, Bangladesh, Sri Lanka, Nepal, Maldives and Bhutan. In April 2007, at the Association's 14th summit, Afghanistan became its eighth member. In the late 1970s, Bangladeshi President Ziaur Rahman proposed the creation of a trade bloc consisting of South Asian countries. The idea of regional cooperation in South Asia was again mooted in May 1980. The foreign secretaries of the seven countries met for the first time in Colombo in April 1981. The Committee of the Whole, which met in Colombo in August 1981, identified five broad areas for regional cooperation. New areas of cooperation were added in the following years. The objectives of the Association as defined in the Charter are to promote the welfare of the peoples of South Asia and to improve their quality of life:to accelerate economic growth, social progress and cultural development in the region and to provide all individuals the opportunity to live in dignity and to realise their full potential; to promote and strengthen collective self-reliance among the countries of South Asia; to contribute to mutual trust, understanding and appreciation of one another's problems; to promote active collaboration and mutual assistance in the economic, social, cultural, technical and scientific fields; to strengthen cooperation with other developing countries; to strengthen cooperation among themselves in international forums on matters of common interest; and to cooperate with international and regional organisations with similar aims and puiposes. The Declaration on South Asian Regional Cooperation was adopted by the Foreign Ministers in 1983 in New Delhi. During the meeting, the Ministers also launched the Integrated Programme of Action (IPA) in nine agreed areas, namely, Agriculture; Rural Development; Telecommunications; Meteorology; Health and Population Activities; Transport Postal Services Science and Technology; and Sports, Arts and Culture. The South Asian Association for Regional Cooperation (SAARC) was established when its Charter was formally adopted on 8 December 1985 by the Heads of State or Government of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. Afghanistan was added to the regional grouping at the behest of India on November 13, 2005, and became a member on April 3,2007. With the addition of Afghanistan, the total number of member states were raised to eight (8). In April 2006, the United States of America and South Korea made formal requests to be granted observer status. The European Union has also indicated interest in being given observer status, and made a formal request for the same to the SAARC Council of Ministers meeting in July 2006. On August 2, 2006 the foreign ministers of the SAARC countries agreed in principle to grant observer status to the US, South Korea and the European Union. On March 4, 2007, Iran requested observer status. Followed shortly by the entrance of Mauritius. In August 1983, the ongoing process was given a political push. At the first Foreign Ministers' Conference in New Delhi, the South Asian Regional Cooperation (S ARC) Declaration was adopted. Following this the organisational structure of SAARC was final. Thereafter, the first summit meeting took place in Dhaka in December 1985 and SAARC was formally launched. The leaders decided in favour of a Council of Ministers and a Secretariat, certifying their enduring commitment to the organisation. In February 1987, the SAARC Secretariat came into being with a secretary general and four directors. Later- the SAARC Council of Ministers was formed consisting of the foreign ministers of respective member states. Organisational Structure The New Delhi meeting of foreign ministers in 1983, the organisational structure of the SAARC assumed a clear form and shape. It developed as a four-tier structure. At the lowest level were the Technical Committees of experts and officials formulating programmes of action and organising seminars and workshops. Next was the Standing Committee of Foreign Secretaries to review and coordinate the recommendations of the Technical Committees, which was to meet at least once a year. Above this was the Foreign Ministers' Conference, also to be held which was to meet at least once a year to grant political approval to the

recommendations of the Standing Committee. At the apex was the Summit Meeting to be held annually to give political significance to SAARC. The SAARC Secretariat was established in Kathmandu on January 16, 1987 and was inaugurated by Late King Birendra Bir Bikram Shah of Nepal. It is headed by a Secretary General appointed by the Council of Ministers from Member Countries in alphabetical order for a three-year term. He is assisted by the Professional and the General Services Staff, and also an appropriate number of functional units called Divisions assigned to Directors on deputation from Member States The Secretariat coordinates and monitors implementation of activities, prepares for and services meetings, and serves as a channel of communication between the Association and its Member States as well as other regional organisations. The Memorandum of Understanding on the establishment of the Secretariat which was signed by Foreign Ministers of member countries on November 17, 1986, at Bangalore, India contains various clauses concerning the role, structure and administration of the SAARC Secretariat as well as the powers of the Secretary-General. In several recent meetings the heads of state or government of member states of SAARC have taken some important decisions and bold initiatives to strengthen the organisation and to widen and deepen regional co operation. The SAARC Secretariat and Member States observe 8 December as the SAARC Charter Day. Criticism SAARC's inability to play a crucial role in integrating South Asia is often credited the political and military rivalry between India and Pakistan. It is due to these economic, political, and territorial disputes that South Asian nations have not been able to harness the benefits of a unified economy. Over the years, PARC's role in South Asia has been greatly diminished and is now used as a more platform for annual talks and meetings between its members. Politicai issues SAARC has intentionally laid more stress on "core issues" mentioned above rather than more decisive political issues like the Kashmir dispute and the Sri Lankan civil war. However, political dialogue is often conducted on the margins of SAARC meetings. SAARC has also refrained itself from interfering in the internal matters of its member states. During the 12th and 13th SAARC summits, extreme emphasis was laid upon greater cooperation between the SAARC members to fight terrorism. Free trade agreement Over the years, the SAARC members have expressed their unwillingness on signing a free trade agreement. Though India has several trade pacts with Maldives, Nepal, Bhutan and Sri Lanka, similar trade agreements with Pakistan and Bangladesh have been stalled due to political and economic concerns on both sides. India has been constructing a barrier across its borders with Bangladesh and Pakistan. In 1993, SAARC countries signed an agreement to gradually lower tariffs within the region, in Dhaka. Eleven years later, at the 12th SAARC Summit at Islamabad, SAARC countries devised the South Asia Free Trade Agreement which created a framework for the establishment of a free trade area covering 1.4 billion people. This agreement went into force on January 1,2006. Under this agreement, SAARC members will bring their duties down to 20 per cent by 2007.

Short Essay on SAARC

In recent years, the global economy is witnessing certain dynamic and unprecented changes. Regional economic integration is becoming its prominent feature. In the South Asian Association for global economic system, South Asian Association for Regional Co-operation (SAARC) is the youngest regional grouping among the seven Asian countries, namely, India, Pakistan, Maldives, Sri Lanka, Bangladesh, Bhutan and Nepal, came into existence in the first summit at Dhaka in 1985. This group comprises over one-sixth of the world's population. Nearly 50 per cent of the world's poor dwelve in this region.

The following are the main objectives of SAARC: 1. To promote the socio-economic welfare and cultural development of the people in the region. 2. To achieve the goal of collective self-reliance. 3. To encourage active collaboration in the economic social, technical and scientific fields among the grouping nations. 4. To strengthen over-all co-operation and harmonious economic and political relations among the countries of the SAARC. 5. To facilitate optimum utilisation of human and material resources. 6. To develop free regional trade. 7. To stimulate investment flows and accelerate pace of economic development. Empirical evidences show that there is an ample scope for extending trade and economic relations among the countries constituting SAARC region. These countries are competing for trade with other countries. For instance, India and Bangladesh compete for their share in the world markets for jute goods. India, Sri Lanka and Pakistan compete for readymade garments. Similarly, India and Sri Lanka compete for tea. Through SAARC this kind of internal competition can be eliminated and the countries can improve their terms of trade by evolving unified marketing policies and practices. There is also a good potential to expand intraregional trade among these countries on bi-lateral terms. The SAARC countries should assume foreign trade as a priority sector under the rapid globalisation of their economies. They must have co-ordination of their technical knowhow and scientific research with mutual help for their industrial growth and development. They have to redesign their tariff and non-tariff structure under a liberalised trade policy. They must built up a system for a common information pool to take advantage in global markets. The member countries of the SAARC would benefit themselves through co-operation in supply of inputs for production an a market for the outputs. The countries should ignore their political differences for the sake of regional co-operation and common welfare. The progress of SAARC, in general has remained very slow due to lack of adequate consensus among the countries. For the success of SAARC co-operation the countries should undergo preferential trading arrangements, open data bank, start joint R&D programme and develop a common support service programme.

Short Essay on Role of India in SAARC

SAARC was established in December 1985 during the first SAARC summit that was held in Dhaka. After gaining independence from the British rule, India adopted the policy of NSR or National Self Reliance and next formed SAARC along with 6 other member nations of South Asia namely: Bangladesh, Bhutan, Pakistan, Nepal, Maldives, India and Sri Lanka which continue to be its members till date. India succeeded in building excellent trade relations and cordial relations on social, political and economic front with the 6 SAARC countries.

India has been an active member of the SAARC and aims and fostering better mutual understanding by supporting peopleto-people initiatives. India offers a great source of potential investment in terms of trade and commerce as it is the sole SAARC member to be sharing borders with all 6 members via land or sea. SAARCs prime objectives include: promoting the welfare of the people of South Asia, accelerating the Economic growth, social progress; providing dignified livelihood to all individuals and on a larger scale promoting the self-reliance amongst the South Asian nations and building trust and appreciation for other countries problem. In the way of achieving these objectives, poverty has been major hindrance. India offered a contribution of US $ 100 million at the twelfth Summit held at Islamabad in 2004. Indias disputes and military rivalry with Pakistan is believed to be the cause of ineffectiveness of SAARC in integrating South Asian countries. If Indo-Pak relations improve, many SAARC nations could benefit from it by improved trade relations and creation of better export markets. SAARC has failed to work towards regional co-operation mainly because India has been reluctant to solve major regional disputes which have given rise to economic and political problems in South Asia. Since India has an unbeatable economic, military strength and international influence compared to all 6 members of SAARC, the disparity of power brings in the reluctance from smaller states to work with India. They have fear of dominance from India if they co-operate in order to facilitate faster economic growth. India has also heightened the fears of fears of South Asian nations by acting in a dominating and arrogant way. Its dispute with neighboring Bangladesh due to redirection of water flows impacting Bangladeshs agricultural production has kept Bangladesh afraid of its powers. Nepal is also fearful that India may take over its world trade because of its geographical suitability. As a result of all these fears and disagreements, SAARC has failed to promote regional co-operation and mutual trust amongst the South Asian countries. The tension between India and Sri Lanka that prevailed for 4 years over Indian Military trying to curb the revolution by the Liberation Tigers of Tamil E Elam and Indo-Pak Dispute over the Kashmir valley and the resulting Trade violations are enough to prove that South Asian countries fail to achieve SAARC objectives by any means. India must come to the front and initiate measures to encourage nations to prove their mettle and make the SAARC summit a meaningful affair. Appropriate measures should be taken with the intent of maintaining peace and resolving disputes amongst the SAARC member countries. Special Economic Zones and Export Promotion Zones should be created in all member countries to make trading easier and smooth the relations between the South Asian nations.

Full flashed answer

A regional organization is a voluntary association of sovereign states within certain area or having common interest in that area. Chapter 8 of United Nation deals with the regional organization. This concept being used by modern nation states for satisfying various needs. These organization are not bounded due to any geographical boundaries. Regional organization are the international organization which promotes institutionalization relation between its member states in context of context of regional development. Common concern and interest are the key element behind formation of any regional organization. After the end of bipolar world structure in 1990's there was drastic increase in regional organization as an alternative center of political and economic power. Regional organization

have proved to be helpful in achieving peaceful and cooperative regional order thereby producing prosperous economies. Some of the major regional organization are as follows-NATO, SARRC, ASEAN, European Union etc. There are basically two types of regional organization based on its major objective. These are military regional organization and functional regional organization.

Origin of SAARC
SAARC is an organization of eight countries towards the economic and political subjects formed by Ziaur Rahman. SAARC headquartered is situated in Kathmandu, Nepal.The eight members who constitute SSARC are India, Bangladesh, Bhutan, Maldives, Nepal, Pakistan, Srilanka, and Afghanistan. Afghanistan joined in the 14th summit. This organization came into existence in December, 1985. Since its formation SAARC has continuously worked on key area of environmental issues, economic and social developmental issues. The progress of SAARC can be said slow but have amazing impact of social economic and personal relations of member countries of SSARC. It has propagated people to people contact on large scale and impoverished the condition and promoted over all development. The major observer countries of SARRC are-Iran, China, Japan, Mauritius, Myanmar, Australia, South Korea, USA and European Union. The first summit of SARRC is done in Dhaka, Bangladesh. The present general secretary of SAARC is Ahmed Salem since March,2012.

Aims and objectives of SAARC

Article 1 of the SARRC Charter includes aim and objectives of SAARC. The various aims and objectives of SAARC are as follows1.To promote welfare and betterment of the quality of life of the people of South Asia. 2.To provide international platform for work on cultural, social and economic development and provide opportunity to the people of member countries of SAARC. 3.To promote collective self-reliance among the countries of South Asia. 4.To promote mutual trust ,understanding and appreciation of one another's problems. 5.To promote active collaboration and mutual assistance in economic, social, cultural and scientific fields. 6.To promote co-operation on similar areas with other developing countries. 7.To promote co-operation on international forum on the issues of common interests to members state. 8.Co-operating with other international and regional organization with similar objectives.

Principles(Article 2 SAARC Charter)

1.Each member nation is to co-operate by respecting the principles of sovereignty, equality, territorial integrity, political independence will be used in context of its working. Either big or small nation, all will be given equal representation. 2.There shall be no interference in the internal affair of any county. 3.Countries will understand their bilateral or multilateral platform for co-operation. So to protect SAARC. 4.Any bilateral conflict or co-operation will be done in considering the interest of all countries.

Major areas of co-operation

SARRC have certain major area of co-operation on which it pays more attention than any other area. The various major area of co-operation within SAARC are as follows-Agriculture and Rural development, Biotechnology Culture advancement, Economic and Trade, Education, Energy, Environment, Finance, Funding mechanism, Information Communication, Media, People to people contact, Poverty alleviation, Science and technology, Security aspects, Social development and Tourism. In agricultural and rural development SAARC have attained much, it focuses on on the agricultural development so as to provide food security to all. The development in in the areas of economic and trade is noticeable. They even lay much emphasis on the common platform for science and technology cooperation. Hence due to all these major co-operation SAARC has attained much more which can be categorized as its achievements.

Achievements of SAARC
SAARC came into existence in year 1985 and since last 27 years of its establishment had accounted for many achievements. The various achievements are as follows1.Integrated Program me of Action(IPA)-SIPA for the nine agreed area have been launched i.e. agriculture, rural development, science and technology, health, transport, sports, arts, culture and population activities. 2.Economic achievements-The major achievements made by SAARC in the economic field are as follows-

o SAPTA(SAARC preferential trading arrangement)was signed on 7 December, 19995 and came

into force since 2001 which promoted trade liberalization in South Asia.

o Signed an agreement of mutual assistance in custom matters establishment of SAARC arbitration

council.

o In 13th summit, mutual administrative assistance in tax matter and avoidance of double taxation
were signed.

o SAFTA(South Asian Free Trade Area) was signed in Islamabad in January 2004 and came into
force in 2006.

o SAARC chamber of commerce and industry (SCCI) came into force to encourages and facilitates
business co-operation in private sector.

o SAARC system of finance promote co-operation on financial matters. It regulate meetings of

governors of Central bank of member state to discuss on the issue of financial management and development.

o SAARC promoted agricultural development by the development and application of Agrinet project
promoting agricultural knowledge in South Asia. 3.Literacy and education-The major development in the field of education and literacy are as follows-

o In the field of education, the member states co-operate through forum of(SACODIL) i.e.SAARC
consortium on open and distance learning and head of universities grants commissions.

o Till 2013 going to establish a common university for education in Delhi.

4.poverty alleviation-The major development regarding poverty alleviation are as follows-

o Regional food security essence have been signed, to which India's contribution is 1lac 53
thousand ton of food grain.

o Promoted global objective of shelter for all.

5.Terrorism and Drug trafficking-the major development regarding terrorism and drug trafficking are as follows-

o Convention on terrorism was signed in November,1987 and came into force on 27th August,
1988.

o SAARC convention on narcotic drugs and psychotropic substances signed on November, 1990 and
came into force on 15 September, 1993.

o Conference on co-operation on police matter exists. o SAARC terrorist offences monitoring desk(STOMD) and SAARC drug offences monitoring
desk(SDOMD) existed in Colombo which maintains its regular flow of information. 6.South Asian Development Fund(SADF)-To promote fund operational at the earliest SADF came into existence. 7.People to people contact-The major development in the field of people to people contact are as follows-

o SAARC chamber of commerce and SARRC law enhanced people to people contact. o SAVE(SARRC audio visual exchange) was implemented. o The library of SAARC constituted periodicals, journals, magazines and annual report which is
available to common people increasing contacts. 8.Science and technologies-It has produced 9 technical publication on subjects like transfer of form technology research and extension system, quarantine and physiotherapy law, plant genetic resources technologies on livestock and fishery. It has produced computers and communicate information i.e. audio-visual media production.

Problems of SAARC
SARRC being a regional organization prone to certain criticism Man Mohan Singh called the 25years journey of SAARC, "a glass half empty" P.M. of Bhutan Jigmi.Y.thinley SARRC losing its flow from core ideas and issues such as poverty, food security etc. The various criticism of SAARC are as follows-

Big brother syndrome developed by the members towards India. Among the member states, member
have the feeling that India tries to dominate the function and activities of SAARC and hence this narrow attitude of members of SAARC results in decreasing co-operation which could have provided more opportunity if this ill feeling have not developed within members towards India.

Political instability due to different political system-SARRC constitutes member of South Asia which have
large variety of different political system. Pakistan promotes military rule, India promotes democracy, Nepal have federal republic, Myanmar have military dictatorship, Bangladesh like India have parliamentary democracy and Afghanistan have Islamic Republic currently with a parliament. So there is so much difference regarding the political system and this creates a political instability.

Regional and cultural differences exists- South Asian countries constitutes large variety regional and
cultural differences which hinders the path of co-operation due to difference in priority of the interest and concluding common interest arises to be a big problem.

Lack of financial resources and technology-South Asian countries constitutes mainly of developing
countries and they lack financial resources and advance technologies as compared to the European Union and other regional organization. Many plans cannot attain its success because of the lack of financial fund .

Internal interference by external actors-It has been marked that from time to time SAARC faces the
problem of involvement of external actors and they to certain extend effect the decision and working by internal interference.

 Internal problem of member states-SAARC countries are developing countries and all of them have
various internal problems constituting social economic and developmental and growth issues. In this context the contribution of member countries towards regional and global development lacks behind and this led to negligence which can be seen and understand by the less count of SAARC submits.

Bilateral disputes and differences- SAARC members are engaged in various bilateral disputes and
differences . The difference between India and Pakistan, India and Bangladesh provides major hindrance for the development of working of SAARC as regional organization. The border and river disputes between these member countries makes the SAARC environment hostile for providing common platform for development of all nations.

Competitive economies of member states- There is a huge competitiveness regarding the economies of
member state for example tea trade with India and Srilanka, jute in case of Bangladesh and India and finally the outward linkages of economies of member states. This competitiveness at one part has its effect on the common platform of SAARC and restricts the co-operation to avail much benefit for all

Conclusion
Hence due to all these drawbacks there are only 17th summit instead of 25 summits. But despite of all these problems and drawbacks SAARC is growing to its success. Thus in the given circumstances there are mixed tendencies of co-operation and differences. The success of SAARC depends upon the role of three actors-India, Bangladesh and Pakistan. India should not depend on other member states to come forward and take action. SAARC at present a most favorable environment for co-operation and mutual benefit as compared to its condition 27years back. And looking towards its development in the the agricultural, science and technology is of great importance. Further it provides platform to curb the bilateral issues between the member countries and spread the hope of co-operation and friendship among the member countries and promoting global peace.

Euro

he EUs new single currency, the euro, was duly launched on 1st January 1999. 11 of the 15EU countries agreed to participate and Greece subsequently joined as a 12 th member. Threecountries (Denmark, Sweden and the UK) decided not to join. The euro and the nationalcurrencies existed side-by-side for all countries in the euro-zone. Exchange rates for eachnational currency were irrevocably locked in terms of euros.The existing national currencies (such as the French franc and Dutch mark) continued incirculation until 1 st January 2002, when they were replaced by euro notes and coins. The euro-zone is comparable in size to the US and the euro has become one of the worlds majorcurrencies.

CPA REVIEWS NOTES- INTERNATIONAL FINANCE kadenchimbi@yahoo.com

, 0754 327487 16 Main Advantages of Euro (): 1. Significant reduction in transaction costs for consumers, businesses, governments, etc.(estimated to be .4% of European GDP, about $50B!)European Saying: If you travel through all 15 countries and exchange money in each country butdon't spend it, you end up with 1/2 of the original amount!2. Elimination of currency risk, which will save companies hedging costs.3. Promote corporate restructuring via M&A activity (mergers and acquisitions), encourageoptimal business location decisions. Main Disadvantage of Euro: Loss of control over domestic monetary policy and exchange rate determination.Suppose that the Finnish economy is not well-diversified, and is dependent on exports of paper/pulp products, it might be prone to "asymmetric shocks" to its economy. If there is asudden drop in world paper/pulp prices, the Finnish economy could go into recession,unemployment could increase. If independent, Finland could use monetary stimulus to lowerinterest rates and lower the value of its currency, to stimulate the domestic economy andincrease exports. As part of EU, Finland no longer has those options, it is under the EU CentralBank, which will probably not adjust policy for the Eurozone to accommodate Finland'srecession. Finland may have a prolonged recession. There are also limits to the degree of fiscalstimulus through tax cuts, since budget deficits cannot exceed 3% of GDP, a requirement tomaintain membership in EMU (to discourage irresponsible fiscal behavior). The European Central bank (ECB )The ECB began operations in May 1998 as the single body with the power to issue currency,draft monetary policy and set interest rates in the euro-zone. It is based in Frankfurt and it is asole issuer of the euro. Strategic implications of Economic and Monetary Union and the euro For the member countries, Economic and Monetary Union (EMU) has created a single currency, the euro , with a single interest rate and single monetary policy. The benefits of EMUmembership have included:

The elimination of foreign exchange risk from dealings in the form national currencies of the euro-zone countries

Larger and more competitive capital markets

Greater transparency of competition within the euro-zone.

The Euro: Economic and Monetary Union [print sheet]

Last updated: 10/04/12

The Euro is the currency used in the 17 member states of the EU that have signed up to full Economic and Monetary Union (EMU). People in all of these countries use the same coins and notes and business amongst companies in Eurozone states takes place in the single currency. For many people, the most noticeable benefit is that money does not have to be changed when travelling within the Eurozone. The Euro economy relies on all members cooperating with one another, and obeying the rules of the Stability and Growth Pact (SGP). There has been scepticism about the ability of the Euro to remain a stable currency serving the interests of all its members. Politicians and economists have expressed concern that the different structures of member states' economies might cause the monetary union to come apart at the seams. History The idea of having one currency for the European Community was first put forward in the 1970 Werner Report. The idea was then developed as the European Monetary System (EMS). In 1989, member states set the process of Economic and Monetary Union in motion. The Maastricht Treaty (1992) made EMU part of EU law and set out a plan for the single currency to be established by 1999. To be a part of EMU, countries had to meet certain rules. They agreed to keep their exchange rates within bands called the Exchange Rate Mechanism (ERM), and government borrowing and spending had to be kept under control, with low inflation and low interest rates. Finally, in 1998, 11 of the member states agreed to fix their exchange rates together and handed over the power to set interest rates to the European Central Bank (ECB). Three member states -Britain, Sweden and Denmark - stayed out of this final

EXTRAS EU Monthly Events Updates The Eurozone Crisis EU Trade Distortions

stage of EMU. The new Euro notes and coins were launched on 1 January 2002. All new EU member states have to join the Euro once they fulfil the necessary monetary and budgetary conditions, except Denmark and the UK which have negotiated an 'opt-out' clause. Greece joined the Eurozone in 2001. Of the new member states that joined the EU in 2004,Slovenia adopted the Euro in 2007, Cyprus and Malta followed in 2008, Slovakia joined in 2009 and Estonia in January 2011. Since the Euro was set up, the markets have been cautious about the single currency, especially as many members have failed to stay within the SGP rules. The currency had performed well until a global economic downturn began in 2008. In general, countries worldwide suffered badly. In particular, Eurozone members with weaker economies (e.g.Portugal,Ireland, Italy and Spain) struggled to repay their debts, which damaged confidence in the Euro. The situation in the Eurozone worsened in 2010 when Greece suffered a financial crisis. Despite initial reluctance, Eurozone countries gave 80 billion worth of loans to Greece. In return Greece had to cut its public spending and allow EU auditors to assess its finances. After concern that other weak Eurozone economies would face similar crises, a European Financial Stability Facility (EFSF)was created to provide loans to struggling Eurozone states. In March 2012 the size of the rescue fund was increased from 500 billion to 800 billion. Ireland will receive a 17.7 billion loan over 2011 and 2012 as part of its bailout package and Portugal will receive 26 billion, to be disbursed over 3 years. The EFSF will contribute a total of 109.1 billion to the second Greek bailout. In 2013 the EFSF will be replaced by the European Stability Mechanism (ESM), a permanent crisis mechanism for the Eurozone. How does the Euro work? The idea behind the single currency is that getting rid of national currencies would make the operation of a single market easier. This requires the EU to become what economists call an 'optimal currency area', which effectively operates as one economy. It is the role of the ECB to manage this by attempting to control inflation through setting interest rates and printing money. In this sense, the EMU sees national governments lose monetary power to the ECB. Euro notes look the same wherever you are in the Eurozone - they come in denominations of 5, 10, 20, 50, 100, 200 and 500 Euros. The coins have different national images on the reverse side. Coins and notes issued in one Eurozone country can be used in any other Eurozone country. The currency was supposed to be regulated by the SGP, but

these rules have not been strictly enforced. Facts and Figures

The Euro is also the official currency in Monaco, San Marino, the Vatican City, Guadeloupe, French Guyana, Martinique, Runion and Madeira. Just over 27% of world foreign exchange reserves are held in Euros.

Arguments
For

The Euro makes trade and travel between Eurozone countries cheaper and easier. The Euro creates greater economic stability in the countries that use it because it takes control of monetary policy out of the hands of politicians and gives it to the ECB. This encourages confidence among investors. The Euro is a symbol of European identity and a vital part of the process of political integration.

Against

The Eurozone is not an optimal currency area; the economies that make it up are too different to make the Euro work properly. This could result in more severe unemployment during recessions and more inflation during booms. EMU can't work because so many members fail to meet the SGP rules. This will eventually create uncontrollable splits. A national currency is a symbol of identity: adopting the Euro means symbolically and practically giving up sovereignty. The Euro is primarily a political, not an economic, project.

Quotes '[The Euro is] a tool to help us master globalisation and help us resist irrational shifts in the market'. - Dominique Strauss-Kahn, French finance minister, 1997-1999 'The single currency is the greatest abandonment of sovereignty since the foundation of the European Community - the decision is of an essentially political nature.' - Felipe Gonzlez, Spanish Prime Minister, 1998 'We will defend the Euro, whatever it takes.' - Jos Manuel Barroso, EU Commission President, 2010

Technical Terms

Eurozone: the nickname commonly used to describe the sixteen member states that use the Euro. Exchange Rates: the ratio in which one country's currency is valued against another. European Financial Stability Facility (EFSF): fund set up in 2010 to defend the stability of the Euro area. Opt-out: the ability to decline from signing an agreement. Optimum Currency Area (OCA): when the benefits of adopting a single currency are greater than the costs of losing monetary and economic independence.
Links

http://ec.europa.eu/economy_finance/euro/index_en.htm http://www.euro-know.org/europages/biblio.html

Creation of the Euro The euro was launched on 1 January 1999 as "an invisible currency, only used for accounting purposes, e.g. in electronic payments" for more than 300 million people in 11 nations in Europe.4 On 1 January 2002, euro cash replaced the banknotes and coins of 12 European nations (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain).1 Today, the euro is the legal currency in the euro area, commonly referred to as the Eurozone, formed out of 17 of the 27 Member States of the European Union (EU). Approximately 880 billion in cash is in circulation in the Eurozone.4 History, Politics, and Institutions The creation of the euro has an extensive historical and political background. Ideas of an economic and monetary union in Europe were raised well before establishing the European Communities (e.g. in 1929, Gustav Stresemann asked for a European currency in the League of Nations).5 However, this

document will only address recent events of more direct impact on the euros establishment. President Nixon moved the US off the gold standard in 1971, "ultimately resulting in widespread currency floats and devaluations, the breakdown dealt a serious blow to hopes for a shift to a European monetary union." The European Monetary Cooperation Fund (EMCF) was created in 1973 to stabilize exchange rates (EMCF is later succeeded by the European Monetary Institute, created 1 January 1994, which was dissolved with the creation of the European Central Bank on 1 June 1998). In March 1979, the European Monetary System (EMS) was created, fixing exchange rates onto the European Currency Unit (ECU an accounting currency) through the European Exchange Rate Mechanism (ERM, replaced by the "ERM II" on 31 December 1998) to counter inflation and further stabilize exchange rates.6 At the European Council summit on 14 June 1988, an outline of monetary cooperation began; France, Italy and the leaders of the European Community backed a fully monetary union with a central bank, opposed heavily by British Prime Minister Margaret Thatcher.7 By 7 February 1992, the Maastricht Treaty was signed, elevating the idea of European monetary cooperation to a new and far more ambitious level by setting a firm date - January 1999 at the latest - for the replacement of national currencies by a single, currency, shared by those nations which met certain criteria.8 Original Obligations of Countries in the Eurozone The euro convergence criteria (also known as the Maastricht criteria) are the original obligations for EU member states adopt the euro as their currency.8 In 2009 the International Monetary Fund suggested that countries be allowed to "partially adopt" the euro - adopting the currency but not qualifying for a seat on the European Central Bank (ECB). Monaco, San Marino and the Vatican City State are in a similar situation: they have adopted the euro and mint their own coins, but they do not have ECB seats.9 Summary of the Euro Convergence Criteria:
Inflation rates: No more than 1.5 percentage points higher than the average of the three best performing member states of the EU. Government finance:

Annual government deficit: The ratio of the annual government deficit to gross domestic product (GDP) must not exceed 3% at the end of the preceding fiscal year. If not it is at least required to reach a level close to 3%. Only exceptional and temporary excesses would be granted for exceptional cases. Government debt: The ratio of gross government debt to GDP must not exceed 60% at the end of the preceding fiscal year. Even if the target cannot be achieved due to the specific conditions, the ratio must have sufficiently diminished and must be approaching the reference value at a satisfactory pace.

Exchange rate: Applicant countries should have joined ERM II for two consecutive years and should not have devalued its currency during the period. Long-term interest rates: The nominal long-term interest rate must not be more than 2 percentage points higher than in the three lowest inflation member states.

The criteria are meant to maintain the price stability within the Eurozone even with the inclusion of new member states.8 The European Monetary Institute (EMI) was created 1 January 1994 to prepare the creation of the euro (so named in 1995); as aforementioned, the EMI was dissolved with the creation of the European Central Bank on 1 June 1998. The ECB, headquartered in Frankfurt, Germany, oversees the activities of the national central banks (NCBs) and initiates further harmonizing of cash services within the Eurozone. The NCBs are responsible for the functioning of their national cash-distribution systems.4 Euro Crisis The euro slumped the first couple years after its launch, with a brief crash to $0.8115 on 15 January 2002. However, its value last closed under $1.00 on 6 November 2002 (at $0.9971); thereafter, the euros value increased quickly, peaking at $1.35 in 2004 and reaching its highest value (versus the USD) at $1.5916 on 14 July 2008.10 International usage grew more as the euro increased against the British pound sterling in the late 2000s.12 Member of the Eurozone must abide by a Stability and Growth Pact, which has similar requirements for budget deficit and debt as the Maastricht criteria. However some Eurozone countries have, without action from the EU, severely violated these criteria, resulting in a continental sovereign debt crisis. The Eurozone did not enter its first official recession until the third quarter of 2008. The EU had negative growth for the second, third, and fourth quarters of 2008 and the first quarter of 2009. In late 2009, it became apparent that a few nations in the Eurozone were in severe financial trouble, and, due to the

unified nature of the Eurozone and EU, were thereby affecting the entire EU negatively

The Euro - Advantages and Disadvantages

The Euro - Advantages and Disadvantages
The Euro was introduced on New Years Day 1999 as an electronic trading currency, on January 1 2002 the came into being a actual currency, freely usable in all cash transactions throughout the Euro zone. For individuals the effect was that they can use the Euro as a common currency throughout the Euro zone. As a concept creating a Single European Currency, the is not new, since the founding of the EU, Europe has been working to towards this end, i.e. the . At present Britain, Denmark and Sweden are the only EU member states that have no intention to join the Euro-area. As part of continuing efforts to promote prosperity within all the regions of European Union, the Euro is part of efforts by EU member states to implement policies that will encourage the creation of a Single European Market throughout the European Union. The implementation of the Euro further assists in the removal of the current trade barriers that divide EU economies; this is especially the case in the labour, finance and movement of goods in the markets of Europe. There appear to be many groups that are against the Euro within and out of the Euro-area. The case they make against the Euro is thus: 1. The impact of the Euro could be a reduced market share for local businesses due to greater competition from elsewhere. 2. Increased potential for price wars, especially as large firms enter local markets, previously served by smaller companies. 3. European consumers did fear that they would be cheated when the new notes and coins are introduced - price changes were onbvious! 4.The biggest criticism is not one of economics, but loss of political control of monetary policy and the fear of a heavier tax burden, because member states might find this the only way they can manage rising inflation (especially in the non Euro countries Great Britain, Sweden and Demark). 57159tmy56mbx8d The Advantages of the Euro are manly in the economical sense: 1. Both consumers and firms would are able to make significant savings in the cost of transactions within the Euro-zone, leading to the development of Europe wide markets for goods and services as a result of not having to convert currencies. This is already benefiting many poor regions of Europe. 2. Firms within the Euro zone are already finding it easier and cheaper to raise money to invest, enabling businesses to improve their competitiveness on the world markets. 3. The introduction of the was already demonstrating savings for business in reducing the cost of transactions between member Euro-zone states. The enables cash received from several different countries to be lumped together instantly and without conversion and deposited in the highest interest earning country. 4. Clearer and better information on input costs and competitors prices enable improved opportunities for long term planning and strategy formulation, as there will be less uncertainty concerning prospective returns on foreign EU operations. 5. Euro zone economies are as part of a massive market are not expected to fluctuate as dramatically as in the past from boom to bust. This added stability is expected to reduce inflationary pressure and stimulate the economy of Europe. Unfortunately there is no clear balance of advantages and disadvantages of the Euro; it appears to be more a question of your own personal economic and political preferences, such as how governments approach managing their monetary policy. For governments the question of joining the Euro is a trade off on having higher unemployment and low inflation or lower unemployment with higher inflation; while some governments see price stability as their objective. But I personally think in the long term there will be no way around a proper, ALL European currency - in sense of economy and politics!

advantages and disadvantages of a single European currency

he Euro came into existence on January 1, 1999. The creation of the currency had been a goal for a number of years and had in reality been determined in 1993 when the Maastricht Treaty gained the support of most European Union countries. On January 1, 2002, Euro coins and bills replaced the prior national currencies in 15 European states (including the Vatican, Monaco and San Marino) and were replaced with the Euro. By 2010, five more countries joined the cooperation.

Advantages and disadvantages of the Euro The Euro has become both popular and unpopular among people in Europe. The primary reason for its popularity is that it has made it easier for people to travel. It has been unpopular, however, because it has been thought to drive inflation upwards. In Germany, for example, it was believed that the change towards the Euro made some commonly consumed products considerably cheaper as a side effect of changing from the Mark to the Euro. The primary way to judge the advantages and disadvantages of the Euro is not found by looking at the public opinion, however. Analysis has shown that the Euro has had positive effects on a number of issues: 1. The movement of goods, financial assets, and people within the eurozone has increased. Studies have found the Euro to have led to 3 to 10 percent increase in trade among European countries. The direct effect of such increased movement is economic growth. Some later studies have found, however, that these effects could be negligible. 2. The Euro has also contributed to increasing the access to capital in the weaker economies and it has led towards reduced interest rates companies operating in those economies can enjoy. This contributes to growing economies in these economies. 3. The introduction of the Euro made tourism easier and tourism has also increased following its introduction. The Euro has removed the risk associated with changes in currency exchange rates. This makes it easier for companies to plan and easier for them to take chances when investing in other countries. A few issues remain that constitute downsides, however: 1. The fact that devaluation as a fiscal tool to counter the effects of economic crises has been taken away as an option for smaller countries. 2. Language issues, tradition and cultural differences limit trade between the countries. This also ensures that the economies of different countries develop very differently.