Asymmetries as Sources of Conflict in a Monetary Union

Abstract

In the long run the replacement of national notes and coins by the euro is expected to benefit national economies. Such benefits will be materialized by reducing uncertainty on interest rates and exchange rates, providing a stable exchange for trade and financial transactions, lessening red tape in financial intermediation, minimizing transaction costs, promoting trade and establishing a strong currency whose stability will be safeguarded by the European Central Bank (ECB). It is argued that in the near future the euro will also allow better access to markets within and outside the EMU for enterprises, thereby raising their competitiveness, while, on the other hand, this process will promote benefits such as price transparency for EMU consumers. Pro-EMU professional economists, politicians and policy makers also argue that the euro will bring higher growth rates, which will help to reduce unemployment (European Economy, 1990; Emerson et al., 1992; Gros and Thygesen, 1992).