Coordinated by Aurelian GIUGĂL


Economic, social, political benefits and effects of introducing the Euro




Associate Researcher, The Legal Research Institute “Acad. Andrei Rădulescu” of the Romanian Academy; assoc. prof. dr. at the Faculty of Law of the University “Titu Maiorescu”


Dr. Luiza NEAGU


Bucharest Bar lawyer


Abstract: The paper aims to present the advantages, disadvantages and consequences of introducing the euro, which are analyzed in several aspects: for consumers, for companies, for the euro area countries, for the European economy, for the society, for the NGO’s and administration.


Keywords: European single currency, the European Union, European Commission.





The European single currency was an important step towards the final objective of the political integration “very close”, discussed for the first time in the Treaty of Rome in 1958 and subsequently in several other treaties. Former German Chancellor Helmut Kohl believes that the economic benefits of the euro have a secondary nature, emphasizing instead that; “Bitter experiences tested in this century, wars and dictatorships, taught us that the project of unification is the best insurance against a revival of national egoism, chauvinism and violent conflict”. 

            There are other political motivations. For example, Ireland believes that the euro is the way that could blur her image as extended England, Italy wants to avoid becoming a political pariah, and France desperately wants to reduce the influence of the decisions taken by Germany about the monetary policy.

Many enthusiastic German leaders hoped that the monetary union will be “the chariot” that pulls this “horse” represented by full political union.

Although the euro is the result of a variety of political agendas, the economic ambitions goals have also played a role, even if a secondary one, still from the beginning. Obviously, the political solidarity in Europe should be promoted more difficult if the founders of the euro would have thought that the new currency will have a weak economic base. In fact, this diversity among political, economic noble objectives has emerged as the most common answers to the question: “Why are they doing this?” According to Werner Report of 1970, the monetary union was first proposed formally, “Monetary union will ensure growth and stability within the Community and increase the contribution to the economic and monetary equilibrium around the world, making the community a pillar of stability”. The 1992 Treaty on European Union also cited the central objective “higher standards of living and quality of life, and economic and social cohesion between Member States.”[i]

The purpose of Economic and Monetary Union (EMU)[ii] and the euro is to allow better functioning of the European economy, creating more jobs and ensuring greater prosperity for its citizens. Euro has brought a stable currency, low inflation rates and interest rates, price transparency, elimination of exchange rate cost, integrated financial markets, a more efficient economy, a solid framework for public finances, a stronger voice for the European Union in the world economy, facilitating international trade, a tangible symbol of European identity.[iii]













Introduction of the euro presents advantages for consumers, business and euro area countries, but, to be noted that the accession of new Member States presents advantages not only for this, but also for the European Union.[iv]

The enlargement of the euro area was due to the market value necessity for increase and introduction of new powers for European partners. Thus, besides the 22 million consumers and over 3 million people as cheap labor, Romania strengthened the European Union as international political and economic actor by: human force reason; economic dynamism - increased by 7.7% in 2006, 2.9% toward EU-25; low debt - public debt of Romania was 3.2 times higher than the lesser EU-25; to healthy public finances - a budget deficit of 4.7 times lower than the EU-25 in 2005; increased energy independence toward EU-25 average, by 80%.[v]

Moreover, Romania can be considered an advantage for the agricultural surface - 62% of the total surface, with a 27% forest area and a large output, in conjunction with Bulgaria[vi], to the Black Sea.





a) Increasing competition. The euro will increase competition because consumers can easily buy from abroad and can compare prices, increase competition between shops and suppliers. Thus, consumers have more choice, some prices are lower, and price rises are kept in check.

b) Stable prices. In the 70’s and 80’s, in many Member States had very high inflation rates that exceeded 20% in some cases. Subsequently, inflation dropped as countries began to prepare for the euro and, since its introduction, the inflation rate in the euro area remained generally around 2%.

With the introduction of the euro, consumers fear that the euro has caused price increases were often met[vii]. In reality, the stability created by sustainable price EMU protects people and businesses from inflation. It is true that locally prices of some basic items, such as a cup of coffee or a haircut, have increased in some countries where the euro was introduced[viii]. But consumer price data shows that, on average, euro adoption caused far fewer price increases than expected and the overall effect on prices was very small (a single impact between 0.1 and 0.3% recorded in 2002)[ix]. Far from making life more expensive, the euro has done the opposite, reducing inflation and increasing competition.

c) Low interest rates due to the high degree of price stability. The single monetary policy is implemented successfully by the Euro system, so euro is as stable and credible as the best performing currencies previously used in the euro area countries. It has created an environment conducive to price stability in the euro area, exerting a moderating influence on the process of pricing and wages. Consequently, inflation expectations and inflation risk have been kept low and stable, leading to low interest rates in the market.[x]

d) More transparency on prices. Payments are made in the same currency in all euro area countries, which makes easier traveling from one state to another. Price transparency is the benefit of consumers, because it is easier to compare labels that allow consumers to purchase from vendors with the lowest prices in the euro area. Therefore, price transparency resulting from the introduction of the single currency helps the Eurosystem to keep inflation under control.[xi]

A single currency makes price differences between goods obvious, services and wages in different countries, thus improving competition between markets. In the absence of the euro, consumers have found it difficult to compare prices of computers, tools, building materials, automotive, consulting or general suppliers beyond national borders.

The prices in euros provide a simple and consistent standard to make comparisons, driving families and businesses across the continent to compare prices with those from outside. Price discrimination is now more difficult than they were before the introduction of the euro. Due to the absence of exchange rate risk, it is easier for entrepreneurs entering into business speculate small differences in prices across borders.

This idea should not be taken too far. Some observers believe that the euro will eliminate price differences on the continent for identical products and services: “A bottle of Coca-Cola in Belgium will have to cost as much as in France.” These statements are totally incorrect. Prices are established following complex interaction between demand, supply and regulation in a wide variety of competitive environments. The introduction of a common currency does not eliminate price differences in the Eurozone, as the US dollar does not set the same price for a can of Coke in the US states of Maine and Arizona[xii].

e) More accessible and cheaper loans. As the European Central Bank acts to keep inflation low, interest rates are reduced.[xiii] This means people can borrow easier and cheaper. Mortgage rates have fallen from around 8% -14% in the early 80-5% today, bringing the contracting of a loan of 100,000 €, a 170 € month economy and 750 € in interest payments.

f) Travel cheaper. In the 90’s, moving through all the EU countries and exchanging money at every border would lead to spending half the money on foreign exchange costs, without buying anything! These costs, not to mention the hassle, were completely eliminated, making life easier and cheaper for tourists, travel agencies, students and workers who travel abroad. And the euro may easily be change in many countries outside the euro zone: according to estimates, up to 20% of euro banknotes are in circulation outside the euro area.[xiv]

g) The elimination of transaction costs. The launch of the euro has eliminated currency transaction costs, enabling considerable savings. In the euro area, there are no costs arising from:

• purchase and sale of foreign currency exchange markets;

• protective measures against adverse changes in exchange rates;

• cross-border payments in foreign currency which entail high fees;

• holding accounts in various currencies, whose management is difficult.[xv]

h) The absence of fluctuations in exchange rates. With the introduction of the euro, in the newly created currency area, have also disappeared exchange rate fluctuations and therefore foreign exchange risks. In the past, risks and costs associated with the exchange rate represented an obstacle to competition and trade across borders.[xvi]

With the introduction of the euro, the newly created currency area has also disappeared, exchange rate fluctuations and therefore foreign exchange risks. In the past, risks and costs associated with the exchange rate represented an obstacle to competition and trade across borders.

In international business, decisions are often adversely affected by future changes in exchange rates. The less predictable exchange rates, the more risky foreign investments and the more unlikely that these economic agents to achieve an increase in foreign markets. Because replaced national currencies, euro completely removes the risk of exchange rate between participating currencies. This will be an advantage for international investment in the euro area.

Risk related to exchange rate is potentially upsetting for any consumer, producer or investor which today takes a decision that involves a payment or supply of a good or service at a later date. Unfortunately, this situation describes the vast majority of economic activities. Firms can consistently cover the risk through currency markets abroad delivery time, which buys the right to change in future foreign currency at the rate that applies today. But coverage is priced like any other insurance policy. More importantly, the hedging instruments are not available for all companies, especially companies and small and illiquid markets in countries with immature foreign exchange forward contracts.[xvii]












a) Low interest rates mean more investment. Low inflation keeps interest rates at a low level. Thus, firms can borrow cheaper to invest, for example, in new equipment and further research. This leads to more new products and services and higher productivity, materialized in economical growth and more jobs.[xviii]

In the first ten years of the introduction of the euro in 1999, in the euro area were created about 8.7 million jobs (compared to only 1.5 million in 1992-1999).

b) Economic stability encourages long-term planning. Before creating Monetary Union, fluctuating interest rates meant unpredictable costs, making long-term investments are risky for companies, because it was difficult to assess whether the investment will generate profit. At the moment, economic stability under EMU reduces uncertainty and encourages long-term investments, lower risks encouraging cross-border trade.[xix]

In the past, trade between the EU countries involved coins with fluctuating exchange rates. To reduce the risk of trading in these conditions, companies would sell at a higher price abroad, discouraging trade. Currently, this risk has disappeared. Trade in the euro area recorded an increase between 4% and 10%, and foreign trade in goods increased by approximately 3% of the single currency.

            c) Elimination of foreign exchange costs stimulates trade and investment. Before the introduction of the euro, foreign exchange costs were high, estimated at 20-25 billion annually in the EU. Currently, these costs have disappeared within the euro area, where all payments and invoices are now expressed in euro. In addition, the euro is accepted outside the euro area.





a) Governments save money. Low and stable inflation means that government borrowing is cheaper than in the past and lower interest payments on public debt unlocks money that governments can use to public services or to cut taxes.[xx]

b) Low inflation has a positive effect on social cohesion. High and volatile inflation rates of the past increased the gap between groups and regions rich and poor. Today, with a low and stable inflation, the disadvantaged are better protected against the decline in wealth and purchasing power.[xxi]

c) EMU promotes sound and sustainable public finances. Before adopting the euro, a country must demonstrate economic viability observing the “Maastricht criteria” (government debt and deficit must be within specified limits, exchange rate stability, inflation and interest rates must decrease between certain limits) and, once inside the euro area, should continue to respect the rules on debt and deficit levels. Strong public finances ensure the citizens, both today and tomorrow, of providing them with adequate and equitable through programs of care and pensions, for example.[xxii]

d) Increased resistance to external shocks. The size and strength of the euro area economy make it more resilient to economic shocks than in the past, when unexpected energy price rises, or turbulence on global currency markets, affect national economies.

A myth exists in the euro area is that euro currency means a loss of national sovereignty. It is true that some sovereignty is voluntarily surrendered when a country adopts the euro, as governments must coordinate their economic policies and to control costs, but, in today's globalized world, national sovereignty is often more an illusion than a reality, especially in the monetary field, where only a few dominant currencies really matter. By coordinating their policies, governments can actually gain influence and power in the economic sphere.[xxiii]

e) Controlled deficit by monetary, fiscal and banking supervision. Euro area members benefits of surveillance from the European Union, aimed in fiscal stability and growth through the tools to stop macroeconomic imbalances (European Semester, Europe 2020, the Euro Plus Pact, the European Stability Mechanism, etc.). In 2010, the EU responded to the sovereign debt crisis by setting up temporary support mechanisms for Member States, thus an advantage situation in the euro area.





a) Increased financial integration. The single currency simplifies the movement of capital investment in the euro area by the most efficient placement and size of the euro area financial markets bring more capital available for investment and allows investors to disperse risks to a greater extent. For citizens, the cost of sending money to another country in the euro area decreased by 90%.[xxiv]

b) The euro area has a greater international presence. Major players of the global economy meet in international groups such as the IMF and the G8, to promote stability in global markets. Euro is now the second most important world currency after the US dollar, and in some respects, for example in bond markets, even exceeded.[xxv] This gives the EU a stronger voice in the world.[xxvi]

c) International trade is supported. Euro is used more increasingly in international business transactions because of its strength and availability, and because the confidence it inspires[xxvii]. This allows euro area firms to make and receive payments in euro, reducing the risk of losses due to currency fluctuations and facilitating global trade business partners, who may enter into transactions in one currency throughout the euro area.





- Increase the possibility of access to structural funds heading for areas that need better development such as education, environment and infrastructure policies. Amounts are superior pre-accession funds that Romania has received during 2000-2006 and received by the Community budget approx. 28 billion euros in 2007-2013;

- The opportunities for participation in the EU's preferential trade agreements. 

Internationally, as a full member belongs to a powerful body, well prepared to meet the challenges posed by crime. Accession to the European Union has been supported by both technical assistance and financial measures, called pre-accession instruments PHARE, ISPA and SAPARD.

PHARE has three main objectives: strengthening public administration and institutions in the candidate countries to enable them to operate effectively within the European Union[xxviii]; support candidate countries in the effort to align investment industrial activities and infrastructure to EU standards[xxix]; promoting economic and social cohesion.[xxx]

SAPARD support candidate countries in approaching the structural reform of the agricultural sector and other areas related to rural development and the implementation of the community acquis concerning the Common Agricultural Policy. The main objective of the SAPARD program is to create the framework for the implementation of a competitive agriculture and sustainable development of rural areas in the candidate countries.

            ISPA is the financial instrument which financed infrastructure projects in 2000-2006 in transport and environment. ISPA program objectives are: to support the beneficiary countries to align their environmental standards in the European Union; extend and connect their systems of transport to the trans-European transport networks; familiarity with policies and procedures Structural and Cohesion Funds of the EU.

After accession, to promote an equitable and sustainable development, Romania has access to the main tools to support regional policy. The resources will be directed towards actions aimed at reducing differences between developed regions and less developed, promoting equal employment choices between different social groups. For 2007-2013 program there were three structural financial instruments:

1. European Regional Development Fund (ERDF);

2. European Social Fund (ESF);

3. Cohesion Fund; and complementary funds:

a. the European Agricultural Guarantee Fund (EAGF);

b. European Agriculture Fund for Rural Development (EAFRD);

c. European Fisheries Fund (EFF).[xxxi]







Any serious analysis of the pros and cons arguments of euro currency, must consider the enormous effort devoted to project development by local governments, regional, national and international, as well as countless hours analysis and preparation needed for the private sector. Critics argue that the euro resources worth billions of dollars would be better spent on urgent reform of Europe's structural problems, such as those generated by unemployment, lack of funds for social assistance programs, excessive taxation systems, innovation stagnation or inefficient privatizing. While it is impossible to assess the total cost incurred euro, all parties agreed that was a huge investment.

Despite their size, costs related to the euro implementation are insignificant compared to the two continuous risks. Risks are further costs incurred only once and will soon disappear; they will threaten the possibility of supporting the euro in the coming years. Although these risks are somewhat complex, their understanding is a defining element for understanding the new trans-European economy.[xxxii]  

According to most authors, weighed the pros and cons of the euro, our opinion is that there are more advantages than disadvantages, for Romania to adopt the euro.

But, an essential aspect to be considered is the time of the changeover. Furthermore, it is essential that certain key reforms (restructuring, privatization, wage policy, labor mobility, fiscal policy) to be addressed before entering the Eurozone economy, to prepare to face successfully the single currency area.





GOTTFRIED, Haber, REINHARD, Neck, “Shall the New EU Members Introduce the Euro? Some Macroeconomic Policy Effects”, Atlantic Economic Journal, Vol. 33, No. 2, 2005, pp. 139-149.

HUBER, Robert G., ROBERTSON, James, “Creating new money; A monetary reform for the information age”, New Economics Foundation, London, 2000.

KAELBERER, Matthias, “The Euro and European Identity: Symbols, Power and the Politics of European Monetary Union”, Review of International Studies, Vol. 30, No. 2, 2004, pp. 161-178.

MAFI-KREFT, Elham, SOBEL, Russel, “Does a Less Active Central Bank Lead to Greater Economic Stability? Evidence from the European Monetary Union”, CATO Journal, 2006, Vol. 26, No. 1, pp. 49-70.

ROBERT, Mundell, CLESSE, Armand, The euro as a stabilizer in the international economic system, Kluwer Academic Publishers, Boston & London, 2000.

ŞAGUNA, Dan D., Drept financiar public. 5th Edition, C.H. Beck, Bucharest, 2012.

ŞAGUNA, Dan D., ŞOVA, D., Drept financiar public. Second edition, C.H. Beck, Bucharest, 2007.

ŞERBAN, Radu, POPESCU, Liliana, Construcţia Uniunii Europene, C.H. Beck, Bucureşti, 2009.

TRAUT-MATTAUSCH, Eva, SCHULZ-HARDT, Stefan, GREITEMEYER Tobias, FREY, Dieter, “Expectancy confirmation in spite of disconfirming evidence: the case of price increases due to the introduction of the euro”, European Journal of Social Psychology, Vol. 34, No. 6, pp. 739-760.

WHYMAN, Philip, BAIMBRIDGE, Mark, BURKITT, Brian, Implications of the Euro: a critical perspective from the left, Routledge, London & New York, Publisher, 2006.


[i] Dan D. ŞAGUNA, Drept financiar public., 5th Edition, C.H. Beck,  Bucharest, 2012, p. 358.

[ii] He started the second largest economy in the world.

[iii] Matthias KAELBERER, “The Euro and European Identity: Symbols, Power and the Politics of European Monetary Union”, Review of International Studies, 2004, Vol. 30, No. 2, pp. 161-178.

[iv] Philip WHYMAN, Mark BAIMBRIDGE, Brian BURKITT, Implications of the Euro: a critical perspective from the left, Routledge, London, New York, 2006, p. 92.

[v] Radu ŞERBAN, Liliana POPESCU, Construcţia Uniunii Europene, C.H. Beck, Bucharest, 2009, pp. 80-81.

[vi] Romania and Bulgaria founded in 2008 The Black Sea Euroregion, among objectives being durable development and exploitation of resources in environmental protection.

[vii] Eva TRAUT-MATTAUSCH., Stefan SCHULZ-HARDT., Tobias GREITEMEYER, Dieter FREY, “Expectancy confirmation in spite of disconfirming evidence: the case of price increases due to the introduction of the euro”, European Journal of Social Psychology, Vol. 34, No. 6, pp. 739-760.

[viii] Flash Eurobarometer years 2002, 2003, 2004.

[ix] Eurostat news releases no. 23/2002, 58/2002, 84/2002 and 69/2003.

[x] Haber GOTTFRIED, Neck REINHARD, “Shall the New EU Members Introduce the Euro? Some Macroeconomic Policy Effects”, Atlantic Economic Journal, 2005, Vol.33, No.2, p. 139.

[xi] “Advantages of the euro”,

[xii] Dan. D. ŞAGUNA, Drept financiar…cit., p. 359.

[xiii] “Advantages of the euro”,

[xiv] Dan D. ŞAGUNA, Dan ŞOVA, Drept financiar public, Second Edition, C.H. Beck, Bucharest, 2007, pp. 404-405.

[xv] “Advantages of the euro”,

[xvi]  “EURO Reports and Studies, World Health Organization”. Published by Regional Office for Europa, Copenhagen, 2012.

[xvii] Dan. D. ŞAGUNA, Dan ŞOVA, Drept financiar …cit., p. 405.

[xviii] “Advantages of the euro”,

[xix] Robert G. HUBER, James ROBERTSON, “Creating new money; A monetary reform for the information age, New Economics Foundation, London, 2000, pp. 38 – 39.

[xx] Ibidem, pp. 42 – 45.

[xxi] “Advantages of the euro”,

[xxii] Elham MAFI-KREFT, Russell SOBEL, Does a Less Active Central Bank Lead to Greater Economic Stability? Evidence from the European Monetary Union. CATO Journal, 2006, Vol. 26, No.1, pp. 49-70.

[xxiii] “Advantages of the euro”,

[xxiv] The average cost of transferring 100€ has been reduced from 24€ to 2.40€ since the introduction, in 2001, of the regulation on cross-border payments in euro.

[xxv] In December 2006, the euro banknotes and coins in circulation, exceeded cash dollars in circulation.

[xxvi] Mundell ROBERT, Armand CLESSE, The euro as a stabilizer in the international economic system, Kluwer Academic Publishers, Boston & London, 2000, p. 80.

[xxvii] “Advantages of the euro”,

[xxviii] Institutional development.

[xxix] Investment to support the application of Community law.

[xxx] Investment in key sectors for regional development.


[xxxii] Dan. D. ŞAGUNA, D. ŞOVA, Drept financiar …cit., p. 410.