rgest and most powerful trading blocs in the world. Although the euro doesn’t alter the fact that Euroland is composed of diverse and highly independent countries, it strengthens the economic and political ties of the region and its part in the world economy. Because of the success of the euro will ultimately be determined by the collaboration of EEC governments through the formulation of exchange rate policy to the harmonization of legal systems and security policy, the concept of western Europe as a single economic and political bloc is now more applicable than ever. The euro creates the second-largest single currency area in the world, one that follows the United States in total output. When and if Great Britain, Sweden, Denmark, and Greece join the euro area, Europe will easily surpass the United States in total economic output. Already, Europe is home to more people who are united by a single currency than is the United States or Japan. Whereas the costs of a common currency have much to do with the macroeconomic management of the economy, the benefits are mostly situated at the microeconomic level. Eliminating national currencies and moving to a common currency can be expected to lead to gains in economic efficiency. The euro’s four primary and direct benefits are: the reduction of transaction costs, the elimination of exchange rate risk, increased price transparency, and the creation of deep financial markets. The first benefit that has come about as a result of the integration of the euro into the EEC has been the elimination of exchange rate risk. In the international business environment, decisions made today are often adversely affected by future shifts in exchange rates. The more unpredictable exchange rates are, the more risky are foreign investments and the less likely companies are to pursue growth in foreign markets. By replacing European national currencies, the euro eliminates exchange rate r...
