International monetary arrangements: the European Union and the euro

Monetary unification within Europe appears to be on target. Eleven nations pegged their currency to the euro in 1999. The euro‐zone is experiencing varying levels of growth related to GDP. Balancing policy for 11 nations will be difficult. The true test will take place when asymmetric shocks hit one or several of the nations and unemployment rises to unmanageable levels forcing the European Union and European Central Bank to make tough decisions. Cultural issues and national identities are ever present. Optimum currency areas and comparative advantage discussed. The paper is divided into four major sections – reasons for unification, benefits, issues and conclusion.