Introduction

On January 1 1999, 11 countries of the European Union (EU) elected to renounce their national currencies to form a single currency, known as the Euro. The new combined economy established the Economic and Monetary Union (EMU) alongside a new European Central Bank (ECB). Greece is the latest to join this bloc, becoming the 12th member state of the eligible 15 countries. The move was a significant historical event in restoring the unification of Europe that had ceased to exist since the reign of the Roman Empire, and also the largest monetary changeover to transpire.


The introduction of the Euro and its economic and political effects are highly debated amongst a variety of literature. Three years since its adoption and now the official currency of 12 nations, the question that arises is what effect has the euro had both within and beyond Europe? This paper will address whether the euro truly is an accelerator of economic growth (Noyer, 1999). In particular, our focus is directed toward the economic growth in the 12 countries that make up the euro-zone. It also examines the impact on the countries that have not joined the EMU including Britain, Denmark and Sweden. The study extends to review the future potential of the euro on the countries external to the EU.


The development of the euro

The concept of a common European currency has existed for some time, dating back to the end of World War II. In 1942, a paper issued by a Hitlerite professor, evoked discussions for a single currency. Soon later, Winston Churchill similarly proposed a 'United States of Europe'. The motivation behind restoring Europe was primarily a political issue to instigate peace amongst a continent that had been divided by two World Wars (Obringer, 2001).


During this time, an international monetary regime was established, referred to...