Question

How has the euro impacted commerce in Europe and other areas of the world?

Answer 1

Considering the euro area's weight in the world economy and the history of the euro's former national currencies, it is no wonder that the euro is the second most commonly used international currency. The Eurosystem's position, consisting of the European Central Bank and the euro area's national central banks, is based on two fundamental principles in this regard. First, since the euro's internationalization is essentially a market-driven process, the Eurosystem takes a neutral stance, neither promoting nor hindering its currency's international use. Secondly, the consequences of the euro's foreign position in internal monetary policy

While the international community uses the euro for a number of other reasons (such as trade, pegging, etc.), the use of this currency on the global financial market is the driving force behind its internationalization. The introduction of the euro, in particular, is accelerating the process of convergence and innovation in the euro area's domestic financial market, which can in turn affect its foreign use. This means the euro has not simply replaced the different national denominations within the market structure in question. The implementation could decide a "regime change" in financial markets, which would mean that market participants must radically update their strategies

It is already a highly integrated and liquid euro area money market. In this sector significantly higher trading volumes have already resulted in lower bid-ask spreads for very short-term maturities. Efforts are under way to merge domestic capital markets and settlement processes. The euro is also increasing competition in the banking sector, thus reinforcing current securitisation patterns as well as restructuring and/or disintermediation in this market. International trade is made easier by securitised financial instruments. In addition, the unprecedented size of mergers and acquisitions within the euro area promotes the development of a large domestic corporate bond market