Definition
The euro area is an area whose Member States share a single market, a single currency and a single monetary policy.
The main implications of the creation of this monetary area are:
- For national economic policies:
- loss of the exchange rate as an adjustment mechanism to combat any deterioration in competitiveness;
- impossibility of changing domestic interest rates.
- For the various markets:
- reduction of transaction costs,
- abatement of uncertainty as to monetary, exchange and financial conditions;
- tendency towards integration of both financial and goods markets.