There are multiple opportunities for EU citizens and consumers to benefit from the euro. These arise because the euro and its political framework, the Economic and Monetary Union, offer lower costs, stable prices, more transparency and economic stability.
Some of these consumer benefits are direct, such as easier-to-compare prices while shopping; others are indirect, such as the long-term benefits economic stability brings to interest repayments on a bank loan for a new car. In both cases, the opportunities the single currency offers are wide ranging, covering not only everyday transactions, but also employment opportunities and European citizens’ quality of life.
The following are examples of these opportunities.
A more competitive market
The euro brings price transparency to the single market. Consumers can easily compare prices across borders and find the most advantageous price for a product or service – especially in the internet era – whether it is a pair of trousers or a high-end home cinema system. This is because increased price transparency has the effect of increasing competition between shops and suppliers, keeping downward pressure on prices in the euro area.
The euro has brought inflation down to a low and stable level. In the 1970s and ‘80s many EU countries had very high inflation rates, some of 20% and more. Inflation fell as they started preparing for the euro and, since its introduction, has remained around 2% in the euro area. Price stability means that ordinary citizens’ purchasing power and the value of their savings are better protected, which helps make the future more certain.
Easier, safer, and cheaper borrowing
Low inflation and stable prices are a key aim of the management of the euro-area economy. Because the European Central Bank acts to keep inflation low, interest rates are also lower. This means consumer loans are cheaper and future repayments are more predictable, so ordinary citizens can borrow more easily and cheaply, for example to pay for holidays or to buy a house. Mortgage rates have fallen from around 8%-14% in the early 1980s to an average of 5% now in the euro area, saving a borrower with a €100 000 outstanding loan between €170 and €750 a month on interest payments.
Lower travel costs
The costs of exchanging money at borders have disappeared in the euro area. This makes it cheaper to travel, whether on vacation, studying, or on business. In the 1990s, a person travelling through all the EU countries and exchanging money at every border would lose half their money in exchange costs – without making a single purchase. Today, a traveller starting out with €1 000 would return home with the same amount in his or her pocket having travelled through the euro-area Member States. And the euro is readily exchanged in many countries outside the euro area as well – it is estimated that up to 20% of euro banknotes are circulated outside the euro area.
More growth and jobs
In a single market with a single currency, doing business across borders is cheaper for companies as they no longer need to include the risk of currency fluctuations into their prices nor to pay exchange costs. Previously, these costs amounted to around €20 to 25 billion annually within the European Union. Today, they have disappeared in the euro area. This helps release capital to invest in expanding and growing business and employing more workers, thereby benefiting jobseekers and their families. Since the euro was introduced in 1999, more than 10 million new jobs have been created in the euro area, compared with only 1.5 million in the previous seven years.
More public investment
It is not only citizens and business which benefit from cheaper loans: government borrowing is also less expensive, as interest payments on national debt are lower. The money saved can therefore either be used for investment in new infrastructure, or to boost research spending for jobs and growth, or for improving welfare and pension systems, or to reduce the tax burden – depending on a Member State’s priorities.