The Euro:

Implications for the United States--Answers to Key Questions

GGD/NSIAD-00-105: Published: Mar 1, 2000. Publicly Released: Mar 1, 2000.

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Pursuant to a congressional request, GAO provided information on the euro, focusing on: (1) what the euro is and why Europe is moving to it now; (2) what the potential effects of the euro are on the dollar; (3) what are the potential monetary policy and exchange rate effects of the euro; (4) what are the euro's implications for U.S. trade and investment with Europe; and (5) what are the implications of the euro for international economic policymaking. GAO noted that: (1) the euro is the new currency being used by 11 of the 15 countries that are members of the European Union (EU); (2) the euro is part of an initiative known as the European Economic and Monetary Union and is designed to more closely link EU's economic policies; (3) a variety of factors will determine whether the emergence of the euro will have a significant impact on the international role of the dollar; (4) over the longer term, several analysts believe that the comparative status of the dollar and euro as international currencies may be affected by potential developments in the euro area payments and securities settlements infrastructure; (5) although the Federal Reserve determines U.S. monetary policies on the basis of domestic economic conditions, it also takes international conditions into account; (6) some economists argued that the euro will be more volatile against other currencies and others argued that it would be less volatile; (7) some experts have said that the largest effect of the creation of the euro will be the transformation of financial services in Europe; and (8) the introduction of the euro would not significantly change international economic policymaking.

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