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Membership of the Economic and Monetary Union (EMU) has been good for Irish business - Leaving Cert Business - Question 3 (b) - 2018
Question 3 (b)
Membership of the Economic and Monetary Union (EMU) has been good for Irish business. Do you agree with this statement? Outline reasons for your answer.
Worked Solution & Example Answer:Membership of the Economic and Monetary Union (EMU) has been good for Irish business - Leaving Cert Business - Question 3 (b) - 2018
Step 1
Do you agree with this statement? Yes/Maybe
Answer
Membership in the EMU has brought several advantages for Irish business. Firstly, there has been a reduction in transaction costs in trade, allowing businesses to trade without needing to change currencies. This has simplified transactions and enhanced trade efficiency.
Moreover, it has facilitated foreign companies to locate in Ireland, maintaining the same currency as much of Europe. This has made Ireland an attractive destination for businesses looking to operate in the European market.
Additionally, the reduction in foreign exchange rate variability has minimized uncertainty for exporters, making financial planning more reliable, as they can predict exchange rates more effectively.
The tourism industry also benefits, as foreign visitors can easily holiday in Ireland without worrying about currency exchange.
Lastly, the stable interest rates controlled by the European Central Bank (ECB) have also contributed to a more predictable business environment.
Step 2
Do you agree with this statement? No/Maybe
Answer
However, one could also argue against this statement. Ireland's biggest trading partner, the UK, did not join the EMU, which in some cases keeps transaction costs higher.
Moreover, Ireland has lost its independent monetary policy, which means it no longer has the freedom to adjust interest rates according to its national needs. The monetary policy is now governed and implemented by the ECB, which may not always align with Ireland's interests.
Increased competition is another facet; businesses in Ireland face more competition from foreign firms, which can affect profitability and market share.
Additionally, Ireland has become more reliant on the euro, which adds vulnerability to external economic shocks. Market fluctuations can have a more pronounced impact on local businesses, particularly small enterprises that might struggle to absorb such shocks.