Eurozone: Latvia, Estonia, Lithuania And Reduced Cost Of Goods (Essay Sample)

Eurozone Azat Muhammedov Monroe College Economy is the effective management of resources that are available in a region CITATION Tho142 \l 1033 (Sowell, 2014). It involves production of goods and services, distribution of the produced goods and services and the consumption by users. It is determined by Gross Domestic Product (GDP). GDP, also called the economy size, is the total market value of the produced goods and services within a given period of time CITATION Don13 \l 1033 (Atwater, 2013). As stated by Sowell (2014), trading activities have increased and expanded beyond the national borders. This has led to the globalization of economy thus effecting the manner by which the globally available resources are utilized to satisfy the consumer wants. A real scenario is the formation of economic regions. Economic regions have dominated the world in the 21st-century more than in any other century CITATION Mur14 \l 1033 (Murphy & Jordan-Bychkov, 2014). These regions are united by a set of agreed economic and legal conditions that the member states must comply with. One of the current economic regions in the world today is the Eurozone. It has a membership of 19 countries who are form the Euro area. These members have adopted the Euro as their legal currency thus replacing their national currencies CITATION Eur18 \l 1033 (European Commission, n.d.). The last three countries to join as at 2018 are Estonia, Latvia and Lithuania which joined in the years 2011, 2014 and 2015 respectively. These countries were faced by common challenges; huge debts, stiff market competition from other countries and fluctuating currency exchange rates. By joining the Eurozone Latvia, Estonia and Lithuania looked forward to becoming more economically effective and stable through reduced competition, single market and currency as well as reduced cost of goods and services. Solutions Achieved by Joining Eurozone * Latvia Latvia suffered huge economic and financial challenges such as huge debts resulting from the 2008 global financial crisis, fluctuating currency exchange rates and stiff market competition from other marketers CITATION Bar131 \l 1033 (Barnato, 2013). Joining the Eurozone gets rid of some of the major economic challenges that the member states are encountered with. For instance, Eurozone has recently offered debt relief to some of its member states such as Greece CITATION Sta189 \l 1033 (Stamouli, 2018). This lightens the debt burden of the members that have a long-term solvency issue. As stated earlier, Latvia owes the IMF, EU and neighboring countries. Through its membership Latvia should seek for a debt relief in order to solve its solvency issue. The Euro area attracts foreign investors to invest in member states. This is because there is a promise of a ready market and available market space for investors to start their production companies. Latvia should be in the forefront to seize this opportunity and focus on wider attraction of foreign investors seeking for a European base. As a member state of the Eurozone Latvia will have reduced trading costs with fellow member states. Allowing foreign investors in its ground will increase its GDP, provide employment opportunities and at large boost its economy. In the trade region there are reduced exchange rates and low risks of price fluctuations CITATION Sho17 \l 1033 (Shotter, 2017). This is a benefit to member states that produce their goods and services in surplus. They can enjoy low export charges to other member states. Latvia exports more than 30% of its products to the European nations CITATION Bar131 \l 1033 (Barnato, 2013). To improve its economy, the country should focus on increasing its exporting activities due to the reduced export transaction costs resulting from the membership. Having adopted the euro as its legal currency, Latvia should pay for its loans and debts in euro. This will be cheaper than it would have been using the Lats which would impose huge burdens on the citizens and business organizations. Therefore, becoming a member of the Euro area has provided Latvia with several solutions to its economic and financial challenges. * Lithuania The Eurozone uses a single currency, the Euro CITATION Vil14 \l 1033 (Charles, 2014). For Lithuania and the other member states this implies that there will be no charges incurred in currency exchange since they will transact in the euro. Lithuania transacts much of its trading activities in the Eurozone CITATION Vil14 \l 1033 (Charles, 2014). Therefore, with the use of the euro as the only currency Lithuania should embrace increasing its trading activities. This will boost its business transaction with other member states and finally improve its economic status. Lithuania should use its membership in the Eurozone to access new markets that have reduced exchange rates. As a small country with approximately 3 million people CITATION Ewi14 \l 1033 (Ewing, 2014) Lithuania should focus on marketing its products in the Euro area which enjoys reduced risks of price fluctuations as well as low export charges. This implies that the Euro area market place is the best market place for Lithuania. As a result of using the Euro, Lithuania will have a chance to negotiate for better business transactions with other countries like Russia CITATION Ewi14 \l 1033 (Ewing, 2014). Lithuania makes about 30% of its exports to Russia. Therefore, making its transactions in euros and at extremely reduced exchange rates as well as interest rates will promote the country’s economy. Similar to Latvia, joining the Eurozone seems to offer solutions to the country’s economic and financial problems. * Estonia The Eurozone is a real deal for Estonia due to the limitless benefits of joining the economic region. To overcome the challenges of poor economic growth resulting from competition and fluctuation risks, Estonia should increase its trade especially through its exports to other countries since there are reduced costs of transactions as well as low interest rates. Further, the adoption of the euro provides an opportunity for Estonia to operate in a zero transactions costs economy. If Estonia fully indulges in this economy then it will enjoy trade activities with reduced expenses enabling it to save more. This will in return boost its economy. Almost all the countries are affected by unemployment rates CITATION Pet15 \l 1033 (Vogel, 2015). However, Estonia, just as the other member states of the Eurozone has a chance to create more job opportunities. Its membership to the Euro area ensures that it can increase its competitiveness in the market place, market its products and services at relatively low prices which would in turn increase the consumption rate. Increase in consumption provokes increased production rate which results in creation of jobs in order to cater for the consumer wants. Economic regions stabilize the economy of member states. This is the expected case of Estonia’s economy after it joined the Eurozone. Without the unexpected commodity price fluctuations and shooting export and import tariffs which are now replaced by a single currency, Estonia should embrace the benefits of its membership in order to stabilize its economy. It can achieve this through establishing more businesses since the costs for businesses has been reduced, and venturing into international trade even beyond the Euro area. The Eurozone has indeed been in the fore front to offer solutions to its member states as seen in the case of Estonia, Latvia and Lithuania. This implies that the member states benefit from their membersh...