Eurozone: Latvia, Estonia, Lithuania And Reduced Cost Of Goods (Essay Sample)
A 10-page essay on a given topicsource..
Economy is the effective management of resources that are available in a region. 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. 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. 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.
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 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. 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. 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. 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. 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.
The Eurozone uses a single currency, the Euro. 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. 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 ap