Final answer:
To adopt a common currency, countries need economic stability, low inflation, and political alignment. In the European Union, for example, the euro was introduced to enhance economic integration, but not all EU countries adopted it, highlighting the importance of political alignment. Joining an economic union like the EU also requires giving up some political autonomy.
Step-by-step explanation:
The three conditions that need to be met in order for a common currency to be adopted are economic stability, low inflation, and political alignment. These requirements ensure that the economies of the member countries are robust enough to handle the stress of a common currency and that there is political will to cede some level of sovereignty to the central authority managing the currency. For instance, the European Union introduced the euro in the early 2000s with the goal of enhancing economic integration by phasing out former national currencies like the German mark and the French franc. However, not all EU countries adopted the euro, indicating that political alignment is critical. Additionally, economic stability and low inflation are necessary to prevent economic turbulences that could undermine the common currency.
When countries join an economic union like the EU, they must give up some political autonomy. Examples of political powers that must be relinquished include the ability to set independent monetary policies, tariff regulations, and to some extent, control over national budgets and fiscal policies. This loss of autonomy is balanced by the potential economic benefits that come from increased trade and movement of goods, labor, and capital across member countries.