Transcript Document

The Changeover to the EURO
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The euro is the official currency and is divided
into 100 cents
National currency units are denominations of
the euro
The euro can only be used for non-cash
transactions
Anyone can have a euro bank account..even
YOU!
12 Eurozone Countries
Austria, Belgium, Finland, France, Germany,
Greece, Holland, Ireland, Italy, Luxembourg,
Portugal and Spain
United Kingdom, Denmark and Sweden are
members of the European Union but not the
Eurozone.
Euro Time Line
January 1, 1999
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Euro is THE currency of eleven countries
Conversion rates irrevocably fixed
Legislation on the euro entered into force
Financial markets in euro
ECB starts operations
August 30, 2001
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European Central Bank releases final details
of euro banknote designs and features to the
media and public at a news conference in
Frankfurt, Germany
Euro Notes
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Coins
Euro Coins
September 1, 2001through December
1, 2001
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Belgian, French, Irish, Italian, Portuguese,
Finnish Greek, Dutch, commercial banks begin
receiving euro coins and bank notes
These countries retailers begin receiving euro
coins as well
December 17, 2001
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Austria, Finland, Germany, Ireland, the
Netherlands, and Portugal begin making euro
coins available to the public through starter
kits. Greece has not made a decision on
releasing starter kits
December 31, 2001
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German national currency ends as legal tender
but under an agreement, deutsche marks can
still be used until at least February 28, 2002
January 1, 2002
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“E-day” or Euro Day” when euro banknotes and coins
will be brought into circulation in the 12 participating
states of EU. All non-cash transactions will hereafter
take place in euros. All currency issued by
participating national banks and ATMs will be new euro
banknotes and coins. Dual circulation period begins, in
which consumers can still use national currencies but
will be given change only in euros
January 28, 2002 through February
28, 2002
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12 participating countries end their national
currency as legal tender.
German commercial banks will exchange
national banknotes and coins for euros until at
least this date. Commercial banks in Austria,
Finland, Greece, and Ireland decide individual
deadline for currency exchanges. Italy had not
made a decision on commercial bank currency
exchanges
June 30, 2002
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Last date commercial banks in France,
Luxembourg, Portugal, and Spain will
exchange national currencies for euros.
December 31, 2002
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Last date commercial banks in Belgium and
the Netherlands will exchange national
currencies for euros
Last date Portugal’s central bank will exchange
national coins for euros
2003 and Beyond
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The 12 eurozone central banks have set
various deadlines for exchanging old national
currencies
Advantages to joining the EMU
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European countries saw the adoption of the
Euro as a way of creating world wide
competition
Integrate the European nations makes the
union a strong world power
World Balance
Advantages to joining the EMU
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Strengthen Banking System
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European Central Bank would provide an
institution of monetary regulation comparable
to the FED
Ex) 6 member Executive Board of the ECD
acts much like the US 7 member FED reserve
board
Advantages to joining the EMU
Ex) 11 central banks of European nations
imitate action of the 12 FED reserve
banks
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Similarities between the European and
United States banking system
Ex) with a unified currency the Euro
could compare in strength to the dollar
Advantages to joining the EMU
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The Euro would advance one’s international
trade
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Way to challenge the power of the US in
foreign exchange
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Inspire exporters to denominate their goods in
euros as well as dollars
Advantages to joining the EMU
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Company can create individualities with
different prices
Single Monetary Policy
Disadvantages to joining the EMU
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Introduction of a single monetary policy
among 12 individual national policies of each
country
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Before joining the country controlled it’s own
money supply
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Monetary decisions with economic and
national policies unique for the circumstances
of the country
Disadvantages to joining the EMU
Ex) Monetary policy for France and Germany
could prove very costly for Spain and Portugal
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Surrender their individual policies on
inflation,unemployment, and economic growth
Disadvantages to joining the EMU
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Implementation of one Monetary policy as a
detriment to their existing financial statuses
Ex) One country whose main concern with the
inflation rate would be reluctant to tolerate
decreasing interest rates
Disadvantages to joining the EMU
Ex) Countries maintained individual monetary
policies that corresponded to their financial
and national status for thousands of years
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Traveling around different countries will have
different prices for the same good or services
Public Opinion Poll
Country
Pro-euro
Against
Austria
59
32
Belgium
75
18
Denmark
40
56
Finland
49
46
France
67
28
Germany
53
38
Greece
72
22
Ireland
72
16
Italy
83
12
Luxembourg
81
15
Netherlands
66
30
Portugal
59
30
Spain
68
22
Sweden
29
62
UK
25
57
EU Overall
59
33
The Police Challenge
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Three key areas of law breaking with the arrival of the
euro are robbery, counterfeiting, and money
laundering
The 500 euro bill, is worth more than the most
expensive note in 11 of the 12 euroland currencies
and has been nicknamed the “gangsters’ note”
This new note makes it possible to pack more than 7
million euros in average brief case
Single currency makes it harder to catch money
launderers
63 % more fake marks were pulled out of circulation in
the first three months of 2001 compared to 2000
“E-DAY”
The Banks started moving into
Euro notes and coins on
September 1, 2001
The Euro became legal tender
on January 1, 2002 or also
known as “E-day”.
The denominations will be 5
euros, and 8 different coins.
They will look slightly different in
each country.
Credit and debit cards wont be
effected by the change.
Scenario for an EMU Collapse
1.
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Recession develops in part of Europe.
Creates a conflict of interest between the weak and strong economically
countries.
Weaker countries want low interest rates and wouldn’t mind some inflation
whereas other stronger countries , such as Germany, are dead set on keeping
prices very stable.
Cant deal with “asymmetric shocks” like the United States can due to labor
mobility.
Downward price stickiness could lead to a higher average unemployment rate
then if countries could pursue separate monetary policy
In the end you get a political argument and even a financial crisis, as markets
discount the bonds of weaker European governments.
Sovereignty of the Country
Sovereignty is the main reason why
the UK has not joined yet.
They believe that giving up the
national currency is the same as
giving up national sovereignty.
Is the Euro leading to ONE
European super state?
Monetary union will end the a
nation’s ability to conduct
monetary policy, ONE interest
rate?
European Central Bank
The ECB is the successor of the
European Monetary Institute that was
set up 5 years ago.
ECB works hand and hand with national
central banks that are within the
European system.
They have the exclusive right to authorize
the issue of banknotes.
The volume of money is approved by the
ECB not central banks.
Considered a double of Germany’s central
bank, Bundesbank.
The ECB is headed by Wim Duisenberg.
Current Situation in the Eurozone
April 11, 2002:
The European Central Bank has stated that high oil prices
could lead to slightly higher inflation than predicted.
Believe that the recent jump in prices will contribute to the
recovery of the Eurozone and would begin to slow in
speed (negative supply shock).
Oil prices spiked above $27 due to fears of increased
violence between Israel and Palestinians.
Eurozone inflation at 2.5% in March, and the rate is still
falling but not by as much due to the oil price increase.
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