introduction to euro
TRANSCRIPT
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INTRODUCTION TO
EURO
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HISTORY OF EURO
1952: European Coal & Steel Community (ECSC)
1957: European Economic Community (EEC)
1958: European Atomic Energy Community (EURATOM)
1969: Initiative by the European Commission
1970: Pierre Werner¶s Report
1971: Collapse of the Bretton Woods System
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HISTORY OF EURO«
1979: European Monetary System (EMS),
Exchange Rate Mechanism (ERM),
European Currency Unit (ECU), &
European Monetary Cooperation Fund (EMCF)
1986: The Single European Act
1988: European Council Summit in Hannover
1989: Jacques Delors¶ Report- Three step plan to set up
the EMU
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STAGE 1: (1990-1993)
1990: Exchange Controls abolished
1992: Treaty on European Union signed in Maastricht, which
states-
1. The Three Pillars of European Union:
o The European Communities
o Common Foreign and Security Police (CFSP)
o Police and Judicial Cooperation in Criminal Matters
2. Role of the European Central Bank (ECB)
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STAGE 2: (1994-1998)
1994: Creation of the European Monetary Institute
1995: Madrid Summit
1997: The Stability and Growth Pact and
A New Exchange Rate Mechanism (ERM II)
1998: May : The 11 Participating Countries
June : The Successor of the European Monetary
Institute- The European Central Bank (ECB)
Dec : Fixing the Exchange Rates
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CURRENCY CODE RATE FIXED ON
Austrian Schilling ATS 13.7603 31st December 1998
Belgian Franc BEF 40.3399 31st December 1998
Dutch Guilder NLG 2.20371 31st December 1998
Finnish Markka FIM 5.94573 31st December 1998
French Franc FRF 6.55957 31st December 1998
German Mark DEM 1.95583 31st December 1998
Irish Pound IEP 0.787564 31st December 1998
Italian Lira ITL 1936.27 31st December 1998
Luxembourgian Franc LUF 40.3399 31st
December 1998
Monegasque Franc MCF 6.55957 31st December 1998
Portuguese Escudo PTE 200.482 31st December 1998
Sammarinese Lira SML 1936.27 31st December 1998
Spanish Peseta ESP 166.386 31st December 1998
Vatican Lira VAL 1936.27 31st December 1998
Greek Drachma GRD 340.75 19th June 2000
Slovenian Tolar SIT 239.64 11th July 2006
Cypriat Pound CYP 0.585274 10th July 2007
Maltese Lira MTL 0.4293 10th July 2007
Slovak Koruna SKK 30.126 8th July 2008
Estonian Kroon EEK 15.6466 13th July 2010
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STAGE 3: (January 1999 onwards)
1999: Introduction of Euro in Non-Physical Form
2001: Distribution, Frontloading of Euro Banknotes and
Coins
2002: Euro Banknotes and Coins in Circulation
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THE EURO CONVERGENCE CRITERIA
Twelve-month Inflation : below 3.2%
Fiscal Deficit : below 3.0%
Debt Ratio : below 60%
Interest Rate : Close to the EU average
A Stable Exchange Rate
Sound Public Finances
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THE EURO SYMBOL
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THE EURO
The Currency Name and Symbol
Who uses the Euro?
Who doesn't use the Euro?
Euro Banknotes and Coins- The Designs & their Significance
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CHARACTERISTICS OF
THE EURO AREA
One of the Largest Economies in the World
Limited Dependence on Foreign Trade
Interbank Money Market: Fully Integrated
Bond market: Integrated, Deep and Liquid
Equity Market: Increasingly viewed as a Single Market.
Banks: Many Domestic and Cross-border Mergers and
Acquisitions
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EURO AS A RESERVE CURRENCY
World¶s Second International Reserve Currency
The German mark
Underweight in Advanced economies
Overweight in Emerging economies
Possibility of becoming World¶s First International Reserve
currency
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THE EFFECTS OF
THE INTRODUCTION OF EURO
Optimum Currency Area
Transaction Costs & Risks
Price Parity
Macroeconomic Stability
Trade
Investment
Inflation
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THE EFFECTS OF
THE INTRODUCTION OF EURO
Exchange Rate Risk
Financial Integration
Interest Rates
Price Convergence
Tourism
Flexible Exchange Rates
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THE FUTURE OF EURO
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EURO¶S CURRENT POSITION
Euro Users: 330 million Europeans & 175 million Others
Euro as a Reserve Currency
ECB¶s plan to backstop European Debt
Structural Flaws in the Euro Framework Exposed
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EUROZONE IGNORING ITS OWN RULES
European Countries bending the Rules
Lending and Borrowing between European Nations
Piling up of Debt
Virtually Nil Labour Mobility
Relatively Small Fiscal Transfers
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DEBT & DEFICIT FIGURES OF
THE WEAKER EURO COUNTRIES
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FLAWS IN THE EURO FRAMEWORK
Ineffectiveness of a ³One-size-fits-all´ Monetary Policy
Unique Challenges during Tough Times
Individual Fiscal Policy
Disregard of the EU¶s Stability and Growth Pact
Absence of a Stronger Political Union
Emergence of Nationalism
Helpless Weaker Countries
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IS EURO UNDER
THE THREAT OF EXTINCTION?
Credibility of the ECB towards fighting Inflation
Too much Vested in the System to Abandon Euro
ECB¶s Bailout Package
Euro¶s Revaluation