Evolution of Euro

amp Threats it is Facing

Prepared for an International Finance Project of Indian Institute of

Management Calcutta (IIM-C)

For more information please contact

Ankur Sharma

ankurdineshsharmagmailcom

+91 9886403253

Follow me ankurdinesh

httpankursharmacoin

Evolution of Euro

bull In 1999 the euro area was established as a currency in eleven of the then fifteen EU Member States

bull Of the 27 EU Member States today sixteen have adopted the euro

bull Outside EU too direct usage of euro affects over 3 million people

bull Its introduction - January 1 1999 marked the final phase of Economic and Monetary Union (EMU) a three-stage process that was launched in 1990 as EU member states prepared for the 1992 single market

Euro Sign

bull The symbol for the euro is a rounded E with one or two cross lines - euro

bull Euros are divided into eurocents each eurocent being one one-hundredth of a euro

The EURO 1990rsquos

bull 1990 Aimed at boosting cross-border business activity the

first stage of EMU lifted restrictions on movements of

capital across internal EU borders

bull 1994 The European Monetary Institute was established in

Frankfurt to pave the way for the European Central Bank

bull 1999 the Euro was introduced as the single currency for

eleven EU member states Austria Belgium Finland

France Germany Ireland Italy Luxembourg the

Netherlands Portugal and Spain

The EURO1999-Present

bull 1999-2002 The Euro and the previous national currencies

were concurrently used in participating states

bull 2002 The participating countries had their previous

national currencies withdrawn permanently as legal tender

bull EU member states not yet using the Euro as currency

Denmark Sweden United Kingdom

bull All nations that have joined the EU since 1993 have pledged

to adopt the euro in due course

Banknote Denominations

Coins

Unity in Diversity - The eurouro

Cyprus Malta Slovakia

Administration

bull Euro is managed and administered by the Frankfurt-based European Central Bank (ECB) and the EuroSystem (composed of the central banks of the Eurozone countries)

bull As an independent central bank the ECB has sole authority to set monetary policy

bull The Eurosystem participates in the printing minting and distribution of notes and coins in all Member States and the operation of the Eurozone payment systems

Why was Euro Introduced

bull Since for most EU countries today majority of international trade is with other EU members a common currency has

bull Removed exchange rate risks from the internal market

bull Cut the costs of transactions

bull Encouraged firms to trade across national borders

bull The common currency has made the eurozone into an area of monetary stability in Europe

bull It has also forced EU states to adopt responsible economic policies that contain inflation and increase real living standards

Criteria to join EMU

bull EMU was agreed at Maastricht the Netherlands in Dec 1991

bull Five Criteria for countries to qualify for EMU

ndash Countries should have an inflation rate within 15 of the three EU countries with the lowest rate

ndash Long-term interest rates must be within 2 of the three lowest interest rates in EU

ndash Exchange rates must be kept within normal fluctuation margins of Europes exchange-rate mechanism

ndash The amount of money owed by a government for 1997 known as the budget deficit has to be below 3 of Gross Domestic Product

ndash The total amount of money owed by a government known as the public debt has to be less than 60 of GDP

Criteria to join EMU

bull Of the 12 countries wanting to join EMU initially only

Luxembourg and Finland fully met the currency criteria

bull The convergence criteria were somewhat flexible so that

Austria Belgium France Germany Ireland Italy the

Netherlands Portugal and Spain were able to join

bull Only Greece failed to qualify

bull The United Kingdom technically qualified for EMU but

decided not to join with the first wave of countries

bull Denmark and Sweden met the Maastricht criteria but have

not joined the European exchange-rate mechanism yet

EuroZone

bull Officially the Euro Area

bull Is and Economic and Monetary Union of 16 EU member states which have adopted the Euro currency

bull Monetary policy of the zone is the responsibility of the European Central Bank

Countries that come under Euro Zone

bull Austria

bull Belgium

bull Cyprus

bull Finland

bull France

bull Germany

bull Greece

bull Ireland

bull Italy

bull Luxembourg

bull Malta

bull Netherlands

bull Portugal

bull Slovak Republic

bull Slovenia

bull Spain

States refusing to join Eurozone

bull Greece and Sweden were originally excluded from the zone because they did not meet the entry criteria in full

bull Greece was subsequently admitted in 2001 but the people of Denmark and the government of the UK decided to remain outside the zone during the first wave

bull No economic justification exists for these two states to remain outside the zone

How does Eurozone Operate

bull Achieved through EMU All countries in the European Union are part of the EMU

bull Each country in the Euro area runs its own economy while keeping to certain rules to make sure that the euro remains strong and the euro-area economy does well

bull These rules put limits on how much money a country can borrow

bull The rules of EMU ensure that a country has a sustainable economy - it can pay its debts and its pensions in the future

bull ECB based in Frankfurt in Germany makes a large contribution to the economic stability of the euro area and has the sole right of issuing banknotes and is in charge of the Monetary Policy

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Euro Sign

bull The symbol for the euro is a rounded E with one or two cross lines - euro

bull Euros are divided into eurocents each eurocent being one one-hundredth of a euro

The EURO 1990rsquos

bull 1990 Aimed at boosting cross-border business activity the

first stage of EMU lifted restrictions on movements of

capital across internal EU borders

bull 1994 The European Monetary Institute was established in

Frankfurt to pave the way for the European Central Bank

bull 1999 the Euro was introduced as the single currency for

eleven EU member states Austria Belgium Finland

France Germany Ireland Italy Luxembourg the

Netherlands Portugal and Spain

The EURO1999-Present

bull 1999-2002 The Euro and the previous national currencies

were concurrently used in participating states

bull 2002 The participating countries had their previous

national currencies withdrawn permanently as legal tender

bull EU member states not yet using the Euro as currency

Denmark Sweden United Kingdom

bull All nations that have joined the EU since 1993 have pledged

to adopt the euro in due course

Banknote Denominations

Coins

Unity in Diversity - The eurouro

Cyprus Malta Slovakia

Administration

bull Euro is managed and administered by the Frankfurt-based European Central Bank (ECB) and the EuroSystem (composed of the central banks of the Eurozone countries)

bull As an independent central bank the ECB has sole authority to set monetary policy

bull The Eurosystem participates in the printing minting and distribution of notes and coins in all Member States and the operation of the Eurozone payment systems

Why was Euro Introduced

bull Since for most EU countries today majority of international trade is with other EU members a common currency has

bull Removed exchange rate risks from the internal market

bull Cut the costs of transactions

bull Encouraged firms to trade across national borders

bull The common currency has made the eurozone into an area of monetary stability in Europe

bull It has also forced EU states to adopt responsible economic policies that contain inflation and increase real living standards

Criteria to join EMU

bull EMU was agreed at Maastricht the Netherlands in Dec 1991

bull Five Criteria for countries to qualify for EMU

ndash Countries should have an inflation rate within 15 of the three EU countries with the lowest rate

ndash Long-term interest rates must be within 2 of the three lowest interest rates in EU

ndash Exchange rates must be kept within normal fluctuation margins of Europes exchange-rate mechanism

ndash The amount of money owed by a government for 1997 known as the budget deficit has to be below 3 of Gross Domestic Product

ndash The total amount of money owed by a government known as the public debt has to be less than 60 of GDP

Criteria to join EMU

bull Of the 12 countries wanting to join EMU initially only

Luxembourg and Finland fully met the currency criteria

bull The convergence criteria were somewhat flexible so that

Austria Belgium France Germany Ireland Italy the

Netherlands Portugal and Spain were able to join

bull Only Greece failed to qualify

bull The United Kingdom technically qualified for EMU but

decided not to join with the first wave of countries

bull Denmark and Sweden met the Maastricht criteria but have

not joined the European exchange-rate mechanism yet

EuroZone

bull Officially the Euro Area

bull Is and Economic and Monetary Union of 16 EU member states which have adopted the Euro currency

bull Monetary policy of the zone is the responsibility of the European Central Bank

Countries that come under Euro Zone

bull Austria

bull Belgium

bull Cyprus

bull Finland

bull France

bull Germany

bull Greece

bull Ireland

bull Italy

bull Luxembourg

bull Malta

bull Netherlands

bull Portugal

bull Slovak Republic

bull Slovenia

bull Spain

States refusing to join Eurozone

bull Greece and Sweden were originally excluded from the zone because they did not meet the entry criteria in full

bull Greece was subsequently admitted in 2001 but the people of Denmark and the government of the UK decided to remain outside the zone during the first wave

bull No economic justification exists for these two states to remain outside the zone

How does Eurozone Operate

bull Achieved through EMU All countries in the European Union are part of the EMU

bull Each country in the Euro area runs its own economy while keeping to certain rules to make sure that the euro remains strong and the euro-area economy does well

bull These rules put limits on how much money a country can borrow

bull The rules of EMU ensure that a country has a sustainable economy - it can pay its debts and its pensions in the future

bull ECB based in Frankfurt in Germany makes a large contribution to the economic stability of the euro area and has the sole right of issuing banknotes and is in charge of the Monetary Policy

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

The EURO 1990rsquos

bull 1990 Aimed at boosting cross-border business activity the

first stage of EMU lifted restrictions on movements of

capital across internal EU borders

bull 1994 The European Monetary Institute was established in

Frankfurt to pave the way for the European Central Bank

bull 1999 the Euro was introduced as the single currency for

eleven EU member states Austria Belgium Finland

France Germany Ireland Italy Luxembourg the

Netherlands Portugal and Spain

The EURO1999-Present

bull 1999-2002 The Euro and the previous national currencies

were concurrently used in participating states

bull 2002 The participating countries had their previous

national currencies withdrawn permanently as legal tender

bull EU member states not yet using the Euro as currency

Denmark Sweden United Kingdom

bull All nations that have joined the EU since 1993 have pledged

to adopt the euro in due course

Banknote Denominations

Coins

Unity in Diversity - The eurouro

Cyprus Malta Slovakia

Administration

bull Euro is managed and administered by the Frankfurt-based European Central Bank (ECB) and the EuroSystem (composed of the central banks of the Eurozone countries)

bull As an independent central bank the ECB has sole authority to set monetary policy

bull The Eurosystem participates in the printing minting and distribution of notes and coins in all Member States and the operation of the Eurozone payment systems

Why was Euro Introduced

bull Since for most EU countries today majority of international trade is with other EU members a common currency has

bull Removed exchange rate risks from the internal market

bull Cut the costs of transactions

bull Encouraged firms to trade across national borders

bull The common currency has made the eurozone into an area of monetary stability in Europe

bull It has also forced EU states to adopt responsible economic policies that contain inflation and increase real living standards

Criteria to join EMU

bull EMU was agreed at Maastricht the Netherlands in Dec 1991

bull Five Criteria for countries to qualify for EMU

ndash Countries should have an inflation rate within 15 of the three EU countries with the lowest rate

ndash Long-term interest rates must be within 2 of the three lowest interest rates in EU

ndash Exchange rates must be kept within normal fluctuation margins of Europes exchange-rate mechanism

ndash The amount of money owed by a government for 1997 known as the budget deficit has to be below 3 of Gross Domestic Product

ndash The total amount of money owed by a government known as the public debt has to be less than 60 of GDP

Criteria to join EMU

bull Of the 12 countries wanting to join EMU initially only

Luxembourg and Finland fully met the currency criteria

bull The convergence criteria were somewhat flexible so that

Austria Belgium France Germany Ireland Italy the

Netherlands Portugal and Spain were able to join

bull Only Greece failed to qualify

bull The United Kingdom technically qualified for EMU but

decided not to join with the first wave of countries

bull Denmark and Sweden met the Maastricht criteria but have

not joined the European exchange-rate mechanism yet

EuroZone

bull Officially the Euro Area

bull Is and Economic and Monetary Union of 16 EU member states which have adopted the Euro currency

bull Monetary policy of the zone is the responsibility of the European Central Bank

Countries that come under Euro Zone

bull Austria

bull Belgium

bull Cyprus

bull Finland

bull France

bull Germany

bull Greece

bull Ireland

bull Italy

bull Luxembourg

bull Malta

bull Netherlands

bull Portugal

bull Slovak Republic

bull Slovenia

bull Spain

States refusing to join Eurozone

bull Greece and Sweden were originally excluded from the zone because they did not meet the entry criteria in full

bull Greece was subsequently admitted in 2001 but the people of Denmark and the government of the UK decided to remain outside the zone during the first wave

bull No economic justification exists for these two states to remain outside the zone

How does Eurozone Operate

bull Achieved through EMU All countries in the European Union are part of the EMU

bull Each country in the Euro area runs its own economy while keeping to certain rules to make sure that the euro remains strong and the euro-area economy does well

bull These rules put limits on how much money a country can borrow

bull The rules of EMU ensure that a country has a sustainable economy - it can pay its debts and its pensions in the future

bull ECB based in Frankfurt in Germany makes a large contribution to the economic stability of the euro area and has the sole right of issuing banknotes and is in charge of the Monetary Policy

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

The EURO1999-Present

bull 1999-2002 The Euro and the previous national currencies

were concurrently used in participating states

bull 2002 The participating countries had their previous

national currencies withdrawn permanently as legal tender

bull EU member states not yet using the Euro as currency

Denmark Sweden United Kingdom

bull All nations that have joined the EU since 1993 have pledged

to adopt the euro in due course

Banknote Denominations

Coins

Unity in Diversity - The eurouro

Cyprus Malta Slovakia

Administration

bull Euro is managed and administered by the Frankfurt-based European Central Bank (ECB) and the EuroSystem (composed of the central banks of the Eurozone countries)

bull As an independent central bank the ECB has sole authority to set monetary policy

bull The Eurosystem participates in the printing minting and distribution of notes and coins in all Member States and the operation of the Eurozone payment systems

Why was Euro Introduced

bull Since for most EU countries today majority of international trade is with other EU members a common currency has

bull Removed exchange rate risks from the internal market

bull Cut the costs of transactions

bull Encouraged firms to trade across national borders

bull The common currency has made the eurozone into an area of monetary stability in Europe

bull It has also forced EU states to adopt responsible economic policies that contain inflation and increase real living standards

Criteria to join EMU

bull EMU was agreed at Maastricht the Netherlands in Dec 1991

bull Five Criteria for countries to qualify for EMU

ndash Countries should have an inflation rate within 15 of the three EU countries with the lowest rate

ndash Long-term interest rates must be within 2 of the three lowest interest rates in EU

ndash Exchange rates must be kept within normal fluctuation margins of Europes exchange-rate mechanism

ndash The amount of money owed by a government for 1997 known as the budget deficit has to be below 3 of Gross Domestic Product

ndash The total amount of money owed by a government known as the public debt has to be less than 60 of GDP

Criteria to join EMU

bull Of the 12 countries wanting to join EMU initially only

Luxembourg and Finland fully met the currency criteria

bull The convergence criteria were somewhat flexible so that

Austria Belgium France Germany Ireland Italy the

Netherlands Portugal and Spain were able to join

bull Only Greece failed to qualify

bull The United Kingdom technically qualified for EMU but

decided not to join with the first wave of countries

bull Denmark and Sweden met the Maastricht criteria but have

not joined the European exchange-rate mechanism yet

EuroZone

bull Officially the Euro Area

bull Is and Economic and Monetary Union of 16 EU member states which have adopted the Euro currency

bull Monetary policy of the zone is the responsibility of the European Central Bank

Countries that come under Euro Zone

bull Austria

bull Belgium

bull Cyprus

bull Finland

bull France

bull Germany

bull Greece

bull Ireland

bull Italy

bull Luxembourg

bull Malta

bull Netherlands

bull Portugal

bull Slovak Republic

bull Slovenia

bull Spain

States refusing to join Eurozone

bull Greece and Sweden were originally excluded from the zone because they did not meet the entry criteria in full

bull Greece was subsequently admitted in 2001 but the people of Denmark and the government of the UK decided to remain outside the zone during the first wave

bull No economic justification exists for these two states to remain outside the zone

How does Eurozone Operate

bull Achieved through EMU All countries in the European Union are part of the EMU

bull Each country in the Euro area runs its own economy while keeping to certain rules to make sure that the euro remains strong and the euro-area economy does well

bull These rules put limits on how much money a country can borrow

bull The rules of EMU ensure that a country has a sustainable economy - it can pay its debts and its pensions in the future

bull ECB based in Frankfurt in Germany makes a large contribution to the economic stability of the euro area and has the sole right of issuing banknotes and is in charge of the Monetary Policy

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Banknote Denominations

Coins

Unity in Diversity - The eurouro

Cyprus Malta Slovakia

Administration

bull Euro is managed and administered by the Frankfurt-based European Central Bank (ECB) and the EuroSystem (composed of the central banks of the Eurozone countries)

bull As an independent central bank the ECB has sole authority to set monetary policy

bull The Eurosystem participates in the printing minting and distribution of notes and coins in all Member States and the operation of the Eurozone payment systems

Why was Euro Introduced

bull Since for most EU countries today majority of international trade is with other EU members a common currency has

bull Removed exchange rate risks from the internal market

bull Cut the costs of transactions

bull Encouraged firms to trade across national borders

bull The common currency has made the eurozone into an area of monetary stability in Europe

bull It has also forced EU states to adopt responsible economic policies that contain inflation and increase real living standards

Criteria to join EMU

bull EMU was agreed at Maastricht the Netherlands in Dec 1991

bull Five Criteria for countries to qualify for EMU

ndash Countries should have an inflation rate within 15 of the three EU countries with the lowest rate

ndash Long-term interest rates must be within 2 of the three lowest interest rates in EU

ndash Exchange rates must be kept within normal fluctuation margins of Europes exchange-rate mechanism

ndash The amount of money owed by a government for 1997 known as the budget deficit has to be below 3 of Gross Domestic Product

ndash The total amount of money owed by a government known as the public debt has to be less than 60 of GDP

Criteria to join EMU

bull Of the 12 countries wanting to join EMU initially only

Luxembourg and Finland fully met the currency criteria

bull The convergence criteria were somewhat flexible so that

Austria Belgium France Germany Ireland Italy the

Netherlands Portugal and Spain were able to join

bull Only Greece failed to qualify

bull The United Kingdom technically qualified for EMU but

decided not to join with the first wave of countries

bull Denmark and Sweden met the Maastricht criteria but have

not joined the European exchange-rate mechanism yet

EuroZone

bull Officially the Euro Area

bull Is and Economic and Monetary Union of 16 EU member states which have adopted the Euro currency

bull Monetary policy of the zone is the responsibility of the European Central Bank

Countries that come under Euro Zone

bull Austria

bull Belgium

bull Cyprus

bull Finland

bull France

bull Germany

bull Greece

bull Ireland

bull Italy

bull Luxembourg

bull Malta

bull Netherlands

bull Portugal

bull Slovak Republic

bull Slovenia

bull Spain

States refusing to join Eurozone

bull Greece and Sweden were originally excluded from the zone because they did not meet the entry criteria in full

bull Greece was subsequently admitted in 2001 but the people of Denmark and the government of the UK decided to remain outside the zone during the first wave

bull No economic justification exists for these two states to remain outside the zone

How does Eurozone Operate

bull Achieved through EMU All countries in the European Union are part of the EMU

bull Each country in the Euro area runs its own economy while keeping to certain rules to make sure that the euro remains strong and the euro-area economy does well

bull These rules put limits on how much money a country can borrow

bull The rules of EMU ensure that a country has a sustainable economy - it can pay its debts and its pensions in the future

bull ECB based in Frankfurt in Germany makes a large contribution to the economic stability of the euro area and has the sole right of issuing banknotes and is in charge of the Monetary Policy

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Coins

Unity in Diversity - The eurouro

Cyprus Malta Slovakia

Administration

bull Euro is managed and administered by the Frankfurt-based European Central Bank (ECB) and the EuroSystem (composed of the central banks of the Eurozone countries)

bull As an independent central bank the ECB has sole authority to set monetary policy

bull The Eurosystem participates in the printing minting and distribution of notes and coins in all Member States and the operation of the Eurozone payment systems

Why was Euro Introduced

bull Since for most EU countries today majority of international trade is with other EU members a common currency has

bull Removed exchange rate risks from the internal market

bull Cut the costs of transactions

bull Encouraged firms to trade across national borders

bull The common currency has made the eurozone into an area of monetary stability in Europe

bull It has also forced EU states to adopt responsible economic policies that contain inflation and increase real living standards

Criteria to join EMU

bull EMU was agreed at Maastricht the Netherlands in Dec 1991

bull Five Criteria for countries to qualify for EMU

ndash Countries should have an inflation rate within 15 of the three EU countries with the lowest rate

ndash Long-term interest rates must be within 2 of the three lowest interest rates in EU

ndash Exchange rates must be kept within normal fluctuation margins of Europes exchange-rate mechanism

ndash The amount of money owed by a government for 1997 known as the budget deficit has to be below 3 of Gross Domestic Product

ndash The total amount of money owed by a government known as the public debt has to be less than 60 of GDP

Criteria to join EMU

bull Of the 12 countries wanting to join EMU initially only

Luxembourg and Finland fully met the currency criteria

bull The convergence criteria were somewhat flexible so that

Austria Belgium France Germany Ireland Italy the

Netherlands Portugal and Spain were able to join

bull Only Greece failed to qualify

bull The United Kingdom technically qualified for EMU but

decided not to join with the first wave of countries

bull Denmark and Sweden met the Maastricht criteria but have

not joined the European exchange-rate mechanism yet

EuroZone

bull Officially the Euro Area

bull Is and Economic and Monetary Union of 16 EU member states which have adopted the Euro currency

bull Monetary policy of the zone is the responsibility of the European Central Bank

Countries that come under Euro Zone

bull Austria

bull Belgium

bull Cyprus

bull Finland

bull France

bull Germany

bull Greece

bull Ireland

bull Italy

bull Luxembourg

bull Malta

bull Netherlands

bull Portugal

bull Slovak Republic

bull Slovenia

bull Spain

States refusing to join Eurozone

bull Greece and Sweden were originally excluded from the zone because they did not meet the entry criteria in full

bull Greece was subsequently admitted in 2001 but the people of Denmark and the government of the UK decided to remain outside the zone during the first wave

bull No economic justification exists for these two states to remain outside the zone

How does Eurozone Operate

bull Achieved through EMU All countries in the European Union are part of the EMU

bull Each country in the Euro area runs its own economy while keeping to certain rules to make sure that the euro remains strong and the euro-area economy does well

bull These rules put limits on how much money a country can borrow

bull The rules of EMU ensure that a country has a sustainable economy - it can pay its debts and its pensions in the future

bull ECB based in Frankfurt in Germany makes a large contribution to the economic stability of the euro area and has the sole right of issuing banknotes and is in charge of the Monetary Policy

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Unity in Diversity - The eurouro

Cyprus Malta Slovakia

Administration

bull Euro is managed and administered by the Frankfurt-based European Central Bank (ECB) and the EuroSystem (composed of the central banks of the Eurozone countries)

bull As an independent central bank the ECB has sole authority to set monetary policy

bull The Eurosystem participates in the printing minting and distribution of notes and coins in all Member States and the operation of the Eurozone payment systems

Why was Euro Introduced

bull Since for most EU countries today majority of international trade is with other EU members a common currency has

bull Removed exchange rate risks from the internal market

bull Cut the costs of transactions

bull Encouraged firms to trade across national borders

bull The common currency has made the eurozone into an area of monetary stability in Europe

bull It has also forced EU states to adopt responsible economic policies that contain inflation and increase real living standards

Criteria to join EMU

bull EMU was agreed at Maastricht the Netherlands in Dec 1991

bull Five Criteria for countries to qualify for EMU

ndash Countries should have an inflation rate within 15 of the three EU countries with the lowest rate

ndash Long-term interest rates must be within 2 of the three lowest interest rates in EU

ndash Exchange rates must be kept within normal fluctuation margins of Europes exchange-rate mechanism

ndash The amount of money owed by a government for 1997 known as the budget deficit has to be below 3 of Gross Domestic Product

ndash The total amount of money owed by a government known as the public debt has to be less than 60 of GDP

Criteria to join EMU

bull Of the 12 countries wanting to join EMU initially only

Luxembourg and Finland fully met the currency criteria

bull The convergence criteria were somewhat flexible so that

Austria Belgium France Germany Ireland Italy the

Netherlands Portugal and Spain were able to join

bull Only Greece failed to qualify

bull The United Kingdom technically qualified for EMU but

decided not to join with the first wave of countries

bull Denmark and Sweden met the Maastricht criteria but have

not joined the European exchange-rate mechanism yet

EuroZone

bull Officially the Euro Area

bull Is and Economic and Monetary Union of 16 EU member states which have adopted the Euro currency

bull Monetary policy of the zone is the responsibility of the European Central Bank

Countries that come under Euro Zone

bull Austria

bull Belgium

bull Cyprus

bull Finland

bull France

bull Germany

bull Greece

bull Ireland

bull Italy

bull Luxembourg

bull Malta

bull Netherlands

bull Portugal

bull Slovak Republic

bull Slovenia

bull Spain

States refusing to join Eurozone

bull Greece and Sweden were originally excluded from the zone because they did not meet the entry criteria in full

bull Greece was subsequently admitted in 2001 but the people of Denmark and the government of the UK decided to remain outside the zone during the first wave

bull No economic justification exists for these two states to remain outside the zone

How does Eurozone Operate

bull Achieved through EMU All countries in the European Union are part of the EMU

bull Each country in the Euro area runs its own economy while keeping to certain rules to make sure that the euro remains strong and the euro-area economy does well

bull These rules put limits on how much money a country can borrow

bull The rules of EMU ensure that a country has a sustainable economy - it can pay its debts and its pensions in the future

bull ECB based in Frankfurt in Germany makes a large contribution to the economic stability of the euro area and has the sole right of issuing banknotes and is in charge of the Monetary Policy

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Administration

bull Euro is managed and administered by the Frankfurt-based European Central Bank (ECB) and the EuroSystem (composed of the central banks of the Eurozone countries)

bull As an independent central bank the ECB has sole authority to set monetary policy

bull The Eurosystem participates in the printing minting and distribution of notes and coins in all Member States and the operation of the Eurozone payment systems

Why was Euro Introduced

bull Since for most EU countries today majority of international trade is with other EU members a common currency has

bull Removed exchange rate risks from the internal market

bull Cut the costs of transactions

bull Encouraged firms to trade across national borders

bull The common currency has made the eurozone into an area of monetary stability in Europe

bull It has also forced EU states to adopt responsible economic policies that contain inflation and increase real living standards

Criteria to join EMU

bull EMU was agreed at Maastricht the Netherlands in Dec 1991

bull Five Criteria for countries to qualify for EMU

ndash Countries should have an inflation rate within 15 of the three EU countries with the lowest rate

ndash Long-term interest rates must be within 2 of the three lowest interest rates in EU

ndash Exchange rates must be kept within normal fluctuation margins of Europes exchange-rate mechanism

ndash The amount of money owed by a government for 1997 known as the budget deficit has to be below 3 of Gross Domestic Product

ndash The total amount of money owed by a government known as the public debt has to be less than 60 of GDP

Criteria to join EMU

bull Of the 12 countries wanting to join EMU initially only

Luxembourg and Finland fully met the currency criteria

bull The convergence criteria were somewhat flexible so that

Austria Belgium France Germany Ireland Italy the

Netherlands Portugal and Spain were able to join

bull Only Greece failed to qualify

bull The United Kingdom technically qualified for EMU but

decided not to join with the first wave of countries

bull Denmark and Sweden met the Maastricht criteria but have

not joined the European exchange-rate mechanism yet

EuroZone

bull Officially the Euro Area

bull Is and Economic and Monetary Union of 16 EU member states which have adopted the Euro currency

bull Monetary policy of the zone is the responsibility of the European Central Bank

Countries that come under Euro Zone

bull Austria

bull Belgium

bull Cyprus

bull Finland

bull France

bull Germany

bull Greece

bull Ireland

bull Italy

bull Luxembourg

bull Malta

bull Netherlands

bull Portugal

bull Slovak Republic

bull Slovenia

bull Spain

States refusing to join Eurozone

bull Greece and Sweden were originally excluded from the zone because they did not meet the entry criteria in full

bull Greece was subsequently admitted in 2001 but the people of Denmark and the government of the UK decided to remain outside the zone during the first wave

bull No economic justification exists for these two states to remain outside the zone

How does Eurozone Operate

bull Achieved through EMU All countries in the European Union are part of the EMU

bull Each country in the Euro area runs its own economy while keeping to certain rules to make sure that the euro remains strong and the euro-area economy does well

bull These rules put limits on how much money a country can borrow

bull The rules of EMU ensure that a country has a sustainable economy - it can pay its debts and its pensions in the future

bull ECB based in Frankfurt in Germany makes a large contribution to the economic stability of the euro area and has the sole right of issuing banknotes and is in charge of the Monetary Policy

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Why was Euro Introduced

bull Since for most EU countries today majority of international trade is with other EU members a common currency has

bull Removed exchange rate risks from the internal market

bull Cut the costs of transactions

bull Encouraged firms to trade across national borders

bull The common currency has made the eurozone into an area of monetary stability in Europe

bull It has also forced EU states to adopt responsible economic policies that contain inflation and increase real living standards

Criteria to join EMU

bull EMU was agreed at Maastricht the Netherlands in Dec 1991

bull Five Criteria for countries to qualify for EMU

ndash Countries should have an inflation rate within 15 of the three EU countries with the lowest rate

ndash Long-term interest rates must be within 2 of the three lowest interest rates in EU

ndash Exchange rates must be kept within normal fluctuation margins of Europes exchange-rate mechanism

ndash The amount of money owed by a government for 1997 known as the budget deficit has to be below 3 of Gross Domestic Product

ndash The total amount of money owed by a government known as the public debt has to be less than 60 of GDP

Criteria to join EMU

bull Of the 12 countries wanting to join EMU initially only

Luxembourg and Finland fully met the currency criteria

bull The convergence criteria were somewhat flexible so that

Austria Belgium France Germany Ireland Italy the

Netherlands Portugal and Spain were able to join

bull Only Greece failed to qualify

bull The United Kingdom technically qualified for EMU but

decided not to join with the first wave of countries

bull Denmark and Sweden met the Maastricht criteria but have

not joined the European exchange-rate mechanism yet

EuroZone

bull Officially the Euro Area

bull Is and Economic and Monetary Union of 16 EU member states which have adopted the Euro currency

bull Monetary policy of the zone is the responsibility of the European Central Bank

Countries that come under Euro Zone

bull Austria

bull Belgium

bull Cyprus

bull Finland

bull France

bull Germany

bull Greece

bull Ireland

bull Italy

bull Luxembourg

bull Malta

bull Netherlands

bull Portugal

bull Slovak Republic

bull Slovenia

bull Spain

States refusing to join Eurozone

bull Greece and Sweden were originally excluded from the zone because they did not meet the entry criteria in full

bull Greece was subsequently admitted in 2001 but the people of Denmark and the government of the UK decided to remain outside the zone during the first wave

bull No economic justification exists for these two states to remain outside the zone

How does Eurozone Operate

bull Achieved through EMU All countries in the European Union are part of the EMU

bull Each country in the Euro area runs its own economy while keeping to certain rules to make sure that the euro remains strong and the euro-area economy does well

bull These rules put limits on how much money a country can borrow

bull The rules of EMU ensure that a country has a sustainable economy - it can pay its debts and its pensions in the future

bull ECB based in Frankfurt in Germany makes a large contribution to the economic stability of the euro area and has the sole right of issuing banknotes and is in charge of the Monetary Policy

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Criteria to join EMU

bull EMU was agreed at Maastricht the Netherlands in Dec 1991

bull Five Criteria for countries to qualify for EMU

ndash Countries should have an inflation rate within 15 of the three EU countries with the lowest rate

ndash Long-term interest rates must be within 2 of the three lowest interest rates in EU

ndash Exchange rates must be kept within normal fluctuation margins of Europes exchange-rate mechanism

ndash The amount of money owed by a government for 1997 known as the budget deficit has to be below 3 of Gross Domestic Product

ndash The total amount of money owed by a government known as the public debt has to be less than 60 of GDP

Criteria to join EMU

bull Of the 12 countries wanting to join EMU initially only

Luxembourg and Finland fully met the currency criteria

bull The convergence criteria were somewhat flexible so that

Austria Belgium France Germany Ireland Italy the

Netherlands Portugal and Spain were able to join

bull Only Greece failed to qualify

bull The United Kingdom technically qualified for EMU but

decided not to join with the first wave of countries

bull Denmark and Sweden met the Maastricht criteria but have

not joined the European exchange-rate mechanism yet

EuroZone

bull Officially the Euro Area

bull Is and Economic and Monetary Union of 16 EU member states which have adopted the Euro currency

bull Monetary policy of the zone is the responsibility of the European Central Bank

Countries that come under Euro Zone

bull Austria

bull Belgium

bull Cyprus

bull Finland

bull France

bull Germany

bull Greece

bull Ireland

bull Italy

bull Luxembourg

bull Malta

bull Netherlands

bull Portugal

bull Slovak Republic

bull Slovenia

bull Spain

States refusing to join Eurozone

bull Greece and Sweden were originally excluded from the zone because they did not meet the entry criteria in full

bull Greece was subsequently admitted in 2001 but the people of Denmark and the government of the UK decided to remain outside the zone during the first wave

bull No economic justification exists for these two states to remain outside the zone

How does Eurozone Operate

bull Achieved through EMU All countries in the European Union are part of the EMU

bull Each country in the Euro area runs its own economy while keeping to certain rules to make sure that the euro remains strong and the euro-area economy does well

bull These rules put limits on how much money a country can borrow

bull The rules of EMU ensure that a country has a sustainable economy - it can pay its debts and its pensions in the future

bull ECB based in Frankfurt in Germany makes a large contribution to the economic stability of the euro area and has the sole right of issuing banknotes and is in charge of the Monetary Policy

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Criteria to join EMU

bull Of the 12 countries wanting to join EMU initially only

Luxembourg and Finland fully met the currency criteria

bull The convergence criteria were somewhat flexible so that

Austria Belgium France Germany Ireland Italy the

Netherlands Portugal and Spain were able to join

bull Only Greece failed to qualify

bull The United Kingdom technically qualified for EMU but

decided not to join with the first wave of countries

bull Denmark and Sweden met the Maastricht criteria but have

not joined the European exchange-rate mechanism yet

EuroZone

bull Officially the Euro Area

bull Is and Economic and Monetary Union of 16 EU member states which have adopted the Euro currency

bull Monetary policy of the zone is the responsibility of the European Central Bank

Countries that come under Euro Zone

bull Austria

bull Belgium

bull Cyprus

bull Finland

bull France

bull Germany

bull Greece

bull Ireland

bull Italy

bull Luxembourg

bull Malta

bull Netherlands

bull Portugal

bull Slovak Republic

bull Slovenia

bull Spain

States refusing to join Eurozone

bull Greece and Sweden were originally excluded from the zone because they did not meet the entry criteria in full

bull Greece was subsequently admitted in 2001 but the people of Denmark and the government of the UK decided to remain outside the zone during the first wave

bull No economic justification exists for these two states to remain outside the zone

How does Eurozone Operate

bull Achieved through EMU All countries in the European Union are part of the EMU

bull Each country in the Euro area runs its own economy while keeping to certain rules to make sure that the euro remains strong and the euro-area economy does well

bull These rules put limits on how much money a country can borrow

bull The rules of EMU ensure that a country has a sustainable economy - it can pay its debts and its pensions in the future

bull ECB based in Frankfurt in Germany makes a large contribution to the economic stability of the euro area and has the sole right of issuing banknotes and is in charge of the Monetary Policy

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

EuroZone

bull Officially the Euro Area

bull Is and Economic and Monetary Union of 16 EU member states which have adopted the Euro currency

bull Monetary policy of the zone is the responsibility of the European Central Bank

Countries that come under Euro Zone

bull Austria

bull Belgium

bull Cyprus

bull Finland

bull France

bull Germany

bull Greece

bull Ireland

bull Italy

bull Luxembourg

bull Malta

bull Netherlands

bull Portugal

bull Slovak Republic

bull Slovenia

bull Spain

States refusing to join Eurozone

bull Greece and Sweden were originally excluded from the zone because they did not meet the entry criteria in full

bull Greece was subsequently admitted in 2001 but the people of Denmark and the government of the UK decided to remain outside the zone during the first wave

bull No economic justification exists for these two states to remain outside the zone

How does Eurozone Operate

bull Achieved through EMU All countries in the European Union are part of the EMU

bull Each country in the Euro area runs its own economy while keeping to certain rules to make sure that the euro remains strong and the euro-area economy does well

bull These rules put limits on how much money a country can borrow

bull The rules of EMU ensure that a country has a sustainable economy - it can pay its debts and its pensions in the future

bull ECB based in Frankfurt in Germany makes a large contribution to the economic stability of the euro area and has the sole right of issuing banknotes and is in charge of the Monetary Policy

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Countries that come under Euro Zone

bull Austria

bull Belgium

bull Cyprus

bull Finland

bull France

bull Germany

bull Greece

bull Ireland

bull Italy

bull Luxembourg

bull Malta

bull Netherlands

bull Portugal

bull Slovak Republic

bull Slovenia

bull Spain

States refusing to join Eurozone

bull Greece and Sweden were originally excluded from the zone because they did not meet the entry criteria in full

bull Greece was subsequently admitted in 2001 but the people of Denmark and the government of the UK decided to remain outside the zone during the first wave

bull No economic justification exists for these two states to remain outside the zone

How does Eurozone Operate

bull Achieved through EMU All countries in the European Union are part of the EMU

bull Each country in the Euro area runs its own economy while keeping to certain rules to make sure that the euro remains strong and the euro-area economy does well

bull These rules put limits on how much money a country can borrow

bull The rules of EMU ensure that a country has a sustainable economy - it can pay its debts and its pensions in the future

bull ECB based in Frankfurt in Germany makes a large contribution to the economic stability of the euro area and has the sole right of issuing banknotes and is in charge of the Monetary Policy

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

States refusing to join Eurozone

bull Greece and Sweden were originally excluded from the zone because they did not meet the entry criteria in full

bull Greece was subsequently admitted in 2001 but the people of Denmark and the government of the UK decided to remain outside the zone during the first wave

bull No economic justification exists for these two states to remain outside the zone

How does Eurozone Operate

bull Achieved through EMU All countries in the European Union are part of the EMU

bull Each country in the Euro area runs its own economy while keeping to certain rules to make sure that the euro remains strong and the euro-area economy does well

bull These rules put limits on how much money a country can borrow

bull The rules of EMU ensure that a country has a sustainable economy - it can pay its debts and its pensions in the future

bull ECB based in Frankfurt in Germany makes a large contribution to the economic stability of the euro area and has the sole right of issuing banknotes and is in charge of the Monetary Policy

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

How does Eurozone Operate

bull Achieved through EMU All countries in the European Union are part of the EMU

bull Each country in the Euro area runs its own economy while keeping to certain rules to make sure that the euro remains strong and the euro-area economy does well

bull These rules put limits on how much money a country can borrow

bull The rules of EMU ensure that a country has a sustainable economy - it can pay its debts and its pensions in the future

bull ECB based in Frankfurt in Germany makes a large contribution to the economic stability of the euro area and has the sole right of issuing banknotes and is in charge of the Monetary Policy

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Effects of Single Currency on EU Member States Outside the Zone

bull The 12 EU member governments outside the Eurozone cannot take part in the Euro-15 Council that deals with economic and fiscal policies within the common currency area

bull Member states not in the first two waves must nevertheless avoid excessive government deficits and continue to regard their exchange rate policies as a matter of common interest

bull No representatives on the ECB board

bull No voice in decisions regarding Eurozone interest rate ndashalthough it directly affects the value of their currency

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Direct and Indirect Usage of Euro

bull Sole Currency of 16 EU member states

bull Outside the EU the euro is also the sole currency of Montenegro and Kosovo and several European micro states as well as in three overseas territories of EU states that are

not themselves part of the EU

bull Gaining increasing international usage as a trading currency in Cuba North Korea and Syria

bull Since introduction euro has been the second most widely-held international reserve currency after US dollar

bull Share of the euro as a reserve currency has increased from 179 in 1999 to 265 in 2008

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Euro as 1st International Reserve Currency

bull Widely debated among economists

bull Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is absolutely conceivable that the euro will replace the dollar as reserve currency or will be traded as an equally important reserve currency

bull In contrast the Greenspans 2007 assessment shows the euros increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Euro Advantages

bull Elimination of exchange-rate fluctuations

bull Price transparency

bull Transaction costs

bull Increased trade across borders

bull Increased cross-border employment

bull Simplified billing

bull Expanding markets for business

bull Financial market stability

bull Macroeconomic stability

bull Lower interest rate

bull Structural reform for European economies

bull Unites Europe

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Euro Disadvantages

bull Cost of transitioning 12 countries currencies over to a single currencybull Including accounting systems software printed materials signs

vending machines parking meters phone booths and every other type of machine that accepts currency

bull Training for employees managers and consumers

bull Countries cannot adjust interest rates

bull Countries cannot adjust their exchange rate

bull Restricted government spending

bull Political shock

bull Loss of cultural identity

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Threats facing the Euro

bull The differences among Eurozone countries jeopardize confidence in the euro and threatens cohesiveness of the euro area

bull Bond markets are indicating that investors are increasingly shunning offerings from Portugal Spain and Ireland

bull After the Greek Debt Crisis UBS advised investors to sell Euros noting that the currency was likely to lose value

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Threats facing the Eurobull Strong fourth-quarter growth in the US

coupled with a rather tepid recovery in Europe has led euro lose 9 from Dec lsquo09 ndashJan rsquo10

bull Euro would go down even further because foreign central banks are assessing the risk of a possible collapse of the Eurozone

bull Struggling euro zone countries would be tempted to abandon Euro to gain back control over interest amp exchange rates thereby leading to collapse

Thank You

Thank You