History of the EuroBy Lindsey Johnston

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Agenda

• The European Union• Treaties

• The European Central Bank

• The Euro/Eurozone• Who does not use the Euro?

• Pros/Cons

• PIIGS

• Converting to the Euro

• Europa Series of Euro Banknotes

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European Economic Community European Union

• A unique economic & political partnership between 27 European countries

• First created in 1958 in the aftermath of the Second World War

• Based on the rule of law: everything founded on treaties, voluntarily and democratically agreed upon by all member countries

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Treaties

• 1951: Treaty of Paris • European Coal and Steel Community

• 1957: Treaty of Rome• European Economic Community (EEC)

• 1993: Maastricht Treaty• European Union (EU) & the euro

• 1997: Treaty of Amsterdam

• 2009: Treaty of Lisbon

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Development of the European Union

1951 1973 1981 1986 1995 2003 2007• Belgium• France• Germany• Italy• Luxembourg• Netherlands

• Denmark• Ireland• United

Kingdom

• Greece • Spain• Portugal

• Austria• Finland• Sweden

• Czech Republic

• Cyprus• Estonia• Latvia• Lithuania• Hungary• Malta• Poland• Slovenia• Slovakia

• Bulgaria• Romania

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Membership Conditions

• Legal Requirements

• ‘Copenhagen Criteria’• Stable institutions guaranteeing

democracy, the rule of law, human rights and respect for and protection of minorities;

• A functioning market economy and the capacity to cope with competitive pressure and market forces within the Union;

• The ability to take on obligations of membership.

• Accession Negotiations

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Who is Next? Croatia

Candidate Countries

Iceland

Montenegro

Serbia

The former Yugoslav Republic of Macedonia

Turkey

Potential Candidate Countries

Albania

Bosnia and Herzegovina

Kosovo

“United in Diversity”

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The Euro/Eurozone

• The single currency of 17 of the 27 Member States

• 1999: euro used for non-cash transactions of 11 Member States

• 2002: used in physical form of banknotes and coins for all payments

• Each new EU Member State is expected to adopt the euro once it meets necessary criteria.

Year Countries

1999 Belgium, Germany, Ireland, Spain, France, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland

2001 Greece

2007 Slovenia

2008 Cyprus, Malta

2009 Slovakia

2011 Estonia

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Conversion Rates, January 1st 1999

Country 1 euro =

Belgium Belgian francs 40.3399

Germany Deutsche Mark 1.95583

Spain Spanish pesetas 166.386

France French francs 6.55957

Ireland Irish pounds 0.787564

Italy Italian lire 1936.27

Luxembourg Luxembourg francs 40.3399

Netherlands Dutch guilders 2.20371

Austria Austrian schillings 13.7603

Portugal Portuguese escudos 200.482

Finland Finnish markkas 5.94573

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Who does not use the Euro? Why?

Denmark

The United Kingdom

Sweden

Latvia – set date: 2014

Romania – set date: 2014

Hungary

Poland

Bulgaria

Lithuania

Czech Republic

• Denmark & UK have opt-out clauses in the Treaty exempting them from participation

• Sweden deliberately did not meet criteria de facto opt-out

• Others are currently preparing to join the Eurozone

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Pros of the Euro:

• Promotes trade stable economy

• Greater security and more opportunities for businesses and markets

• Eliminates fluctuating exchange rates/costs

• More integrated financial markets

• A stronger presence for the EU in the global economy

• A tangible sign of a European identity

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Cons of the Euro:

• Limits independence of the monetary policy being implemented by a country

• Loss of national sovereignty

• Larger countries can directly/indirectly influence decisions of the ECB

• Debt problems…

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PIIGS

• Portugal, Ireland, Italy, Greece and Spain

• Considered the European Union’s weakest link

• Unstable economies financial trouble & national debt

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Joining the Eurozone – ‘Convergence Criteria’What is measured How it is measured Convergence criteria

Price stability Harmonized consumer price inflation

Not more then 1.5% points above the rate of the three best performing Member States

Sound public finances Government deficit as % of GDP

Reference value: not more than 3%

Sustainable public finances

Government debt as % of GDP Reference value: not more than 60%

Durability of convergence

Long-term interest rate Not more than 2% points above the rate of the three best performing Member States in terms of price stability

Exchange rate stability Deviation from a central rate Participation in ERM (±2.25% of the central states) for two years without severe tensions

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Europa Series of Euro Banknotes

• Second series of euro banknotes

• Enhanced security features

• Will be gradually introduced in the euro area over the next few years

• €5 banknote started circulating on May 2nd, 2013

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Summary: History of the Euro

• Set as a goal in the Maastricht Treaty in 1992

• Born as a virtual currency in 1999

• First appeared in people’s pockets in 2002

• Is an important and tangible indicator of the European Union’s values:• Freedom

• Democracy

• The rule of law

• Respect for human rights

• Equality

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References

• "Creating The Euro Zone." Across the Pond. N.p., n.d. Web. 08 May 2013. <http://iuwest.wordpress.com/2011/12/12/creating-the-euro-zone/>.

• "Scenarios for Adopting the Euro - European Commission." Scenarios for Adopting the Euro - European Commission. N.p., n.d. Web. 30 May 2013. <http://ec.europa.eu/economy_finance/euro/adoption/scenarios/index_en.htm>.

• “The Euro Benefits and Challenges.” ECB:. N.p., n.d. Web. 30 May 2013. <http://www.ecb.int/press/key/date/2007/html/sp071126.en.html>.

• "Why New Banknotes?" - ECB. N.p., n.d. Web. 30 May 2013. <http://www.new-euro-banknotes.eu/Europa-Series/Why-new-banknotes>.

• Ramos, John Louie. "The Benefits and Disadvantages Adopting the Euro." Helium. Helium, 10 July 2011. Web. 02 June 2013. <http://www.helium.com/items/2193436-the-benefits-and-disadvantages-adopting-the-euro>.

• Alesina, Alberto, and Francesco Giavazzi. Europe and the Euro. Chicago: University of Chicago, 2010. Print.

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Thank You! Questions?