From Europe to the Euro From Europe to the Euro an outline What is the EU Before the Euro The Euro Time line Map United in diversity AdvantagesBenefits Some definitions Eurozone Advantages ID: 1029125
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1. THE EUROPEAN UNIONLesson 3From Europe to the Euro
2. From Europe to the Euroan outlineWhat is the EUBefore the EuroThe EuroTime lineMapUnited in diversityAdvantages/BenefitsSome definitionsEuro-zoneAdvantagesDisadvantagesEuropean Central Bank
3. What is the European Union? Union – Family of European countries committed to working together for peace and prosperity Shared values: liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law. Largest economic region in the world. World’s most successful model for advancing peace and democracy (2012 Nobel Peace Prize winner). World’s largest donor providing assistance to developing countries.
4. Sizing up the European Unionover 500 million combined population 28 member states20% of global exports and imports4.2 million km2 total surface area24 official languages
5. Before the Euro: a multitude of currencies Difficult inter-state trading Comparing prices is more difficult Currency exchange can be irregular in contracts and loans
6. Before the EuroFlagCountryPre – Euro currencyFlagCountryPre – Euro currency AustriaSchilling IrelandIrish pound BelgiumBelgian franc ItalyItalian lira CyprusCypriot pound LatviaLats NetherlandsGuilder LithuaniaLitas EstoniaKroon LuxembourgLuxembourgian franc FinlandMarkka MaltaMaltese lira FranceFrench franc PortugalEscudo GermanyMark SlovakiaKoruna GreeceDrachma SloveniaTolarSpainPeseta
7. The EuroOne of the most important accomplishments of the EU is the establishment of a single currency
8. Euro Time LineThe Euro and the Economic and Monetary Union (EMU)882002 Banknotes and coinsIntroduction of euro banknotes and coins, replacing national currencies1999 Introduction of the euroThe euro is officially introduced as an accounting currency in Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.1992 Maastricht TreatyIntroduces the euro as a common currency
9. The Euro In 1999, the euro area was established as a currency in 11 of the then 15 EU Member States.Of the 28 EU Member States today, 18 have adopted the euro. Can be used everywhere in the 18 country euro zoneCoins: one side with national symbols, one side commonNotes: no national side EU countries using the euro in 2013EU countries not using the euro
10. United in Diversity - The €uro
11. United in Diversity - The €uro
12. Some of the Euro’s advantages European Central Bank keeps price inflation low so interest rates also remain low Travelling is made easier Comparing prices is made simpler International trade is facilitated Currency exchange costs are eliminated
13. What Are the Benefits of the Single Market?Increased competition Lower prices Wider choice of products and services More jobs+More opportunities to live, work and study in other EU countries+Easier travel+
14. What Are the Additional Benefits and “Costs” of Adopting the Euro?Price stability and security of purchasing powerElimination of transaction costsPrice transparency across countriesCountries can no longer change their interest rate or their exchange rate. Elimination of exchange rate risks1€2€Countries cannot have an independent monetary policy!
15. EMU? Euro? Single Market? Some Definitions…15TreatyEconomic integration is the cornerstone of the EUEconomic and Monetary Union (EMU) an objective in the EU TreatiesThe single market – elimination of trade barriers; free movement of goods, services, capital and people28 member statesThe euro zone – Countries share the euro as their currency, European Central Bank (ECB) sets interest rates.18 member states28member statesEnhanced policy coordination – countries maintain control over economic policy, but have to coordinate at EU level
16. Euro-zone: who’s in, who’s out The euro (€) is the official currency of 19 out of 28 EU member countries. These countries are collectively known as the Eurozone. EurozoneAustriaBelgiumCyprusEstoniaFinlandFranceGermanyGreeceIrelandItalyNon Eurozone BulgariaCroatiaCzech RepublicHungaryPolandRomaniaSwedenOut of Eurozone DenmarkU.K.EurozoneLatviaLithuaniaLuxembourgMaltathe NetherlandsPortugalSlovakiaSloveniaSpain
17. Euro zone ≠ European Union Of the 28 EU Member States today, 18 have adopted the euro What about the other 10?17Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, Lithuania and SpainDenmark and the United Kingdom have opted out and are not obliged to adopt the euro.Bulgaria, Czech Republic, Hungary, Latvia,, Poland, Romania, Sweden aim to adopt the euro eventually, when they are ready.Map: Wikimedia Commons
18. Advantages to joining the EMUSingle Monetary PolicyAdoption of the Euro as a way of creating world wide competitionEuropean union is a stronger world power Strengthen Banking System Advance international trade
19. Disadvantages to joining the EMUCreates a conflict of interest between the economically weak and strong countries. Higher average unemployment rate then if countries could pursue separate monetary policyBefore joining the country controlled it’s own money supplyEx.: Countries maintained individual monetary policies that corresponded to their financial and national status for thousands of yearsMonetary decisions unique for the circumstances of the country Ex.: Monetary policy for France and Germany could prove very costly for Spain and Portugal.Surrender their individual policies on inflation, unemployment, and economic growth
20. The European Central Bank – managing the EuroThe European Central Bank (ECB) is the central bank for the euro area. The ECB’s main task is to maintain price stability in the euro area, i.e. keep inflation low.They have the exclusive right to authorize the issue of banknotes.The ECB operates independently from Member State governments.
21. Forms of Economic Integrationfree trade area - free movement of goods and services between member countriesExample: NAFTAcustoms union = free trade area + common external trade barriersExample: Mercosur (Brazil, Argentina, Paraguay, Uruguay)common market = customs union + free movement of labor and capitalExample: European Union after Single Market Programeconomic union = common market + common currency ( common monetary policy and coordinated fiscal policies) Example: European Union after Maastricht Treaty
22. Outline of the PresentationThe €uro Currency and the Monetary Union- United in Diversity22
23. How Do Countries Qualify for Membership of the Euro Area?Countries must fulfill the convergence (or “Maastricht”) criteria23Price Stability (low inflation)Public finance discipline (low government debt and deficit)Interest rate convergence%Exchange rate stability