Euro

EURO

Executed by Tetiana Olinycheno

The 2nd year student of MEO program

by Specialty “Economic and Organization of Enterprises”

What does it mean “euro”?

The euro is the single currency shared by (currently) 18 of the European Union's Member States, which together make up the euro area.The euro is the second largest reserve currency as well as the second most traded currency in the world after the United States dollar.The euro zone is the second largest economy in the world.1

History of the euro

The 1st

step

• The currency was introduced in non-physical form (electronic transfers, banking, etc.) at midnight on 1 January 1999, when the national currencies of participating countries (the Eurozone). On the first day of trading, 5 January, the euro climbed to 1.19 US$.

The 2nd

step

• Since 1 January 2002 the euro has been circulating in physical form, as banknotes and coins. The euro is not the currency of all EU Member States.

The euro and Economic and Monetary Union

All EU Member States form part of Economic and Monetary Union (EMU), which can be described as an advanced stage of economic integration based on a single market. It involves close co-ordination of economic and fiscal policies and, a single monetary policy and a single currency - the euro. These conditions are known as the 'convergence criteria' (or 'Maastricht criteria') and include low and stable inflation, exchange rate stability and sound public finances.

Who manages it?

• With the launch of the euro monetary policy became the responsibility of the independent European Central Bank (ECB), which was created for that purpose, and the national central banks of the Member States having adopted the euro. Together they compose the Eurosystem.

Who uses it?

The euro is the currency of the 333 million people who live in the 18 euro area countries. It is also used, either formally as legal tender or for practical purposes, by other countries such as close neighbours and former colonies. The euro has become the second most important international currency after the dollar.

Global currency reserves

Why do we need it?

Apart from making travelling easier within the EU, a single currency makes economic and political sense. The framework under which the euro is managed underpins its stability, contributes to low inflation and good sound public finances. A single currency is also a logical complement to the single market and contributes to making it more efficient. Last but not least, the euro gives the EU’s citizens a tangible symbol of their European identity.

Which countries have adopted the euro - and when?

Year Country1999 Belgium, Germany, Ireland, Spain, France, Italy, Luxembourg,

the Netherlands, Austria, Portugal and Finland

2001 Greece

2002 Introduction of euro banknotes and coins

2007 Slovenia

2008 Cyprus, Malta

2009 Slovakia

2011 Estonia

2014 Latvia

Eurozone map in 1999 - 2002

Economic and Monetary Union of the European Union (EMU 2014)

Two countries (Denmark and the United Kingdom) have ‘opt-out’ clauses in the Treaty exempting them from participationIn February 2013, the government of Lithuania approved a plan for euro adoption in 2015. However, Lithuania has not yet met all the economic criteria necessary to join the euro.

The United Kingdom's currency is the pound sterling and it has not declared plans to adopt the euro in the foreseeable future. British public opinion has consistently opposed joining the euro. Opinion polls 19–21 December 2008, 71% of respondents said they would vote No whilst 23% of participants would vote Yes, and 6% were undecided.

Denmark uses the krone as its currency and does not use the euro, having negotiated an opt-out from participation under the Edinburgh Agreement in 1992. In 2000, the government held a referendum on introducing the euro, which was defeated with 46.8% voting yes and 53.2% voting no.

Convergence criteria of Lithuania

Assessment month Country

inflation rate Budget deficit to

GDPDebt-to-GDP ratio

ERM II member

Long-term interest rate

2012 Report

Reference values

max. 3.1%

(31 Mar 2012)

max. 3.0%(Fiscal year

2011)

max. 60%, or

decreasing(Fiscal year

2011)

min. 2 years

(31 Mar 2012)

max. 5.80%

(31 Mar 2012)

Lithuania 4.2% 5.5% 38.5% 28 June 2004 5.19%

April 2013

Reference values

max. 2.5%

(as of 31 Mar

2013)

max. 3.0%(Fiscal year

2012)

max. 60%, or

decreasing(Fiscal year

2012)

min. 2 years

(as of 31 Mar 2013)

max. 4.81%

(as of 31 Mar 2013)

Lithuania 2.8% 3.2% 40.7% 28 June 2004 4.53%

Benefits of the EURO

1. Transaction Costs2. Price Transparency3. 3. Eliminating Exchange Rate uncertainty4. 4. Improvement in Inflation Performance.5. 5. Euro could emerge as a global trading

currency6. Inward investment7. Economizing on foreign currency reserves

Potential adoption byother countries

• EU – Bulgaria, Croatia, Czech Republic, Denmark, Lithuania, Hungary, Poland, Romania, Sweden, United Kingdom.• Non- EU Iceland, Kosovo,

Montenegro.

Bibliography

1. http://ec.europa.eu/economy_finance/euro/index_en.htm 2. "By the third protocol to the Cyprus adhesion Treaty to EU

and British local ordinance“3. EMU: A Historical Documentation (European Commission)4. Hacker, Björn (2013): On the Way to a Fiscal or a Stability

Union? The Plans for a »Genuine« Economic and Monetary Union, FES, online at: http://library.fes.de/pdf-files/id/ipa/10400.pdf

5. http://www.euro-dollar-currency.com/index.htm6. http://ec.europa.eu/internal_market/index_en.htm

Thank you for your attentionDziękuję za uwagę

Дякую за вашу увагуGrazie per la vostra attenzione

Vielen Dank für Ihre Aufmerksamkeit დიდი მადლობაhvala