Economic and Monetary Union and the Euro

From the Treaty to application

• The Treaty of Maastricht (1992) enshrined the principle of a single European currency

• On 1 January 2002 the euro notes and coins started circulating in 12 European countries

• enshrine – sadržavati, ugraditi• notes and coins – novčanice i kovanice

The origins

• In 1970 the Werner Report proposed a convergence of economies and currencies of the six EEC countries

• In 1979 the European Monetary System (EMS) was set up to reduce variations in the exchange rates between the currencies of the member states

• convergence – konvergencija, usklađivanje• currency - valuta

The Single European Act

• In 1986 the Single European Act implied the convergence of European economies and the need to limit fluctuations in the exchange rates between their currencies

• exchange rate - devizni tečaj

Economic and Monetary Union

• In 1989 Commission President Jacques Delors put forward a plan and timetable for bringing about economic and monetary union (EMU)

• The Treaty of Maastricht laid down a set of criteria to be met by member states if they were to qualify for the EMU

Maastricht Criteria

• Curbing inflation (Inflation may not be more than 1.5% higher than that of the average of 3 best performing member states)

• Cutting interest rates • Reducing budget deficits to a maximum of 3% of GDP• Limiting public borrowing (not more than 60% of the

GDP)• Stabilising the currency’s exchange rate

• curb inflation – regulirati inflaciju

‘Opting out’

• Denmark, Sweden and the UK reserved the right not to move to the third stage of EMU (adoption of the euro)

• Opting out - izuzimanje

European Central Bank

• In order to ensure the stability of the euro, an independent European Central Bank (ECB) was set up, based in Frankfurt, and given the task of setting interest rates to maintain the value of the euro

Economic union

• The euro has replaced currencies that were traditional symbols and instruments of national sovereignty (f. e. German mark)

• It moved Europe considerably closer to economic union

• The need for monetary stability

Stability pact and economic growth

• In Amsterdam, in June 1997 the European Council adopted two important resolutions:

• 1. Stability and growth pact (maintaining budgetary discipline)

• 2. Economic growth (employment as priority)

Coordinating economic policies

• In Luxembourg, in December 1997, the European Council adopted a resolution on coordinating economic policies to establish stronger ties between countries that adopted the euro

Stability of the euro

• In spite of turbulent world situations and crises, the euro has enjoyed that kind of stability and predictability that investors and consumers need

The world’s second most important currency

• The first one is US dollar• The euro is increasingly being used for

international payments and as a reserve currency, alongside the US dollar

Benefits of a single currency

• The euro has given European citizens a much clearer sense of sharing a common European identity (free movement of people, goods and capital)

The eurozone

• The following members of the European Union use the euro:

• Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, The Netherlands, Portugal, Slovenia, Slovakia, Spain

• Andorra, Monaco, San Marino, and Vatican City have formal agreements with the EU to use the euro as their official currency and issue their own coins

• Kosovo and Montenegro have adopted the euro unilaterally, but these countries do not officially form part of the eurozone and do not have representation in the European Central Bank (ECB) or in the Eurogroup.

• The following members of the European Union do not use the euro:

• Bulgaria, Czech Republic, Denmark, Croatia, Lithuania, Hungary, Poland, Romania, Sweden and the United Kingdom.

The name

• The name euro was adopted on December 16, 1995

Acronyms

• What do they stand for?

• EEC• EMS• EMU• GDP• ECB

Translate into Croatian:

• The Maastricht Treaty laid down a set of criteria to be met by the member states if they were to qualify for EMU. These criteria were all about economic and financial discipline: curbing inflation, cutting interest rates, reducing budget deficits to a maximum of 3% of GDP, limiting public borrowing to a maximum of 60% of GDP and stabilising the currency’s exchange rate. In protocols annexed to the Treaty, Denmark and the United Kingdom reserved the right not to move to the third stage of EMU (i.e. adoption of the euro) even if they met the criteria. This was called ‘opting out’. Following a referendum, Denmark announced that it did not intend to adopt the euro. The Swedish people turned down euro adoption in a 2003 referendum.

About the euro

• •The euro symbol – € – was inspired by the Greek letter epsilon. It also stands for the first letter of the word ‘Europe’ in the Latin alphabet, while the two parallel lines running through the symbol signify stability. The European Commission organised an internal competition to come up with the euro symbol. Some 30 drafts were considered.

Euro banknote designs• a design competition winning

design by Robert Kalina theme “Ages and styles of Europe”

• Classical for the €5

• Romanesque for the €10

• Gothic for the €20

• Renaissance for the €50

• Baroque and rococo for the €100

• Iron and glass architecture for the €200

• Modern 20th century architecture for the €500

Euro coin designs

• a design competition winning design by Luc Luycx

• Avers of all euro coins are same, but revers are different for each European Union Member Stete

Italy

• The design of euro coins differs in:– Common side

– Colour

– Edge

– Diameter and thickness

– Mass in grams

Banknote security features

• The “raised” print

• The watermark• The security thread

• The see-through register

• F oil stripe/foil patch

• Iridescent stripe/colour- shifting ink

• Micro lettering

• Ultra-violet properties

• Infra-red properties

The euro today

• Read and discuss the text “The failure of the euro” (handout)

Vocabulary

• Inevitable – neizbježan• Adverse- negativan• To plague – mučiti, ometati, stvarati teškoće• Austerity measures – mjere štednje• To clash – sukobiti se, ne slagati se• Impetus- poriv, pobuda, poticaj• To instill – usaditi, uliti, ulijevati• The Common Market – tržište EU (zajedničko

tržište)

The History of the Euro

• http://www.youtube.com/watch?v=PdLr3lTSyns

• What was contemplated by the League of Nations in 1929?

• What does ECU stand for?• Which countries opted out?• Did the euro help tourism?

Thank you for your attention!