2. The Euro €
What is the Euro?
The euro is the single currency shared
currently by 17 of the European Union's 27
Member States, which together make up the
euro area.
The introduction of the euro in 1999 was a
major step in European integration.
Approximately 330 million EU citizens now
use it as their currency.
3. The Euro
Which countries use the Euro?
EU countries using the euro
EU countries not using the euro
4. The Euro
Which countries have adopted the euro - and when?
1999
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
5. 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, for those countries fulfilling certain
conditions, a single monetary policy and a single
currency – the euro.
6. The Euro and Economic and Monetary Union
• The process of economic and monetary integration in
the EU parallels the history of the Union itself.
• When the EU was founded in 1957, the Member
States concentrated on building a 'common market'.
• However, over time it became clear that closer
economic and monetary co-operation was desirable
for the internal market to develop and flourish further.
7. The Euro and Economic and Monetary Union
• But the goal of achieving the EMU including a single
currency was not enshrined until the 1992 Maastricht
Treaty (Treaty on European Union), which set out the
ground rules for its introduction.
• These state what the objectives of EMU are, who is
responsible for what, and what conditions Member
States must meet in order to adopt the euro.
8. The Euro and Economic and Monetary Union
• These conditions are known as the 'convergence
criteria' (or 'Maastricht criteria') and include:
1. Low and stable inflation
2. Exchange rate stability and
3. Sound public finances
9. The Euro
Who manages the Euro?
The European Central Bank
1) Ensures price stability
2) Controls money supply and decides interest rates
3) Works independently from governments
Mario Draghi
President of the Central Bank
12. Changing To The Euro
12 Original Eurozone Countries
Austria, Belgium, Finland, France, Germany,
Greece, Holland, Ireland, Italy, Luxembourg,
Portugal and Spain
*United Kingdom, Denmark and Sweden are
members of the European Union but NOT the
Eurozone.
13. Euro Time Line
January 1, 1999
• Euro is the currency of eleven countries
• Conversion rates irrevocably fixed
• Legislation on the euro entered into force
• Financial markets in euro
August 30, 2001
• European Central Bank releases final details of euro
banknote designs and features to the media and
public at a news conference in Frankfurt, Germany
15. Euro Time Line
January 1, 2002
• “E-day” or Euro Day” when euro banknotes and coins will
be brought into circulation in the 12 participating states of
EU.
• All non-cash transactions will hereafter take place in
euros. All currency issued by participating national banks
and ATMs will be new euro banknotes and coins.
• Dual circulation period begins, in which consumers can
still use national currencies but will be given change only
in euros
16. Euro Public Opinion Poll
Country Pro-euro Against
Austria 59 32
Belgium 75 18
Denmark 40 56
Finland 49 46
France 67 28
Germany 53 38
Greece 72 22
Ireland 72 16
Italy 83 12
Luxembourg 81 15
Netherlands 66 30
Portugal 59 30
Spain 68 22
Sweden 29 62
UK 25 57
EU Overall 59 33
17. Advantages
• European countries saw the adoption of the Euro as a
way of creating world wide competition
• Integrate the European nations makes the union a strong
world power
• Strengthen Banking System
• European Central Bank would provide an institution of
monetary regulation comparable to the FED
18. Advantages
• Similarities between the European and United States
banking system
• The Euro would advance international trade
• Way to challenge the power of the US in foreign
exchange
• Inspire exporters to denominate their goods in euros as
well as dollars
• Single Monetary Policy
20. Disadvantages
• Introduction of a single monetary policy among 12
individual national policies of each country
• Before joining the country controlled it’s own money
supply
• Monetary decisions with economic and national policies
unique for the circumstances of the country
• Surrender their individual policies on inflation,
unemployment, and economic growth
21. Disadvantages
• Implementation of one Monetary policy as a detriment to
their existing financial statuses
• Traveling around different countries will have different
prices for the same good or services
22. Why Do We Need The Euro?
• 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
encourages sound public finances.
• A single currency is also a logical complement to the
single market and contributes to making it more efficient.
• Using a common currency increases price transparency,
eliminates currency exchange costs, facilitates
international trade and gives the EU a more powerful
voice in the world.
23. Why Do We Need The Euro?
• The size and strength of the euro area also better
protect it from external economic shocks, such as
unexpected oil price rises or turbulence in the currency
markets. Last but not least, the euro gives the EU’s
citizens a tangible symbol of their European identity.
• Against the background of the current debt crisis
important measures to improve the economic
governance in the EU and the euro area in particular
have been taken.
24. Why Do We Need The Euro?
• EU Member States have strengthened the Stability
and Growth Pact, introduced a new mechanism to
prevent or correct macroeconomic imbalances and are
increasingly coordinating structural policies.
• These are crucial steps to strengthen the "E" - the
economic leg - of the EMU and to ensure the success
of the euro in the long run.
26. Eurozone Debt Crisis – What is it?
• This is also known as Eurozone sovereign debt crisis
• The term indicates the financial problems caused due to
overspending by come European countries
• When a nation lives beyond its means by borrowing
heavily, a point comes when it cannot manage its financial
obligations.
• When that country faces insolvency (unable to repay its
debts and lenders start demanding higher interest rates)
that nation begins to get swallowed up by what is known
as the Sovereign Debt Crisis
27. Eurozone Debt Crisis – History
• The EDC began in 2008 with the crash of Iceland’s
banking system, which spread to Greece.
• Greece had experienced corruption and spending as its
government continued borrowing money despite not
being able to produce sufficient income through work and
goods.
• It was admitted that Greece's debts had reached 300bn
euros, the highest in modern history
• Spain, Portugal, and the other nations later followed
Greece.
28. Eurozone Debt Crisis – History
COUNTRIES STATISTICS
France Debt/G.D.P: 81.7%
Unemployment. Oct 2011: 9.8%
S&P Rating: AAA
Germany Debt/G.D.P: 83.2%
Unemployment. Oct 2011: 5.5%
S&P Rating: AAA
Greece Debt/G.D.P: 142.8%
Unemployment. July 2011: 18.3%
S&P Rating: CC
Italy Debt/G.D.P: 119%
Unemployment. Oct 2011: 8.5%
S&P Rating: A
Portugal Debt/G.D.P: 93%
Unemployment. Oct 2011: 12.9%
S&P Rating: BBB-
Spain Debt/G.D.P: 60.1%
Unemployment. Oct 2011: 22.8%
S&P Rating: AA
The main
European
countries
affected in the
European Debt
Crisis are:
29. Eurozone Debt Crisis – History
GREECE
• November 5 2009-Greece reveals that their budget deficit is
1207 percent of GDP
• December 8 2009- Greece's long-term debt to BBB+, from A-.
• March 3 2010- Greece tries to persuade the financial market that
they can repay their debts
• April 23 2010- Papandreou asks help from International
Monetary Fund after Greece is priced out of the international
bond markets.
30. Eurozone Debt Crisis – History
GREECE
• May 2 2010- European finance ministers lend €110bn
which covers until 2013. Greece pledges to bring its
budget deficit into line, through unprecedented budget
cuts.
• April 17 2011- Greek borrowing costs start rising sharply
again, on fears that its austerity measures are failing to
work. Greece is now deep in recession.
• June 19 2011- Admits that they need to borrow money
again
31. Eurozone Debt Crisis – History
GREECE
• June 29, 2011- EU leaders agree on €109bn bailout –
which will see private sector lenders take losses of 20%
• October 27 2011- Europe leaders agree new deals that
slash Greek debt and increase the power of the main
bailout fund to around €1 trillion.
• November 6 2011- Prime Minister resigns
32. The Greek budget deficit - never got below the 3%
of GDP limit, nor did the debt ever decline toward the 60% limit
32
33. Eurozone Debt Crisis – History
SPAIN
• The country's public debt relative to GDP in 2010 was
only 60%
• As one of the largest euro zone economies, the condition
of Spain's economy is of particular concern to
international observers, and faced pressure from the
United States, the IMF, other European countries and the
European Commission to cut its deficit more aggressively
34. Eurozone Debt Crisis – History
SPAIN
• Spain succeeded in minimizing its deficit from 11.2% of
GDP in 2009 to 9.2% in 2010 and around 6% in 2011
• To build up additional trust in the financial markets, the
government amended the Spanish Constitution in 2011
to require a balanced budget at both the national and
regional level by 2020
• The amendment states that public debt cannot exceed
60% of GDP
35. Eurozone Debt Crisis – History
PORTUGAL
• In the first quarter of 2010 Portugal had one of the best
rates of economic recovery in the EU.
• A report was released that the Portuguese government
public debt has increased due to mismanaged
structural and cohesion funds which then resulted to the
verge of bankruptcy of the country.
• Bonuses and wages of head officers also resulted to
their economic situation
36. Eurozone Debt Crisis – History
PORTUGAL
• May 16 2011- Eurozone leaders officially approved a
€78 billion bailout package for Portugal, which became
the third Eurozone country, after Ireland and Greece, to
receive emergency funds.
• As part of the deal, the country agreed to cut its budget
deficit from 9.8 percent of GDP in 2010 to 5.9 percent in
2011, 4.5 percent in 2012 and 3 percent in 2013.
• July 6 2011- Rating’s agency Moody had cut Portugal’s
credit rating to junk status
37. Europe's response to the economic crisis
Coordinated response from the EU's national governments, the
European Central Bank and the European Commission:
A. Commitment to the euro and to financial stability
B. New crisis management tools and reforms of rules:
1. European Stability Mechanism: fund to help extraordinary economic difficulties
2. EU-wide financial supervisory authorities, new laws for stability of banks
C. Better economic governance:
1. European Semester: annual procedure to coordinate public budgets
2. Euro+ pact, "Fiscal compact treaty” : mutual commitments to sound public finances
38. Europe's response to the economic crisis
The ECB reduces interest rates to
historically low levels (1.25%) and begun
“quantitative easing”
Dec 08: EU governments adopt
European Economic Recovery Plan - a
coordinated fiscal stimulus
Oct 08: euro area governments adopt
concerted action plan to support their
financial systems
39. Europe's response to the economic crisis
Conclusion:
• Emergency loans have been extended as bailouts mainly
by stronger economies like France and Germany, as also
by the IMF.
• The EU member states have also created the European
Financial Stability Facility (EFSF) to provide emergency
loans.
• Restructuring of the debt
40. Lessons Learned
• Be careful who you admit to the EU
• Use caution in leveraging funds
42. Contact Infomation
Richard Bays JD, MBA, RN, CPHQ
RBaysConsulting@Gmail.com
+49 01796557037
+1 832.316.2701
Presented for the European School of
Management and Technology (ESMT)
Berlin, Germany 2013
