The Changeover to the EURO

The

euro is the official currency and is divided

into 100 cents
National currency units are denominations of
the euro
The euro can only be used for non-cash
transactions
Anyone can have a euro bank account..even
YOU!

12 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.

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
ECB starts operations

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

Euro Notes

Coins

Euro Coins

September 1, 2001through December

1, 2001
Belgian,

French, Irish, Italian, Portuguese,

Finnish Greek, Dutch, commercial banks begin
receiving euro coins and bank notes
These countries retailers begin receiving euro
coins as well

December 17, 2001

Austria,

Finland, Germany, Ireland, the

Netherlands, and Portugal begin making euro
coins available to the public through starter
kits. Greece has not made a decision on
releasing starter kits

December 31, 2001

German

national currency ends as legal tender

but under an agreement, deutsche marks can
still be used until at least February 28, 2002

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

January 28, 2002 through February

28, 2002
12

participating countries end their national

currency as legal tender.
German commercial banks will exchange
national banknotes and coins for euros until at
least this date. Commercial banks in Austria,
Finland, Greece, and Ireland decide individual
deadline for currency exchanges. Italy had not
made a decision on commercial bank currency
exchanges

June 30, 2002

Last

date commercial banks in France,

Luxembourg, Portugal, and Spain will
exchange national currencies for euros.

December 31, 2002

Last

date commercial banks in Belgium and

the Netherlands will exchange national
currencies for euros
Last date Portugals central bank will exchange
national coins for euros

2003 and Beyond

The

12 eurozone central banks have set

various deadlines for exchanging old national
currencies

Advantages to joining the EMU

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
World

Balance

Advantages to joining the EMU

Strengthen

Banking System

European

Central Bank would provide an

institution of monetary regulation comparable
to the FED
Ex) 6 member Executive Board of the ECD
acts much like the US 7 member FED reserve
board

Advantages to joining the EMU

Ex) 11 central banks of European nations
imitate action of the 12 FED reserve
banks

Similarities between the European and

United States banking system
Ex) with a unified currency the Euro
could compare in strength to the dollar

Advantages to joining the EMU

The

Euro would advance ones 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

Advantages to joining the EMU

Company

can create individualities with

different prices
Single Monetary Policy

Disadvantages to joining the EMU

Introduction

of a single monetary policy

among 12 individual national policies of each
country

Before

joining the country controlled its own

money supply

Monetary

decisions with economic and

national policies unique for the circumstances
of the country

Disadvantages to joining the EMU

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

Disadvantages to joining the EMU

Implementation

of one Monetary policy as a

detriment to their existing financial statuses

Ex) One country whose main concern with the

inflation rate would be reluctant to tolerate
decreasing interest rates

Disadvantages to joining the EMU

Ex) Countries maintained individual monetary
policies that corresponded to their financial
and national status for thousands of years
Traveling

around different countries will have

different prices for the same good or services

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

The Police Challenge

Three key areas of law breaking with the arrival of the

euro are robbery, counterfeiting, and money
laundering
The 500 euro bill, is worth more than the most
expensive note in 11 of the 12 euroland currencies
and has been nicknamed the gangsters note
This new note makes it possible to pack more than 7
million euros in average brief case
Single currency makes it harder to catch money
launderers
63 % more fake marks were pulled out of circulation in
the first three months of 2001 compared to 2000

E-DAY
The Banks started moving into
Euro notes and coins on
September 1, 2001
The Euro became legal tender
on January 1, 2002 or also
known as E-day.
The denominations will be 5
euros, and 8 different coins.
They will look slightly different in
each country.
Credit and debit cards wont be
effected by the change.

Scenario for an EMU Collapse

1.
2.
3.

4.
5.
6.

Recession develops in part of Europe.

Creates a conflict of interest between the weak and strong economically
countries.
Weaker countries want low interest rates and wouldnt mind some inflation
whereas other stronger countries , such as Germany, are dead set on keeping
prices very stable.
Cant deal with asymmetric shocks like the United States can due to labor
mobility.
Downward price stickiness could lead to a higher average unemployment rate
then if countries could pursue separate monetary policy
In the end you get a political argument and even a financial crisis, as markets
discount the bonds of weaker European governments.

Sovereignty of the Country

Sovereignty is the main reason why
the UK has not joined yet.
They believe that giving up the
national currency is the same as
giving up national sovereignty.
Is the Euro leading to ONE
European super state?
Monetary union will end the a
nations ability to conduct
monetary policy, ONE interest
rate?

European Central Bank

The ECB is the successor of the
European Monetary Institute that was
set up 5 years ago.
ECB works hand and hand with national
central banks that are within the
European system.
They have the exclusive right to authorize
the issue of banknotes.
The volume of money is approved by the
ECB not central banks.
Considered a double of Germanys central
bank, Bundesbank.
The ECB is headed by Wim Duisenberg.

Current Situation in the Eurozone

April 11, 2002:
The European Central Bank has stated that high oil prices
could lead to slightly higher inflation than predicted.
Believe that the recent jump in prices will contribute to the
recovery of the Eurozone and would begin to slow in
speed (negative supply shock).
Oil prices spiked above $27 due to fears of increased
violence between Israel and Palestinians.
Eurozone inflation at 2.5% in March, and the rate is still
falling but not by as much due to the oil price increase.

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