EURO BACKGROUND AND INTERNATIONAL ASPECTS

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EURO BACKGROUND AND INTERNATIONAL ASPECTS

• Dr. h.c. Michael Cwik
• DG ECFIN, European Commission

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EURO BACKGROUND

• A SINGLE CURRENCY - WHAT DOES IT MEAN?

WHY DO WE NEED ONE IN EUROPE?
WHAT ARE THE CHALLENGES?
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A SINGLE CURRENCY - WHAT DOES IT MEAN?

• FOUR ESSENTIALS
• AN INTERNAL MARKET
• gt THE FOUR FREEDOMS
• FAIR AND LOYAL COMPETITION
• gt PUBLIC AIDES?
• SOUND PUBLIC FINANCES
• gt BUDGETARY DISCIPLINE
• COORDINATION OF POLICIES
• gt FRAMEWORK DECISIONS

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A SINGLE CURRENCY - WHAT DOES IT MEAN?

• FOR POLICIES AND INSTRUMENTS
• AS TO ECONOMIC POLICIES
• COMPATIBILITY/CONSISTENCY OF POLICIES
• AS TO FISCAL AND BUDGETARY POLICIE
• CONSISTENT RULES AND POSSIBILITY FOR SANCTIONS
• AS TO SOCIAL POLICIES
• COMPARABLE PUBLIC INCOME SOURCES
• AS TO REGIONAL POLICIES
• POSSIBILITIES FOR TERRITORIAL FINE-TUNING
• INSTITUTIONALLY
• THE LARGER TERRITORY, THE MORE FEDERAL STRUCTURES
• POLITICALLY
• A POLITICAL FRAMEWORK DEMOCRATICALLY CONTROLLED

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A SINGLE CURRENCY - WHY DO WE NEED IT?

• THE POLITICAL ARGUMENTS
• THE ECONOMIC ARGUMENTS

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THE POLITICAL ARGUMENTS

• 1. EUROPEAN INTEGRATION - ITS MOTIVATION
• THE POLITICAL ARGUMENT gt NEVER WAR AGAIN!
• THE ECONOMIC ARGUMENT gt HOW TO SAFEGUARD
  THE LIVING STANDARD?
• THE CULTURAL ARGUMENT gt DEFENDING COMMON
  VALUES!
• 2. MONETARY SOVEREIGNTY - AN ARGUMENT
• BUNDESBANK POLICIES
• THE LOST SOUVEREIGNTY ARGUMENT

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THE ECONOMIC ARGUMENTS

• 1. THE ECONOMIC INTERDEPENDENCY ARGUMENT
• OPENESS OF NATIONAL ECONOMIES
• HIGH DEGREE OF SPECIALISATION
• TRADE IS NOT A ONE-WAY STREET
• THE RICH CANNOT REMAIN RICH IF HE HAS POOR
  NEIGHBOURS
• 2. THE DECISION-MAKING ARGUMENT
• MEMBER STATES ARE RESPONSIBLE FOR THEIR POLICIES
• CAN THEY SOLVE THEIR ECONOMIC PROBLEMS ALONE?
• THE ECONOMIC PLAYERS ARE DECIDING MORE AND MORE
  SUPRA-NATIONALLY

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THE ECONOMIC ARGUMENTS

• 3. THE IN-EFFICIENT INSTRUMENT ARGUMENT
• THE FOUR FREEDOMS
• POLICIES AND INSTRUMENTS - FOR DOING WHAT?
• THE INSTRUMENTS ARE BECOMING BLUNT!
• EXAMPLES gt THE EXCHANGE RATE gt PUBLIC
  DEMAND POLICIES
• 4. THE WORLD-COMPETITION ARGUMENT
• THE LARGE INTERNAL MARKET ARGUMENT gt
  SPECIALISATION
• THE ECONOMIES OF SCALE ARGUMENT
• EXAMPLES gt PRODUCTION OF TELEVISION SETS
  (1950ies) gt THE JAPANESE CONCEPT

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THE ECONOMIC ARGUMENTS

• 5. THE CURRENCY SPECULATION ARGUMENT
• THE VOLUME OF DAILY TRANSACTIONS ON THE EXCHANGE
  MARKETS
• UNCERTAINTY ABOUT EXCHANGE RATES WITHIN AN
  INTERNAL MARKET gt COSTS, gt INVESTMENTS?
• UN-NECESSARY RISK BETWEEN ECONOMIES WHICH ARE
  INTERDEPENDENT gt PRE-CONDITION CONVERGENCE!
• 6. THE WORLD-CURRENCY ARGUMENT
• EURO HAS LARGER VOLUME THAN DM
• LARGER MARKETS - LESS FLUCTUATIONS
• INVOICING IN THE HOUSE CURRENCY gt NO RISKS
• DISPOSAL OF AN INTERNATIONAL TRANSACTION AND
  INVESTMENT CURRENCY MORE INSTRUMENTS - LOWER
  COSTS
• AN INTERNATIONAL RESERVE CURRENCY WITH ALL RISKS
  AND BENEFITS

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A SINGLE CURRENCY -WHAT ARE THE CHALLENGES?

• gt ECONOMIC COHESION
• gt SOCIAL COHESION
• gt POLITICAL COHESION

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A SINGLE CURRENCY -WHAT ARE THE CHALLENGES?

• ECONOMIC COHESION
• EMU EFFECTS
• INTERNAL STABILITY
• gt PRICE STABILITY
• gt THE THREE ACTORS
• CO-ORDINATION OF POLICES
• gt APPLICATION OF THE PRINCIPLE OF SUBSIDIARITY
• gt REPARTITION OF COMPETENCES
• gt FRAMEWORK DECISIONS
• gt STRUCTURAL POLICIES
• gt REGIONAL POLICIES
• gt SOCIAL POLICIES

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A SINGLE CURRENCY -WHAT ARE THE CHALLENGES?

• SOCIAL COHESION
• gt CONCENTRATION PROCESSES OF ECONOMIC ACTIVITIES
• gt EMPLOYMENT
• gt UNEMPLOYMENT
• gt THE ONE WHO WANTS TO SELL NEEDS BUYERS!
• gt SOLIDARITY VERSUS INDEPENDENCE

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A SINGLE CURRENCY -WHAT ARE THE CHALLENGES

• POLITICAL COHESION
• gt INSTITUTIONAL ASPECTS gt DEMOCRATICALLY
  CONTROLLED INSTITUTIONS gt EFFICIENT INSTITUTIONS
• gt POLITICAL ASPECTS gt REPARTITON OF
  COMPETENCES gt ORGANIZING A MULTI-CULTURAL
  COMMUNITY? gt CHARTER ON FUNDAMENTAL RIGHT gt
  EUROPEAN CONSTITUTION

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EURO BACKGROUND

• CONCLUSION

ECONOMIC AND MONETARY UNION IS ONLY ONE PART OF
THE EUROPEAN INTEGRATION PROCESS!
THERE ARE MAJOR POLITICAL AND ECONOMIC REASONS!
A SINGLE CURRENCY NEEDS A DEMOCRATIC AND
EFFICIENT POLITICAL FRAMEWORK! THE POLITICAL
DISCUSSION HAS ONLY STARTED!
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A SINGLE CURRENCY MEANS gt CENTRALISED MONETARY
POLICIES AND gt POLICY CO-ORDINATION !
BUT DOES NOT MEAN THAT WE CANNOT BUILT EUROPE
- FROM THE BOTTOM-UP! - DEMOCRACY, SOLIDARITY
AND SUBSIDIARITY START AT THE LOCAL LEVEL, IN
THE SMALLEST POLITICAL ENTITY DEMOCRATICALLY
ELECTED!
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 EURO-LAND België/Belgique, Deutschland,
Ellas, España, France, Ireland, Italia,
Luxemburg, Nederland, Österreich, Portugal,
Suomi/Finland

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Euro Conference
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Euro Conference
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Euro Conference
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Euro Conference
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Euro Conference
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Euro Conference
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Euro-Conference
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EURO CONFERENCEEURO AREA
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EURO CONFERENCEEURO AREA
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EURO CONFERENCETHE EURO IN THE WORLD

• In short
• On 1 January 2002, the Euro became official
  tender in 12 EU Member States (group 1), in 4
  other European countries and 2 territories on the
  Balkans (group 2 3), in a number of territories
  and islands in the world which are part of or
  associated with one Euro area Member State (group
  4). The Euro has also relative stable exchange
  relations with a number of countries which,
  because of their past, have specific ties with a
  Member State of the European Union (group 5).
• The "Euro-area" in more details (groups)
• 1) EU Member States in which the "Euro" is the
  official currency
• België/Belgique (B), Deutschland (D), Ellas (GR),
  España (E), France (F), Ireland, (IRL), Italia
  (I), Luxemburg (L), Nederland (NL), Österreich
  (A), Portugal (P), Suomi/Finland (FIN).
• 2) European countries which are using the Euro on
  the basis of a formal arrangement with the
  European Community
• Monaco (MC), San Marino (RSM), Vaticano (V).
• 3) Third countries or territories which are using
  the Euro without formal arrangements
• Andorra (AND), Montenegro, Kosovo.
• 4) Overseas departments, territories and islands
  which are either part of or associated with Euro
  area Member States and where the Euro is legal
  tender
• Alhucemas (E), Azores (P), Ceuta (E), Guadeloupe
  with Désirade, Les Saintes, Marie-Galante, St.
  Barthelemy, St. Martin (F), Guyane (F), Islas
  Baleares (E), Islas Canarias (E), Islas
  Chafarinas (E), Madeira (P), Martinique (F),
  Mayotte (F), Melilla (E), Réunion (F), St. Pierre
  et Miquelon (F), St. Velez de la Gomera (E),
  Terres Australes et Antarctiques Fransçaise
  (TAAF) with "Archipel Crozet", "Archipel des
  Kerquelen", Iles St. Paul, Nouvelle Amsterdam,
  Terre Adélie.
• 5) Countries, regions and territories which have
  stable exchange rate relations with the Euro (but
  not legal tender)
• "Franc-pacifique" (CFP) gt Polynésie
  Française1), Nouvelle-Calédonie, Wallis et
  Futuna (Territoires d'Outre Mer /TOM)

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EURO CONFERENCETHE EURO IN THE WORLD
International debt securities net issuance
volume
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EURO CONFERENCETHE EURO IN THE WORLD
International debt securities amounts
outstanding