History of the Euro By Lindsey Johnston

Agenda The European Union Treaties The European Central Bank The Euro/Eurozone Who does not use the Euro? Pros/Cons PIIGS Converting to the Euro Europa Series of Euro Banknotes 2

European Economic Community  European Union A unique economic & political partnership between 27 European countries First created in 1958 in the aftermath of the Second World War Based on the rule of law: everything founded on treaties, voluntarily and democratically agreed upon by all member countries 3

Treaties 1951: Treaty of Paris European Coal and Steel Community 1957: Treaty of Rome European Economic Community (EEC) 1993: Maastricht Treaty European Union (EU) & the euro 1997: Treaty of Amsterdam 2009: Treaty of Lisbon 4

Development of the European Union Belgium France Germany Italy Luxembourg Netherlands Denmark Ireland United Kingdom Greece Spain Portugal Austria Finland Sweden Czech Republic Cyprus Estonia Latvia Lithuania Hungary Malta Poland Slovenia Slovakia Bulgaria Romania 5

Membership Conditions Legal Requirements ‘Copenhagen Criteria’ Stable institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities; A functioning market economy and the capacity to cope with competitive pressure and market forces within the Union; The ability to take on obligations of membership. Accession Negotiations 6

Who is Next? Croatia Candidate Countries Iceland Montenegro Serbia The former Yugoslav Republic of Macedonia Turkey Potential Candidate Countries Albania Bosnia and Herzegovina Kosovo “United in Diversity” 7

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The Euro/Eurozone The single currency of 17 of the 27 Member States 1999: euro used for non-cash transactions of 11 Member States 2002: used in physical form of banknotes and coins for all payments Each new EU Member State is expected to adopt the euro once it meets necessary criteria. YearCountries 1999Belgium, Germany, Ireland, Spain, France, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland 2001Greece 2007Slovenia 2008Cyprus, Malta 2009Slovakia 2011Estonia 9

Conversion Rates, January 1 st 1999 Country1 euro = BelgiumBelgian francs GermanyDeutsche Mark SpainSpanish pesetas FranceFrench francs IrelandIrish pounds ItalyItalian lire LuxembourgLuxembourg francs NetherlandsDutch guilders AustriaAustrian schillings PortugalPortuguese escudos FinlandFinnish markkas

Who does not use the Euro? Why? Denmark The United Kingdom Sweden Latvia – set date: 2014 Romania – set date: 2014 Hungary Poland Bulgaria Lithuania Czech Republic Denmark & UK have opt-out clauses in the Treaty exempting them from participation Sweden deliberately did not meet criteria  de facto opt-out Others are currently preparing to join the Eurozone 11

Pros of the Euro: Promotes trade  stable economy Greater security and more opportunities for businesses and markets Eliminates fluctuating exchange rates/costs More integrated financial markets A stronger presence for the EU in the global economy A tangible sign of a European identity 12

Cons of the Euro: Limits independence of the monetary policy being implemented by a country Loss of national sovereignty Larger countries can directly/indirectly influence decisions of the ECB Debt problems… 13

PIIGS Portugal, Ireland, Italy, Greece and Spain Considered the European Union’s weakest link Unstable economies  financial trouble & national debt 14

Joining the Eurozone – ‘Convergence Criteria’ What is measuredHow it is measuredConvergence criteria Price stabilityHarmonized consumer price inflation Not more then 1.5% points above the rate of the three best performing Member States Sound public financesGovernment deficit as % of GDP Reference value: not more than 3% Sustainable public finances Government debt as % of GDPReference value: not more than 60% Durability of convergence Long-term interest rateNot more than 2% points above the rate of the three best performing Member States in terms of price stability Exchange rate stabilityDeviation from a central rateParticipation in ERM (±2.25% of the central states) for two years without severe tensions 15

Europa Series of Euro Banknotes Second series of euro banknotes Enhanced security features Will be gradually introduced in the euro area over the next few years €5 banknote started circulating on May 2 nd,

Summary: History of the Euro Set as a goal in the Maastricht Treaty in 1992 Born as a virtual currency in 1999 First appeared in people’s pockets in 2002 Is an important and tangible indicator of the European Union’s values: Freedom Democracy The rule of law Respect for human rights Equality 17

References "Creating The Euro Zone." Across the Pond. N.p., n.d. Web. 08 May "Scenarios for Adopting the Euro - European Commission." Scenarios for Adopting the Euro - European Commission. N.p., n.d. Web. 30 May “The Euro Benefits and Challenges.” ECB:. N.p., n.d. Web. 30 May "Why New Banknotes?" - ECB. N.p., n.d. Web. 30 May Ramos, John Louie. "The Benefits and Disadvantages Adopting the Euro." Helium. Helium, 10 July Web. 02 June Alesina, Alberto, and Francesco Giavazzi. Europe and the Euro. Chicago: University of Chicago, Print. 18

Thank You! Questions? 19