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Under the concept EURO everybody imagines the new currency used in the European union. I would like to begin with the definition of what the money really is. Money is generally accepted mean of payment. The use of it is almost as old as the human civilization. But it hasn't always had the same form as today and it is still developing. My intention is to present you the new currency or as we know the new form of payment in the European union - EURO. But why did the reason of creating euro appear? Which counties don´t have euro yet? When will our republic join to the countries which uses euro as their currency? In the following presentation, I would like explain these questions and make a number of points about its creation, about states which has decided to use it. The topic of euro banknotes and coins has fascinated me for a long time. I had a lots questions for example: Has each country its specific features on their coins or banknotes? Who did it designed? So I would like to present you some information I have found.
Euro Exchange Rates
1 GENERAL INFORMATION
Euro started its function on 1.1.1999. It’s common European currency, which is based on group of currencies of countries, which are members of the European Union. National currencies are represented proportionally to their economic power. On 1 January 2002, the euro banknotes and coins were introduced in 12 Member States of the European Union, with seven different banknotes and eight coins. They were put into circulation.
The arrival of the euro, however, means much more than exchanging one currency for another. It involves individuals and businesses not only in the countries that have joined the single currency, but all over the world.
Which countries are participating EURO?
12 members of the European Union: Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, The Netherlands, Austria, Portugal, Finland. Other 3 members of European Union, Denmark, Sweden and the United Kingdom are not currently participating in EURO. They’re still using their own currencies.
2 THE HISTORY OF EURO CREATION
· 3 May 1998: Decision on euro members
The Heads of State and Government meeting in Brussels decided that eleven Member States fulfilled the convergence criteria and would take part in the euro from 1 January 1999, on the basis of convergence reports prepared by the Commission and the ECB.
The countries were Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland. (Look at pages 24 – 31).
· 1 June 1998: Creation of the European Central Bank (ECB)
The European Central Bank was created when the Members of its Executive Board were appointed by the Member States adopting the euro, replacing the EMI.
The bank continued the EMI’s work on preparations for the new currency to be launched on 1 January. The first president would be Wim Duisenberg, former president of the Dutch central bank.
· 1 January 2002: € Day - Euro notes and coins enter circulation
Around 7.8 billion euro notes and 40.4 billion euro coins, together worth €144 billion, were put into general circulation by the central banks of the twelve participating countries of the euro area. Euro notes were distributed by bank machines and shops started to give customers change in euro cash.
At the same time, each country started to withdraw national currency notes and coins from circulation.
Exchange Rate American Dollar (USD)
· 1 May 2004: Accession of ten new Member States to EU
The ten new Member States that joined the EU on 1 May 2004 (Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia) do not have a fixed timetable to join the euro.
However, they will do so once they have fulfilled the same Maastricht convergence criteria for membership as the current members of the euro area.
Estonia, Lithuania and Slovenia hope to start using euro notes and coins on 1 January 2007. Cyprus -the country's target date for eurozone membership is 2007. Poland- the likely date is 2009. Malta- the earliest possible date for the euro's introduction is 2007. Latvia- may decide to push back the euro's introduction from 2007. Slovakia - expects to join the euro in January 2009. Hungary - The slow pace of deficit reduction may endanger the country's plans to enter the eurozone in 2010. Czech Republic - The Czech government has declared its commitment to adopting the euro by 2010.
3 THE EUROSYSTEM
The national central banks of the euro area together with the ECB are known as the Eurosystem. The Eurosystem's primary objective is the maintenance of price stability. It meets its objectives through:
- deciding and implementing monetary policy;
- conducting foreign exchange operations; and
- operating payment systems
The NCBs of the participating Member States played a key role in the smooth transition to the euro. Their responsibilities have included:
- introducing the euro in their respective countries;
- managing the changeover from national currencies to the euro;
- creating the necessary systems to effectively circulate the euro banknotes and coins;
- withdrawing national currencies; and
- providing advice about and promoting the use of the euro.
3.1 European Central Bank (ECB)
The European Central Bank was established on 1 June 1998 and is situated in Frankfurt am Main, Germany. It ensures that the tasks conferred upon the Eurosystem and the European System of Central Banks (ESCB) are implemented either by its own activities pursuant to the Statute of the ESCB or through the national central banks. (Look at pages 32 – 33).
3.2 European System of Central Banks (ESCB)
The European System of Central Banks (ESCB) comprises the ECB and the national central banks of all 15 Member States of the European Union. It includes, in addition to the members of the Eurosystem, the national central banks of the Member States which have not adopted the euro. The ESCB is governed by the Governing Council, the Executive Board and the General Council of the ECB.
4 EURO SYMBOL DESIGN
The euro symbol was created by the European Commission as part of its communications work for the single currency. The design had to satisfy three simple criteria:
- to be a highly recognisable symbol of Europe
- to be easy to write by hand
- to have an aesthetically pleasing design.
Thirty or so drafts were drawn up internally. Of these, ten were subject to a qualitative assessment by the general public.Two designs emerged from the survey well ahead of the rest. It was from these two that the then President of the Commission, Jacques Santer, and the European Commissioner in charge of the euro, Yves-Thibault de Silguy, made their final choice. Here is how the euro symbol was born. (Look at page 17). It was inspired by the Greek letter epsilon, harking back to Classical times and the cradle of European civilisation. The symbol also refers to the first letter of the word "Europe". The two parallel lines indicate the stability of the euro.
The graphic symbol for the euro looks like an E with two clearly marked, horizontal parallel lines across it. It was inspired by the Greek letter epsilon, in reference to the cradle of European civilisation and to the first letter of the word 'Europe'. The parallel lines represent the stability of the euro. The official abbreviation for the euro is 'EUR'.
5 EURO BANKNOTES
Euro notes are identical across the euro area. There are notes in denominations €500, €200, €100, €50, €20, €10 and €5. These can be used anywhere within the euro area, regardless of country of issue. The notes differ in size and colour by denomination with the values printed in large figures to facilitate recognition by the visually impaired. Designed by the Austrian artist Robert Kalina, the euro banknotes have pictures of windows, arches, gateways and bridges on them as well as a map of Europe and the European flag. Unlike the coins, the notes have the same design throughout Europe. Each banknote has a different colour and is a different size. Production of the euro banknotes began in July 1999. About 14.5 billion euro banknotes were produced at launch of the currency; 10 billion were needed to replace the national banknotes in circulation and 4.5 billion will be held in reserve.
When we began the design process it became apparent that what would be a good design for the blind and partially sighted would be a good design for everybody. As a result the following features have been incorporated into the seven euro banknotes:
· Different sizes, according to value.
· Striking dominant colours, with contrasting colours for pairs of banknotes in sequence. The EUR 5 banknote is grey, the EUR 10 is red, the EUR 20 is blue, the EUR 50 is orange, the EUR 100 is green, the EUR 200 is yellow- brown and the EUR 500 is purple.
· Values are printed in large numerals.
· The banknotes are printed in relief, using a special printing method known as intaglio.
On the front of the banknotes, windows and gateways symbolise the European spirit of openness and co-operation. The 12 stars of the European Union represent the dynamism and harmony between European nations. (Look at pages 17 – 20).
5.1 Who designed the euro banknotes?
The euro banknotes were designed by the Austrian artist Robert Kalina. His designs were inspired by the theme "Ages and styles of Europe". They depict the architectural styles of seven periods in Europe's cultural history: Classical for the EUR 5, Romanesque for the EUR 10, Gothic for the EUR 20, Renaissance for the EUR 50, Baroque and Rococo for the EUR 100, the age of iron and glass architecture for the EUR 200 and modern 20th century architecture for the EUR 500. Windows and gateways are the main feature on the front of the banknotes, while bridges are the main feature on the reverse. The images are modelled on the typical architectural style of each period, rather than on specific structures.
5.2 Which bridges are depicted on the euro banknotes?
The bridges, which appear on the reverse side of the banknotes, are modelled on the architectural style of each period rather than on specific structures. If it were easy to recognise particular bridges, then certain banknotes would inevitably be associated with a specific country. Therefore, the bridges merely represent a period in European history by using a stylised representation. Bridges of a similar appearance can be found in many parts of Europe. The same also applies to the windows and gateways which appear on the banknotes.
6 EURO COINS
Euro coins have one common side and one national side. They can be used anywhere within the euro area, regardless of the country of issue. So for example a euro coin issued in Spain and featuring a Spanish national side can be used to buy goods in Finland, Italy or Portugal.
There are coins in denominations of €2, €1, 50 cent, 20 cent, 10 cent, 5 cent, 2 cent and 1 cent. There are 100 cent to €1. 50 billion coins are being minted across the euro area. Production began in May 1998.
Euro coins are also available for Monaco, San Marino and Vatican City.
We believe that what is a good design for the blind and partially sighted is a good design for everybody. It is not surprising, therefore, that we paid particular care to the design of the eight euro coins, which incorporate the following features:
- Different coin shapes, colours and edges. (Look at pages 21 – 23).
- The weight of each coin is different - the heavier the coin, the higher the value (except for the EUR 1 coin).
- The thickness of each coin varies according to value - the thicker the coin, the higher the value (except for the EUR 1 and EUR 2 coins).
- The values are prominently displayed on the European face of the coins.
- Familiar national motifs are engraved on the reverse side of each coin.
7 WILL THE EURO BE SUCCESSFUL?
The Euro is already in use for non-cash transactions within all the Eurozone countries. Even in the three non-zone countries it is possible to have a bank account in Euros, and this helps many larger businesses to manage their currencies and foreign exchange transactions more efficiently. The Euro is already being used successfully, and has been for a few years. There are still many critics who have pointed to the fall in value of the Euro, but most world currencies fluctuate quite considerably, perhaps alarmingly, and this does not mean they are unsuccessful. We believe that the Euro will work successfully when introduced for cash transactions. Obviously there will be some teething problems and these will be much publicised and ridiculed by the media, who will be in tune with the normal human instinct to resist change.
8 THE MASS MEDIA CAMPAIGN
This campaign starts in September and will run until the end of January 2002. It supports the introduction of the banknotes and coins by conveying their appearance and providing information on their security features to the general public.
All applicants must fulfill a number of formal and substantial conditions before joining the euro:
- Maastricht convergence criteria of fiscal stability;
- Central Bank independence;
- Low inflation and interest rates;
- Monetary stability of their currencies by participating in the Exchange Rate Mechanism II (ERM II) for a minimum period of two years.
The eurozone hopefuls can already now re-denominate their external trade in the single currency. They also benefit from new sources of funding from the newly integrated euro financial markets, which have seen a massive number of international bonds denominated in the euro issued since the launch of euro in January 1999.
9.1 Why is the word EURO written in the Greek as well as in the Latin alphabet?
The name of the currency is written in both the Latin (EURO) and the Greek alphabet (EYPΩ), since these are both in current use in the European Union.
9.2 Why is it necessary to have a reserve of 4.5 billion euro banknotes?
Reserve stocks are part of good planning. At any point in time, the national central banks must be able to satisfy the demand for banknotes. A careful watch is being kept on the levels of electronic and credit spending, as this affects the amount of paper currency in circulation. Demand for banknotes fluctuates and the national central banks need to be prepared to handle this effectively.
9.3 Who decides how many coins to produce?
The European Central Bank is responsible for approving the overall value of coins to be issued. The use of coins varies greatly across the euro area, so each Member State has estimated the number of coins it needs and justified that figure to the European Central Bank, which has authorised the appropriate level of production.
9.4 Will Great Britain Join The Euro?
Prime Minister Tony Blair has effectively ruled out Britain joining the euro until 2010 at the earliest. Donald Mackenzie, managing director of FX Currency Services said: "Whilst we can be encouraged by the improvement witnessed in consumer understanding of euro conversion rates over the past six months, it is clear we still have a long way to go. With UK consumers believing they will receive well over four euros to each pound when they go abroad, we could well see some very disappointed holiday makers."
9.5 What about the real exchange rate movements of the currencies of eight
Central European transition countries against the ECU/euro?
Since the start of transition, the currencies of most East European countries have experienced an abrupt real depreciation, followed by a trend real appreciation over the subsequent years. Within the framework of a panel-data study for eight Central European transition countries - Hungary, the Czech Republic, Poland, Slovakia, Slovenia, Bulgaria, Romania, and Croatia - over a period of up to 12 years, we attempt to explain their real exchange rate movements against the ECU/euro. Theory suggests that in the medium and long run, real exchange rate movements can only be explained by real shocks, such as the shifts in tastes and technology. We construct a model decomposing real exchange rate movements into two components: the changing relative price of tradables (the shifts in terms of trade, reflecting the quality upgrading of the countries’ exports) and the changing relative price of non-tradables, relating the latter variable to cross-sectoral productivity differentials (capturing presumably the so-called Balassa-Samuelson effect). Our findings suggest that not only the tradable sector productivity and the share of government in GDP, but also the terms of trade are significant determinants of the real exchange rate. However, controlling for sectoral productivities, we found no positive correlation between real exchange rate and per capita GDP, suggesting the relative unimportance of demand effects associated with rising income. The latter finding implies that the trend real appreciation in the countries involved (i.e. higher domestic inflation under a fixed exchange rate arrangement within the framework of monetary integration with the EU) may prove more pronounced than usually assumed due to the possible demand-driven component, as living standards and consumption patterns in transition economies are expected to converge to those currently observed in West European countries.
The topic about euro is really difficlt but when you go into it you could find a lot of useful information. To summarise- EURO is the currency in 12 european countries since 1.1. 2002. Great Britain, Denmark, Sweden and 10 new Member states of European union will join to this currency in the near future. I think I have answered all the questions which I had mentioned in the introduction. Now I know who had designed the coins and banknotes, what is specific on them. Also that each banknote has another colour and also coins are made of different materials. And the main answer when will the Slovak republic start to using euro. It will be after the achievement of conditions. I am interested in history too, so the new information about the creation of it and the symbol are enjoyable for me. I think I have bring a lot of useful information about euro. And I hope we will use it in Slovakia soon. Because in my opinoin we will better deal with the other countries in the world.
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