歐洲貨幣體系（EMS）留學(xué)生dissertation

歐洲貨幣體系和歐元創(chuàng)立
 

歐洲貨幣體系（EMS），其實是通往歐洲單一貨幣歐元的奠基石。環(huán)境管理體系既不是一個完美的浮動匯率制度，也不是完全固定的系統(tǒng)。
 

歐洲貨幣體系是由歐盟各國在1979年創(chuàng)建。生產(chǎn)和采用單一貨幣和貨幣體系，這是所有歐盟成員國之間的協(xié)議。建立歐洲貨幣聯(lián)盟背后的主要想法是建立匯率穩(wěn)定的區(qū)域，從而增加貿(mào)易增長的吸引力。該動車組同樣旨在加快歐盟內(nèi)部的經(jīng)濟政策的統(tǒng)一進程。
 

在1991年12月10日，歐盟各國領(lǐng)導(dǎo)人聚集在馬斯特里赫特，羅馬條約的目的是打開對動車組的路徑變化，在林堡省的荷蘭發(fā)現(xiàn)其中的某些根本性的改變。該條約涉及3個階段。第一階段涉及歐盟成員國的央行中全部缺失的資本管制。第二階段計劃開始于1994年1月1日，它涉及到縮小的匯率利潤，并決定了一些歐盟控制下的宏觀經(jīng)濟政策。
 

The European Monetary System and the creation of the Euro

 

The European Monetary System (EMS) was in fact the founding stone leading to the European single currency the Euro. The EMS is neither a perfect floating regime nor is the system wholly fixed.

 

The European Monetary System was created in year 1979 by the European Union countries. It was an agreement among all the EU members to produce and adopt a single currency and monetary system. The main idea behind the creation of the EMU was to establish an area of stable exchange rate so as to make trading and growth more attractive. The EMU equally aimed at speeding up the unification process of economic policies within the EU.

 

On December 10, 1991, the EU countries’ leaders gathered at Maastricht in the Limburg Province found in Netherlands where certain radical changes to the Treaty of Rome, changes which aimed at opening the path towards the EMU. The treaty involved 3 stages. The first stage involved the total deletion of capital controls among EU members’ central banks. Stage two was planned to begin on January 1, 1994 and it involved narrowing down exchange rate margins and placing some macroeconomic policy decisions under the EU control. On January 1, 1999, stage 3 was started. This stage involved replacing all the individual national currencies by a single European central bank to monitor the Exchange rate mechanism and take monetary policy decisions.

 

Stage 3 was further broken down into two parts. The first one involved the initial period where each participated state would be using both their local currencies and at the same time circulates the new currency, the Euro. The second part was where all the local currencies shall be withdrawn from circulation and euro notes and coins will be introduced. This stage was entered in on January 1, 2002.#p#分頁標題#e#

 

The Maastricht treaty signed on February 7, 1992 was subsequently ratified by all member states. Certain countries backed their approval by a public note, while others ratified through legislative note.

 

The treaty set down 5 conditions, known as the “convergence criteria” by which each member state should abide so that they can be part of the EMU. This meant that an EU member does not automatically qualify to the EMU unless it met all the convergence criteria.

 

There are essentially 5 main criteria to comply with and they are as follows:

 

PRICE STABILITY

 

A successful candidate of the EMU is considered as one having an inflation rate within 1.5 percent points of the average rate of the three EU states with lowest inflation rates.

 

INTEREST RATES

 

The long term interest rates must be within 2 percentage points of the average rate of the three EU states with the lowest Interest Rates.

 

BUDGET DEBTS

 

The national budget deficient must be less than 3% of gross domestic product. However, exceptional and temporary excess would be granted for special cases.

 

NATIONAL DEBTS

 

The national debt must not be more than 60% of GNP. Even though certain particular circumstances do not allow decreased enough and must be moving towards this rate at a reasonable pace.

 

EXCHANGE RATE STABILITY

 

The national currency must not have been devalued for two years and must have remained within the 2.25% bands of the Exchange Rate Mechanism.

 

 

External events: collapse of communism in Eastern Europe and possible German reunification.

 

Internal events: member states had the desire to boost up the progress reached to by the single European Act.

 

The creation of the EMU brought different EU regions economies closer. The EMU further brought modification brought different European Union regions’ economies closer. The EMU further brought modifications in the trade world, not only within member states but all throughout Europe. For instance, given the same currency prevailing, lower transaction costs have to be borne by traders. The single currency has enabled trading entities in the various Euro zone countries to trade with each other without changing currencies. Therefore, the problem of exchange losses is cut out and a payment between Euro zone countries is now less costly.#p#分頁標題#e#

 

Furthermore, stable exchange rates have been reached to. The single currency eliminated exchange rates between countries in Euro zone. Such a situation has helped companies to have better decision making sessions.

 

The European monetary union has lead to transparent price differences in the Euro areas. Price comparisons now becomes an easier process and companies now have to sharpen their competition strategy given more or less same prices all around.

 

The main objectives of the treaty were to:

 

Make the democratic legitimacy of institutions stronger

 

Bring about and improvement in the effectiveness of institutions

 

Establish an economic and monetary union

 

Develop the community social dimension

 

Establish a common foreign and security policy

 

TRANSITION FORM LOCAL CURRENCIES TO THE EURO

 

One of the key steps in the formation of the EMU was the introduction of the Euro as currency and the gradual phasing out of local currencies. The euro made its official introduction in the trade world in a non cash form in late 1990’s when Euro notes and coins did not yet physically exist. The Euro was expected to phase in during a transitional period from January 1, 1999 to December 31, 2001.

 

During the above mentioned three year period, concerned stakeholders were free to use the euro but were not obliged to do it. The legacy currencies co existed with the euro during that period after which the local currencies phased out as the euro was physically introduces into circulation.

 

By July 1, 2001, the changeover was completed: The Euro was now the only legal tender in Euro Zone countries.

 

On the start of the transition period of the Euro in January 1, 1999, foreign exchange transactions and translations of foreign financial statements between the 11 euro zone countries, the legacy countries, and the US dollar have undergone tremendous altercations. The conversion rated of the legacy currencies are fixed in euro terms; they no longer floated against other currencies. Only the euro floated against other currencies with a published exchange rate. For instance, the German Mark could no longer be directly converted into the US dollar; any transaction must be “triangulated”, that is, converted through the Euro first.

 

Among the first important modifications that was required was in the language. Adopting the Euro has meant adopting new labels like the “Euro” and “Cent” which have replaced earlier monetary denominations. This has brought significant changes to the lexicosyncratic structure of terms regarding money (Marques, 1999).#p#分頁標題#e#

 

Initially (but even after 2 years of using the Euro), when the old currencies were used altogether, citizens of various states found it a difficult task to figure out how much a product or service costs. A study on the psychological consequences of Euro introduction said that our cognitive system in fact uses a “price memory” to instinctively determine whether a product is overpriced, under priced or fairly priced on the market. This memory has been used for the old currency over years and all of a sudden it has to change and be replaced by a new one. The absence of this memory has at the beginning given rise to an uncertainty date as regards to the good’s quality/ cost ratio (Bini Smaghi, 2001).

 

In fact, a research by Dehaene and Marques (2002) demonstrated that this uncertainty was caused by the absence of any “mental map” for the new currency.

 

Another study further added that the lack of routine using the Euro as a daily currency may leave people more vulnerable to unwanted influences ( Jonas & al, 2002).

 

Apart from the psychological effects mentioned above, joining the European Union fully and introducing a new currency presented other intricacies. It is of common knowledge that the Euro-zone countries trade more frequently with non- Euro countries, like the USA, than among themselves. For instance, for an American company, foreign exchange transactions with companies in the euro-zone, accounts can be settled in dollars, Euros, or the legacy currency. For transactions settled in dollars, no problems arise. However, transactions settled in Euros will require translation into dollars at the appropriate dates and exchange rates, which may result in foreign exchange gains or losses. This new element brought about an additional uncertainty element for foreign investor companies.

 

DRAWBACKS FACED BY MEMBER COUNTRIES

 

When the Euro was finally introduced in 2002, there was a tendency to associate it with intense public fear. People were and they still are preoccupied about monetary stability and their ability to adapt themselves to the new currency.

 

Apart from the transitional problems mentioned above, joining the European Union fully and introducing a whole new currency presented other intricacies. Up to now (year 2010), the European Monetary Union has not always been a joyride for its members. They have faced various difficulties, some of which are yet to be overcome. The most noticeable problems associated with the European Monetary Union have been the Euro Crises and the Debt Crisis among other multiple troubles.

 

The Euro Crises

 

Back in year 2000, nothing like the crisis state through which Europe went was foreseen when the Euro entered the Monetary World on January 1, 1999. The accuracy and motivation with which governments, banks, trading rooms, stock exchanges and corporations embraced the new currency on a clear New Year’s Day indicated that Europe might finally be committed to creating a unified economy. At that particular point, as per general suppositions, the worst situation in which the Euro could be forecasted to be was that the markets might eventually assess the currency’s actual strength. The cause of the crisis then was not that Europe was not a good enough zone to invest or to trade with. It rather happened because the technologically advanced economy and markets were perceived as being more attractive in America.#p#分頁標題#e#

 

In years 2008- 2009, together with the financial crisis, the European Monetary Union was hit by another Euro Crisis. This additional blow to the Euro was even considered as the point of no return on the way into a drawn out recession, if not depression. Politicians’ reactions only reflected the helpless state they were in, a state which required action since 2006. Euro land was hastily going for a surging monetary inflation in the near future.

 

In year 2008, the European Central Bank’ s (ECB) president Jean Claude Trichet suggested that more and more fresh Euros to be let into circulation until politicians managed to find a way out of the crisis that had started to weaken real economy almost overnight. He further added that extra governmental intervention would take place.

 

These constant ‘patches’ affixed to the Euro was only buying the EMU some time but politicians were under the looming risk of skyrocketing inflation if no reasonable solution was brought forward in the immediate future. The belief that today’s € 100 would buy the same amount of services or goods in the future was in a declining motion.

 

The Debt Crisis

 

Southern Europe’s debt crisis has started to raise doubts about the long- term future of the common European currency. Around the start of year 2010, the European Union already started to apprehend the beginning of a sovereign debt crisis (or what was also called the Aegean Contagion) due to the rapidly declining performance of some EMU members like Greece, Spain and Portugal. This further lead to the lowering of the confidence level in the Union as well as the deepening of the risk factors.

 

It is of widespread belief that the recent occurring in Greece were the ones to feed the European Debt Crisis. Greece has been facing a drift towards an increasing cost of financing government debt, even though the Greek economy was one of the fastest growing during the 2000s with the peak annual growth rate being 4.2 %. Throughout the years several Greek governments have involved themselves into large deficits to finance public sector jobs, pensions, and other social benefits with the aim of helping out certain parts of the population.

 

A devaluation of Greece’s currency at first helped to finance the borrowing. However, after the Euro was introduced Greece found itself borrowing more and more due to the lower interest rates government bonds could command with the 2008 financial crisis, Greece’s economy was deeply affected and the country’s main industries, tourism and shipping faced enormous cuts in turnover. So that they do not infringe any of the EMU guidelines, the Greece government was suspected of consistently and deliberately misreported the country’s official economic statistics. All of these causes taken together resulted in Greece being a factor holding down the Euro and contaminating other EMU countries.#p#分頁標題#e#

 

Simon Tilford, Chief Economist at the Center for European Reform in London, says “The Greek crisis reflects a larger economic problem in Europe. EMU members like the Netherlands and Germany have spent too little and their economies are driven by Exports. Meanwhile, southern economies like Greece and Portugal have spent too much and amassed debts as a result.

 

The consequences of the crises have now become more visible such that labour markets in some countries have started to weaken and government debts almost everywhere is far in excess of allowable deficit limits.

 

Danske Bank Chief economist Steen Bocian was not surprised by the general change in feelings towards the EMU.

 

“Enthusiasm for the currency has disappeared because of the crisis in Southern Europe”, he said. “The thinking is why should Denmark join a club whose members have such big problems? But in practical terms, Denmark already is a member. Whether we have a formal membership or not won’t make a lot of difference if the Euro falls apart.”

 

After the collapse of the Bretton- Woods system, extensive exchange rates problems found their way to the economies in several Euro zone currencies, which could have hindered the process of economic specialisation and the tearing down of tariff walls across borders in Europe ( Crouch 2000).

 

The European monetary union was established to deal with this problem. However, the situation became trickier with the start of financial deregulation among many European economies. Another reason sharing a common currency proved to be costly is that it deprived states of the ability to alter the nominal exchange rate of their currency in response to a shock.

 

Certain Euro zone states have exposed acute complications in the structure, which can only be fought back by a long and painful adjustment process. Economic and fiscal policy scrutinising in the Euro zone was inadequate to avert undesirable trends in a timely manner. A more decisive use of the instruments available is required and a great deal of political resistance needs to be surmounted.

 

Additionally, the Euro is subject to wide variations in prices, despite the fact that proponents of the Euro claim that the currency is highly stable. Even with the Euro to ease trade, it has been commonly found that Euro zone countries trade more with non- Euro zone countries than among themselves. Hence, questioning the role of the Euro in promoting trade. The administrative costs of maintaining a stable Euro is costly and impractical and the European Central Bank failed to do such maintenance.

 

To help maintain an Euro with minimum fluctuations, EMU member countries were required to keep their budget deficit to 3% of output. However, there was virtually no way for the ECB to enforce this limit and it was even less likely to be informed when this rule is breached.#p#分頁標題#e#

 

The past experiences with the Euro might lead us to think that it takes a crisis for proponents to understand that weaker economies that spend above their means do so at the disadvantage of stronger ones that run surpluses.

 

In fact, they are wasting off the surpluses of the other member countries using the Euro. A common currency is the path through which reckless spending is possible. It works the same way was common bank account where all the members are authorised signatories who may draw funds at will.

 

The prolonged Euro crisis encountered brought to light that the actual European body of regulations is still incomplete. The European Monetary Union is not robust enough for extremely severe situations of the kind Euro zone members are now facing. Such a situation require a comprehensive intervention to prevent more complex systemic risks. If budget monitoring would have been enough or effective, the disbalance faced today was held to be inconceivable.

 

The wearing off of national economic sovereignty is the prime claim against the Euro. As soon as the UK or Denmark join the EMU, they will not be able to manipulate their rates of interest anymore as per the requirements of their respective economy. UK foresees this situation as a ‘destructive’ one in terms of instable economy, decreasing growth, increase in unemployment and overall economic deterioration. In case UK or Denmark decide to join the EMU, it entails that these two countries have to stand up to their decision.

 

It has equally been mentioned that ‘Euroland’ is not considered as an ‘optimal currency area’, that is, it is not one where general economic efficiency is ideal and maximised. A lucrative monetary policy is one which is backed by flexible wages, mobile labour force and a large enough central budget to help out those members who might be economically lagging behind. However, examining the current and past figures and facts, we tend to conclude that the EMU is not much of an ‘optimal currency area’ in terms of the rigidity of its labour market as well as restricted mobility of labour. Adding to that, the central EU budget is less than 1.3 % of GDP.

 

UK and Danish EMU critics further add that converting their local currencies to Euros involved tremendous costs, especially for financial industry companies like banks or retail corporations. The state would not be able to cover these costs fully.

 

The ability to match the convergence criteria by certain members can be questioned. We should not exclude the possible idea that in order to be part of the EMU, a certain amount of data manipulation and appealing presentation of facts went about keeping this in mind, the whole process of currency value and interest rate setting no longer holds true. Henceforth, a single interest rate for Euro Zone countries can be inappropriate for some of the members. A consequence of this can be cited as the meagre progress in growth of the EMU since 1999.#p#分頁標題#e#

 

Both UK and Denmark run a further risk that the inflexibility of the EMU’s structure will spread to their own countries. Given that, the stability of the current EMU members depends a great deal on the EMU policies and Euro fluctuations frequency, there should be as little adjustment as possible. The reason why UK is among the most prospering of its trading partners is that it has been able to remain flexible. Losing flexibility might later mean losing competitiveness for both countries.

 

Currently, Euro zone countries have a relatively high level of pension debts compared to the UK’s or Denmark’s fairly modest liabilities. The EMU cannot compel any of the two countries to support German or Italian pensions financially, but they will be adverserly affected by increasing interest rates.

 

UK claimed that it’s Central Bank has a far better structure than the European Central Bank. Past statistics about the ECB reveal more of wrong turns than right ones. The ECB has more often than not failed to timely react by easing policy. Adopting the Euro might imply adopting an inferior monetary framework. UK has set up an effective process of managing the rate of interest at the Bank of England; the EMU might (will) not provide such facilities to the UK.

 

The fall down of precedent monetary unions is not doing anything to convince UK or Denmark to be part of the EMU. To the Britons and the Danes, there was no guarantee that the common currency will lead to a booming of economic performance. The European Central Bank might pursue the deflationary policy for Europe during unusual points in time to meet the needs of the UK’s domestic economy, the Euro will not be able to remedy economic decline and increased unemployment. Theoretically speaking, a common currency union can bring about positive economic results given that the circumstances can be exploited. In recession however, it is no longer possible to spend more on exports so as to devaluate the currency and stimulate the economy.

 

BRIEF OVERVIEW OF THE UK’S ECONOMY

 

The United kingdom is made up of Great Britain and Northern Ireland. It is presently ranked 6th largest of the world in terms of nominal GDP. Preceded by Germany and France, UK is the largest economy in Europe. UK uses the Pound Sterling as currency, which is commonly used by various countries as a reserve currency.

 

The UK opted not to join the EMU at Maastricht. Tony Blair (former prime minister of the UK) stated that a public referendum will be held to decide whether or not UK should become an EMU member provided that “five economic tests” are met. Those five economic tests are:

 

Even though the results of the test came out very positive later on, in 2007, Britain’ s then prime minister Gordon Brown officially rejected the membership to the EMU for the forthcoming years. He said that “UK should not yet join the Euro” and that it has been a right thing for both Britain and Europe. Every public opinion polls carried out on the membership issue up to now have shown that most of the Britons are against the common currency. For a fact, a poll in year 2005 showed that 55% (more than half) of the UK voted against the EMU’s Euro compared to only 30 % who voted for. In addition to that, the present government lead by David Cameron is against the membership.#p#分頁標題#e#

 

BRIEF OVERVIEW OF THE DANISH ECONOMY

 

Denmark officially known as the kingdom of Denmark is a Scandinavian country in northern Europe. Demark operates a mixed economy where the services sector is the predominant factor given the small quantity of natural resources (oil and natural gas). The services sector is the one to employ most of the country’s human resources.

 

The Euro has not yet been introduced in Denmark. However, the Denmark central bank has closely pegged the Danish Krone (Denmark’s prevailing currency) to the Euro in ERM II.

 

The Danish government said that they left the decision as to whether to join the EMU or not to its population. On September 28, 2000, the Danes, in a referendum, made their choice about the Euroamd the result was a rejection of the membership. The treaty allowed Denmark to stay off the Euro Area despite the fact that Denmark has met the convergence criteria. By help of a referendum, such a status can be eliminated.