Introduction



Europe and the Euro

The European countries concerned with the Euro can, to date, be arranged in two categories:

  • The 27 EU countries
- Great Britain did not take part in the Treaty of Maastricht
- Denmark benefits from a clause of exclusion (that does not mean that there will be no later adhesion)
- Twelve countries introduced the Euro on 1st of January 2002
- as 13th country, Slovenia introduced it in January 2007
- as 14th and 15th, Cyprus and Malta in January 2008
- the 16th, Slovakia, in January 2009
- The nine remaining countries (Bulgaria, Estonia, Lithuania, Latvia, Hungary, Poland, Sweden, Czech Republic, Romania) are all urged by their treaty of adhesion to join the Eurozone
- Sweden is, so to say, “commiting an offense”

The next introductions will undoubtedly be the three “Baltic” States.

  • Non EU member States having the Euro as currency

Two groups of countries are in this case:

  1. States benefiting from a privileged association

    These “microstates”, enclosed in Member States, are connected in a very narrow way to the economy of the EU. Two are in Italy (The Vatican and San Marino), the third in France (Monaco)

    Thus it seems interesting to give some information on these countries and their policy with respect to the issue of coins (none can issue banknotes). We will devote a part of this rubric to it.

  2. States using the Euro without particular rights

There are three different situations for three European States:

  1. Andorra, which could be identified with the preceding countries, received the Euro like previously the peseta and the French franc. This situation could change, and to integrate it to the group above would make the greatest delight of the collectors.
  2. Montenegro, lately independent, chose “unilaterally” the Euro as currency. Its future integration will depend on its admission in the EU, as well as the respect of the criteria.
  3. Kosovo, republic of Southern Europe of which the proclaimed independence in 2008 is recognized by numerous countries (including France).

We will devote to these countries the second part of this rubric.

Reminder: Conditions and procedures of introduction of the Euro

The EU learned a lesson of the first introduction at least on the following points:

- to institute one convergence period much more constraining than the EMS, which one could enter or leave to his own way; the new mechanism, called ERM II (Exchange Rate Mechanism), does not suffer from these approximations. When a State adheres to it, its central parity with the Euro is fixed (which has the role to become, except incident, the final and irrevocable parity during the introduction); the fluctuation cannot exceed +/- 15%, but can, according to the economy of the country, stay near 0% of variation (for example it was the case for Malta)
- to institute an economic monitoring by the means of “reports of convergence”, every year or every two years, for the new candidates
- to shorten the preparation period, three years having seemed well too long (moreover, two years were enough for Greece). It is also necessary to note:

* that five countries (the Baltic countries left the rouble, the Slovenia the tolar, Czech Republic liberalizing its economy) have already the experience of such a change (Latvia and Lithuania even changed their currency three times in a year!)
* and that in all the countries, coins and banknotes in euros are now well-known

- to incite at a short period of double circulation, even like the German model without double circulation period (this choice had caused the incredulity of its partners, in particular because of the enormous money supply needed, but appeared a great success, especially avoiding the problem of the “double cash box” to the tradesmen); the actual plans envisage an introduction of the Euro simultaneously to the withdrawal of the national currency in Estonia, two weeks of double circulation in Lithuania (Latvia did not communicate on it)
- a very rigorous application of the criteria of Maastricht for the new comers
- put the emphasis on the communication towards the public

In fact, an applicant country must satisfy five criteria:

- a two years long participation in ERM II while having shown monetary stability
The four other criteria are those of Maastricht:
- public deficit lower than 3% of the GDP
- national debt lower than 60% of the GDP
- inflation rate lower than the average of the three best EU countries + 1,5%
- long-term interest rate lower than the average of the three EU best countries + 2%

It will be noted that the two first criteria are not appreciated in the absolute, but rather in tendency; for example, the national debt of Cyprus is at 72%, thus higher than the objective of 60% of the GDP, but the reports of convergence of the ECB show that this country decreases its debt regularly and should achieve the goal. It will then not be an obstacle for the qualification of this country. However, the other criteria must be strictly respected, as the rejection of the Lithuanian introduction showed it (up to absurdity) for 0,1 point inflation!

In case of success, the Euro can be introduced into the next six months.



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Last update the 21/08/2010
by Clément Caudron