European Monetry System
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Transcript of European Monetry System
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European Monetary system and Euro
Submitted to
Prof. Smita Kumar
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GROUP MEMBERS
ABHISHEK TAWDE 1
ANAMIKA SINGH 3
ROHIT GUPTA 30
SAGAR NAWALE 32
VISHAL KARADE 39
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EUROPEAN MONETRY SYSTEM
EMS is a Monetary System originated in an attemptto stabilize inflation and stop large exchange-ratefluctuations between European countries.
A 1979 arrangement between several European
countries which links their currencies in an attempt tostabilize the exchange rate. This system wassucceeded by the European Monetary Union (EMU),an institution of the European Union (EU), whichestablished a common currency called the euro.
Solution to the end of Bretton Wood system.
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EMS MEMBER
Belgium, Denmark, France, Ireland, Italy,Luxembourg, the Netherlands, and WestGermany are the initially participate members.
Spain joined in 1989 & UK in 1990. Portugal and Greece are members but do not
participate fully
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WHY EMS COME
High global Inflation.
Economic stagnation.
Currency fluctuation. To Stabilized the local currency.
Reducing import & Export taxes.
Giving strength and protection to each other.
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Parity Grid
parity gridbilateral central parities to theECU
narrow fluctuation band ( 2,25 % or
6,0 %)
unanimous agreement on realignments
ECU as reserve currency, unit of account weighted average of the EMS
currencies
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ECU
Is a basket of the currencies of the European
Community.
The ECU was conceived on 13 March 1979 as
an internal accounting unit.
The ECU was used as the International
financial transition.
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Snake In The Tunnel(1972-73)
The snake in the tunnelwas the first attempt
at European monetary cooperation in the
1970s, aiming at limiting fluctuations between
different European currencies.
It was an attempt at creating a single currency
band for the European Economic
Community(EEC) essentially pegging all theEEC currencies to one another
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Snake In the Tunnel
Fluctuation band around USD (1,125%)
compared with (2,25%) of the IMF members.
Speculative pressure, oil shocks, economic
divergence
Challenges for the philosophy of monetary
integration.
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Maastricht Treaty - The Treaty on
European Union
Treaty establishing the European Community.
Agreed in 1991,Signed in 1992.
Important step in the European integrationprocess.
Creation of the European monetary
Union(EMU).
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Maastricht Treaty
Commitment to launch single currency before
1999.
Introduces five criteria for admission to the
monetary union.
Mentioned condition on the fiscal policy.
Economic definition of the EMU.
UK + DK negotiated option out arrangement.
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Maastricht Criteria
Monetary criteria
inflation rate ( 1,5 %)
long-term interest rate ( 2,0 %)
exchange rate stability (ERM)
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Maastricht Criteria
Fiscal criteria
budget deficits (3 %) government debt (60 %)
relationship between Maastricht fiscal criteria
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Euro
When did Euro begin?
The name euro was officially adopted on 16 December 1995.The euro wasintroduced to world financial markets as an accounting currency on 1January 1999, replacing the former European Currency Unit (ECU) .
1999The euro was adopted by eleven countries including Austria, Belgium,
Finland, France, Germany, Ireland, Italy, Luxembourg, The Netherlands,Portugal and Spain as their official currency.
2001
Greece became country number 12 to adopt the euro.
2002The euro became the common currency of Europe for twelve countries in the
European Union
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EURO ( )
Why Did the Euro Start?
Where is the Euro Being Used?
The euro was adopted by twelve countries including
Austria, Belgium, Finland, France, Germany, Ireland,
Italy, Luxembourg, The Netherlands, Portugal , Spain
and Greece in 2002. 5 members were joined latter to become 17 Members.
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Future of EURO
Sovereign debt problem of some countries.
Continuously weakening against Dollar
The PIIG nations are overleveraged. Germany are not in a mood to Bailout the
Greece..
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