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Saturday, 20.04.2024, 08:39
Euro celebrates 20 years in the EU and 5 years in Latvia
The establishment of a single market necessitated the
creation of a single currency. The “euro-moment” followed decades of
discussions on achieving Economic and Monetary Union, EMU: e.g. in 1988 the
Delors Committee was set up (under the chairmanship of then Commission
President Jacques Delors, it examined specific, gradual steps towards a single
currency). Then the agreement among political leaders followed with the signing
in 1992 the Maastricht Treaty, which brought the single currency to life. More
on the Treaty in:
https://www.ecb.europa.eu/explainers/tell-me-more/html/25_years_maastricht.en.html
In 1994, the European Monetary Institute (EMI) started its
preparatory work in Frankfurt for the European Central Bank (ECB) to
assume its responsibility for monetary policy in the euro area; on 1 June 1998,
the ECB became operational.
More on ECB in: https://www.ecb.europa.eu/home/html/index.en.html
On 1 January 1999, the euro was launched, becoming the
official currency of initially 11 EU states and 19 presently. The euro is the
second most important international currency; it is a safe store of value for
international central banks and widely accepted for international payments.
During last years, the architecture of the EMU has been
significantly reinforced, building on the visions set out in the Five
Presidents' Report of June 2015 and the Reflection Papers on the Deepening
of the Economic and Monetary Union and the Future of EU Finances in
spring 2017. Besides, the Commission set out a roadmap for deepening the Economic
and Monetary Union. On the EMU reforms see the following web-links:
- Learn more
about the story and the benefits of the euro;
- Find
out more about what the EU is doing to strengthen the euro;
- Factsheet:
Commission presents ways to further strengthen the euro's global role;
Public support for the euro has been consistently increasing:
a majority of 74% of respondents across the euro area thought the euro was good
for the EU; this is the same as the record high score set in 2017 and confirms that
popular support for the euro is at its highest since surveys began in 2002. A
majority of 64% of respondents across the euro area thought the euro was good
for their own country; about 36% of Europeans identify the euro as one of the EU’s
main symbol, the second highest behind “freedom”. References to: https://ec.europa.eu/info/news/eurobarometer-2018-nov-20_en
Euro’s two decades in the EU is a good point to make some
assessments. In January 1999, eleven EU
states launched a common currency, the euro, and introduced a shared monetary
policy under the control of the EU’s authority, i.e. the European Central Bank.
Presently, the euro is the currency of 340 million Europeans in 19 member
states.
According to the Commission, “it has brought tangible
benefits to European households, businesses and governments alike: stable
prices, lower transaction costs, protected savings, more transparent and
competitive markets, and increased trade. Some 60 countries around the world
link their currencies to the euro in one way or another, and euro is going to play
even bigger role on the international scene”. All other EU member states,
except Denmark and Sweden, are expected to join the euro area once the introduction
criteria are met.
Source: Commission’s
press release “Euro celebrates its 20th birthday”, in:
http://europa.eu/rapid/press-release_IP-18-6811_en.htm?locale=en
Latvian 5 years with euro
Latvian road to the adoption of the common currency began
with the country’s accession to the EU in 2004. This provided a solid policy
anchor and set out major reforms, which required responsible fiscal and macroeconomic
policies. Latvian government’s plan to join the euro-zone originated in 2008;
however, the crisis came and the national economy was critical asking for the
EU and international financial assistance. Things went better: Latvia complete
the adjustments and meet the convergence criteria.
In Latvia’s joining the euro, there were many skeptics: some
were questioning whether it was a right time to join the euro area. Even
presently, the euro is not wholeheartedly accepted: about 63% of Latvians
believe it had been a good idea for the country (compared to about 80% in the
whole Europe).
At the celebrations in Riga, the Commission vice-president underlined
that during these five years “the euro has brought Latvian businesses
transparent prices, less currency conversion costs and lower interest rates. It
has supported exports, as well as investment. At the end of the day, this
translates into growth and a better standard of living for Latvian people”.
Reference: http://europa.eu/rapid/press-release_SPEECH-19-181_en.htm?locale=en
As Estonia joining the euro, it provided and additional
impetus for Latvia and later Lithuania follow the positive steps.
Following reforms and protective measures
European authorities are unanimous that the EU urgently
needs reforms; some steps have been already made: the European Semester to
coordinate member states fiscal and macroeconomic policies; the banking union,
which has made European financial sector stronger in the euro area and improved
responses to possible crisis through the European Stability Mechanism. Hence, banks
in the EU are being better capitalised, supervision is stronger and the average
level of non-performing loans has come down. These efforts paid off: the EU’s economy
is now entering its sixth year of uninterrupted growth, with record levels of
employment.
Important reforms shall be continued: common efforts are needed
to provide necessary protection
against failure by the Single Resolution Fund, with the European Deposit
Insurance Scheme to ensure that all depositors in the banking union enjoy the
same high level of protection.
The Commission has elaborated some crisis management tools:
reinforcing the European Stability Mechanism, proposing a European Investment
Stabilisation Fund, alongside support for the member states’ structural reforms
through the reform support program.
The EU capital markets union is aimed at making financial markets
more interconnected in order to improve access to capitals for European
companies and SMEs, while helping to put European savings to a productive use. Capital
markets should play a bigger role in financing companies with the necessary stabilising
effect.
Vice-president V. Dombrovskis underlined that Latvia's
experience shows that the sooner the countries perform the necessary adoption
criteria the better with the importance of cooperation and partnership. As a
small economy, Latvia has naturally chosen this direction.
Source: Vice-President Valdis Dombrovskis Speech “Five
Years with the Euro”, Riga, 7 January 2019, in: http://europa.eu/rapid/press-release_SPEECH-19-181_en.htm?locale=en
Euro’s 20 years in the EU: authorities’ comments
Commenting the event, five Presidents of the EU institutions
and bodies most directly responsible for the euro made the following notes:
Jean-Claude Juncker, President of the European
Commission, said that the Maastricht
Treaty (signed in 1992), which launched the Economic and Monetary Union, EMU
and the common currency’s idea opened a new chapter in the EU’s history. The
euro has become a symbol of unity, sovereignty and stability; it has delivered
prosperity and protection to citizens. However, he added the EU and the member
states must continue these efforts and complete EMU and boost the euro's
international role.
Antonio Tajani, President of the European Parliament,
mentioned that euro has been more
popular today than ever: three out of four citizens believe it is good for the economy.
In order for Europeans to benefit fully, the member states must complete the
EMU through genuine financial, fiscal and political cooperation.
Donald Tusk, President of the European Council, underlined
that the creation of the euro 20 years
ago was a pivotal moment in the European history. The common currency has since
matured into a powerful EU’s expression as a political and economic force in
the world; despite crises, the euro has shown itself resilient.
Mario Draghi, President of the European Central Bank,
mentioned that the euro was a logical
and necessary consequence of the single market. After 20 years, young generation
doesn’t know other domestic currencies. During two decades the ECB has
delivered on its main task of maintaining price stability, while contributing to
the well-being of euro area’s citizens by developing safe, innovative
banknotes, promoting secure payment systems, supervising banks to ensure they
are resilient and overseeing financial stability.
Mário Centeno, President of the Eurogroup, noted that
euro has been one of the biggest
European success stories: its importance and impact over the first two decades
is obvious. However, the euro and the close economic cooperation that it
entails have evolved over time; but the “euro-work” is not yet finished; it
requires continuous reforms and efforts.
More information on the issue in: Flash Eurobarometer: Support for the euro steady at all-time high levels;
- Information about the prospective enlargement of the euro area;
- The
History of the euro and the European Central Bank
Reference:
Commission’s press release “Euro celebrates its 20th birthday”,
in:
http://europa.eu/rapid/press-release_IP-18-6811_en.htm?locale=en