If you like the shirt that you have
just seen in a shop window in Spain, you have to force yourself
to translate the price into pesetas. The problem is that not
only are you not sure of the exact exchange rate but neither
do you know how much you will be charged from your current
account when you pay with your credit card. In a few years
this situation will disappear.
The stopwatch has begun.
From the year 2002 the european countries will be able to
have the same currency: the euro. However a hard exam must
be passed in order to become one of the countries with a single
currency. The objective is to have similar economies within
the countries and the exam is called the convergency plan.
There will be four constraints to be met in order to pass
the exam:
1. Public deficit.
Not allowed to be more than 3% of the Gross Domestic Product.
2. Inflation.
The average of the three countries with lowest consumer price
rates will not to exceed 1.5%
3. Foreign Debt.
The total debt of country headquarters (central, autonomic
and local) must not exceed 60% of the Gross Domestic Product.
At the moment only Luxembourg
would pass this exam. For that reason the interested countries
in the euro must carry out big economic changes and most of
the time these will not be popular measures. |
| 1. In Spain the interest
rates will be lower thus the cost of credit will be less.
2. There will be no need
to exchange money (and pay expensive commissiones) in order
to travel around Europe. This will be a great benefit to the
intraeurope tourist, to be able to dismiss the commissiones
charged on the purchase and sale of foreign currency. Nowadays,
an imaginary tourist that might go out of Spain with 1.000
pesetas would come back with only 500 pesetas because of the
commissions he would have to pay.
3. The european companies
will be able to buy and sell merchandise and services with
the same currency, without the risk of it fluctuating.
4. The structure of the
European Economy with be better as the creation of employment
will increase.
5. The conditiones in order
to compete with the dollar and the Yen will be better.
6. The exchange speculators
will not be able to influence the value of money. The idea
of the euro does not appeal to the banks and saving societies
because they will lose business in the exchange market, and
as well as this they will have to adapt all their computer
systems to the new currency. Neither do the speculators nor
the intermediate fincancers like the idea that today they
do business playing with the differences between the interest
rates of different countries. |
1) Companies and people
will have to make up for the elevated costs derived from the
convergence process. This will have to comply very much with
the established conditions for the euro.
2) The banks and the saving
societies will lose important financial incomes via the equality
of interest rates.
3) The countries will lose
sovereignty in the monetary matter.
4) If the there are few
European nations they could divide themselves even further
apart: into rich countries and poor countries.
5) Unemployment could increase
if the trade unions demand a rapid salary comparison.
|
| If everything turns out to plan the single currency will create
a stable economic space and moderate inflation, both of which
will generate eleven million jobs in four years, according to
the calculations made by the European Commission. Whichever
way one must wait to see what happens in the future with the
constraints that must be met and the practical position of the
currency. |
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THE
SINGLE CURRENCY. THE EURO 
September 1997
Advantages
of having a single currency
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