| EURO |
The Euro
Currency:
History and Adoption (continued) |
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In addition to all of the careful planning and preparation, a very detailed
implementation plan was created to ensure a smooth rollout of the euro. From
January 1, 1999 - December 31, 2001, the euro could only be used for non-cash
transactions. There were no euro notes or coins in circulation at this time.
However, price tags, bank statements and other documents and systems began
reflecting amounts in euros. Additionally, the conversion rates for national
currencies of the member states and euro were fixed.
In preparation for the changeover, euro notes and coins were delivered to
banks in the 12 member states in September 2001. At this point in time, the
banks began distributing the euro notes and coins to retailers and other institutions.
Then in December 2001 the euro coins were distributed by banks to the general
public. "In Germany, people were given the option to exchange 20 DM for a "starter
kit" containing €10.23 in coins" (Ref).
| On January 2002, euro notes and coins entered
circulation as legal tender in the euro zone. Conversion of all bank
accounts and corporate books in the euro area were completed. Finally,
all salary and social security transactions and all new contracts were
transacted in euro. |
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Between January 1, 2002 and February 28, 2002 the euro as well as old currencies
was accepted in most euro-area countries. Consumers had the option to make purchases
using the old currencies, but received their change in euros. The aim at this
time was to have most cash transactions made in euro by mid-January 2001.
Given the difficulty and length of implementation, there must have been
compelling reasons for these countries to agree to switch to one common
currency.
Overall it was felt that the main benefit was that a single market needs
a single
currency. In fact, some of the main marketing slogans used by the European
Monetary Union
prior to the introduction of the euro were "one market, one money" and "the
value of the euro is the value of Europe" (Ref).
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Surprisingly, businesses wanted the euro. Adopting the euro lowered
their transaction costs through eliminating the cost and administrative
overhead of exchanging currencies between one country and another. It
also eliminated currency exchange rate risk. The introduction of the "euro
also lifted barriers to free trade in goods, services, labor and capital" (Ref).
As a result, they realized lower prices for products and services. Another
added benefit is that the euro made it much easier to compare prices
for the same goods and services between countries. This not only helps
the business but customers as well. |
While there clearly were advantages to adopting the
euro, Great Britain, Sweden, and Denmark chose not to switch to a single
currency. The following arguments
from Great Britain illustrate many of the reasons that the other non-adopting
countries identified. Some of these examples do not universally apply
but are indicative of the scope of the problem.
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