Euro

Begining and explanation
Ladies and Gentlemem, I would like to talk about Euro. I will mainly adress you, who wants to study at the economic university. Nevertheless I will try to cach attention of the rest, I hope I won´t be boring.

Origins of money
Let´s begin in far history, it can help us to understand the present situation. From the beginning of civilization people needed to exchange goods. As The number of people was growing and they started to concentrate in settlements and towns, volume of changes started to grow rapidely. So the markets were born. There was a substitutional unit needed, that can exactly express invested work and material. So money was born. Firstly they used as a money most common things such as wheat, then it was silk scarfs. Hundreds year laters were created coins made of gold and silver. This caused that currency was founded, their applicability was declared by the King. People was producing more and more goods, they had to pay more money for it. Carrying thousands of gold coins for long distance wasn´t safe. They started to use paper money, bank statements, and other papers that prooved, owner have money in bank.

Gold standard
At the end of 19th century the first monetary system called gold standard was developed. Every state expend it´s own money, fiduciaried by gold reserves. Exchange rates was nearly constant. , only a small diferences was caused by expenses on transporting gold. Balance and stability was obtained by Hume´s mechanism. It says concentrated gold in one country is causing higher price level, lower demand for their goods. It means this country will get expensive for others, and they will buy their goods somewhere else, till the gold moves out and price level get to normal.

Brettonwood system
In 1944 a meeting of ally states took place at Brettonwoods in the USA . They passed a new monetary systém called Brettonwood, that survived till 1971. Currencies were put to constant proportion, only with small field where they could move, so it was controlled floating monetary rate of exchange. Curancies was defined both to gold and dolar . At same time they established International monetary fund the central bank of all central banks. Member state lend it money, and it help countries with bad balance of payments. This helps to soften negative parts of the economic cycle and prevent big crises caused by secondary cash disability such as bank fall in our country at the end of 19.century. They also established World bank that use money of the members to help developing countries.

Non-stabile period
Time of BWS was a prosperity of all countries. But at 1970´s raised number of dolars hloded in foreign countries too much and USA left the systém. The curancies went their own ways e.rate was depend on supply and demand., central banks can only do a little with interventions. E.rate depended on regular economic reports, oil crizes, disaster. Now we can say that this was not good solution. The curancies tendency to oscilate in wide zone. It have many negative impacts. Credits and investitios are very risky, especialy in foreign curancy. Big fluctuation can cause bankruptcy of many companies. Risin exchange rate as we have now, has bad impact on export, because its geting expensive for buyers. They sell less and have to fire employers. Graphs with with E.rate and GNP says, once you lost the market it´s very difficult to get it back, it usually takes years.

European monetary system
As a defence, west-ueropean countries established in 1978 EMS. It collected main european curancies and put them into a snake. They have constantly related to each other but floating to other curancies as a single one. In early 90, was born an idea of single europen curancy with two main aims. 1. Prevent wars in Europe
2.Gather more prosperity from close cooperative work

Preparation for Euro
Collect so many curancies into one, is a very dificult process, which needs much time and work. Firstly it was needed to agree on limits for main economic aspects, then integrate work of central bank and their monetary policy. They have 2 key-tools to regulate economy.
1. Interventions- buying and selling their own curancy to regulate the E.rate
2. Discount rates. In recession they can lower it to provide more money into the economy. It cause more investitions and new workplaces. In boom they can higher it to prevent bad investitions and overheating.
Because the countries are not at the same place of E. cycle, although their high convergence. It means monetary policy in one country don´t have to be good for other. This is the main argument of Anti-euros, who says that Euro will not survive and if yes, it will be expensive. A big problem is the change it self. Member states were allowed to chose if they wanted to be a part of the euroland. This was not easy to make a decision, because there is many pros and cons. At the end all EU members joined except GB Dennmark and Sweden. But not witout problems, mayn people especially the older ones, didn´t want to lose their national curancy as a symbol of prosperity, tradition and national identity. In Germany Helmut Kohl passed the Euro without blessing from people. Two years before, printing machines started producing the Euro and sending it to national banks. In 1.1. 2002 Euro came to be valid.

Europe and Euro
We don´t know if the impact of Euro will be good or bad. My opinion is that it was a necessary step because of the economical sitiation in which in incomparasion with America is not much bright. Europe is too slow and looking at Americas back from bigger and bigger distance. They deal with problems much faster than europe. Their crises least for 3 months, ours for 1year. It is caused by the tradititions we still follow. As a social state we collect too much money that our goverments give back to people, this long process costs us money, inflexibility and big authority . Big companies are driven to keep emploeyrs when they dont want to, it turns against us. Companies dont want to employ workes for short time, because its not profitable, it causes workers higher unemployment rate. Strong nationalist govermants wants to protect their market against foreign companies, this makes europe fragmentize. Americans say we are like a big slow turtle. But now things have changed. Last february all old currencies ended. Since january newspapers are full of articles about Euro. Euro is now the symbol of europe.

First reactions
It´s a big step to united Europe.After New year´s euphoria and first problematic days people get accustomed to pay wit Euro.Strange problems has The Italiens who have a feeling of poorness, because they now gets their salary in thousand times smaller amounts. The advantage first recognized people in borderlands. Big shopping centers are having great time now. When they see prizes in same currency they can quickly compare prizes in nearby state.So it can happen that family buys minerale water in Belgium and sausages in France. New currency really uncovered some dissimilaries. Different price of same commodity is caused by different taxes in different countries. Before january almost nobody knows it, bu tnow it´s evident. I think this disbalance is not possible in long term wiev and they quickly make up things. Destroying these walls was always way to prosperity. I think that installation of Euro will unleash many small changes which will cause market rapprochement. Of course there will be a synergy efect. I means two isolated markets sell less then together. Big imact is on peoples´s way of thinking. Their home currency has a power in the world. If they want they can go for shoping to different state, without calculator. During the trip they don´t need to care about these things as a foreign currency. You know. Oh they have an ugly money, is this a 20 or 50? And what about big industrial companies, now they can chose from mre dealers, they can safe a big money. At the same time they can sale their products in abroad without changing prices every week.

Three faithless
Under the influence of enthusiasm in press an d report about succesfull euro, many people in „faithless countries“ have changed their minds. They are putting themselves into a not good position. Some of them has a feeling of a missed party. Exchange offices now offers 4 instead of tens west european currencies. They are now minority more then before. They are nervous, because nobody wants to stay alone.

Crown an Euro
There is nothing to tal about, when our convergention with germany is so high. There is no disadvantages. The only one who will always says there are onyl disadvantages is profesor Vaclav Klaus. Installation of Euro will be very possitive for us. But question is how and when join. There is a common topic of different price levels in CZ an EU and conected GNP/person. In this field is disbalance. While some products has same price as in EU some are many times cheaper. We can even up their price level using two tools.
1. rising exchange rate
2. have a highher inflation
It would make people happy, because prices of petrol and electronics will fall down. Now the E.rates rising. It´s caused by high demand of crowns, which will be needed to pay for big state monopols. But this report is Alarm for industy and export. As I explained before, they will lose their markets. This can cost us lower grow of GNP in next ten years. So the problem is how to chose relation of crown and Euro an which way chose in following years. Higher price level would be very pleasent. But we can´t boost the inflation because of Maastricht criteries, and cost of rising E.rate is too high.