Transcript Tema 15

Strategy of EURO application and
influence of EURO in SR on trading
and participants of the market
Juraj Somorovský
Viktor Maceják
Juraj Molnár
2nd class,MPAK
EURO currency – past and present
• Eurozone – created with 15 member states
which has adopted EURO
• 1999 – used only an accounting currency
• 1.1.2002 – replaced national currencies in 12
member states in EU
• issued by ECB – sole authority to set the
monetary policy of EU
• All nations that have joined the EU since the
1993 implementation of the Maastricht Treaty
have pledged to adopt the euro in due course
EURO currency – past and present
• Maastricht Treaty obliged current members to join
the EURO, but the UK and Denmark negotiated
exemptions
• 2003 - Sweden turned down the EURO in
referendum, and has circumvented the requirement
by not meeting the membership criteria
• three European microstates Vatican city, San Marino
and Monaco adopted the euro due to currency
unions with member states
• Andorra, Montenegro and Kosovo have adopted the
euro unilaterally, despite they are not member
countries
Maastricht criteria and Slovakia
• When Slovakia wants to adopt EURO
currency it is obliged to fulfill following
criteria:
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Inflation rate
Government finance
Exchange rate
Long – term interest rate
Inflation rate
• not higher than 1.5 percentage points than the
three best-performing member states of EU
(based on inflation)
• for example: (AUT 1.1%+ FRA 1.2% + IRL
1.2%)/3=1.2%
• 1.2% + 1.5% = 2.7% - inflation rate to adopt an
EURO must be under 2.7%
• in August 2007 Slovakia fulfilled this criteria inflation rate was on 1.9%
• nowadays the rate is on 2.9% but the criteria
today is about 3.2% - meets the requirements
Government finance
Annual government deficit:
• the ratio to GDP must not exceed 3% at the end of the
preceeding fiscal year, if not, it needs to reach a level
close to 3%
• only in exceptional excesses would be granted for
exceptional cases
Government debt:
• the ratio to GDP must not exceed 60% at the end of the
preceeding fiscal year
• countries like FIN, FRA, LUX and GB did not fulfill this
criteria
• SVK fulfilled this criteria, despite small problems with
deficit
Exchange rate
• applicant countries should have joined the
exchange-rate mechanism under the EMS for
2 consecutive years and should not have
devaluate its currency during this period
• possible fluctuation of rate: +/- 15%
• 28.11.2005 - first central rate was checked up to
the mark of 38.4545 SKK/EUR
• 19.3.2007 - second central rate was changed up
to the mark of 35.4424 SKK/EUR
Long – term interest rate
• nominal long-term interest rate must not be
higher than two percentage points than in the
three lowest inflation member states.
• the purpose is to maintain the price stability
within the Eurozone even with the inclusion of
new member states
• the rate in Slovakia – 4.5%, maximal level from
Maastrich criteria – 6.5%
• Slovakia fulfilled all criterias for adopt the EURO
Impacts of the common currency
adoption in the Slovak Republic
Positive impacts:
• such positives will permanently decrease the
level of costs or increase GDP
• savings of enterprises and citizens on transaction
costs will be the most visible when charges and
margins for SKK/EUR exchanges will be
eliminated
• consumers should profit from increased
transparency and more intensive competition
• sector trade development between Slovakia and
member states will be stabilized
Impacts of the common currency
adoption in the Slovak Republic
• enterprises will save the exchange rate risk
insurance costs
• elimination of the administration costs
• decrease of the real interest rates from 2 % to
1–1.5 %
• reduction of the bank services prices
• decrease of the exchange rate risk to the JPY,
CHF, CZK, GBP and USD
• increased competition pressure among the
producers of the goods
• exchange rate risk elimination
Impacts of the common currency
adoption in the Slovak Republic
Negative impacts:
• disadvantages of euro adoption include one-off
costs of euro changeover and a permanent
drawback of the loss of independent monetary
policy
• one-off costs of currency conversion will be
caused during the period of one to three years
before joining the eurozone immediately after
euro changeover
• loss of independent monetary policy will
permanent disadvantage
Impacts of the common currency
adoption in the Slovak Republic
• companies will face to tougher competition
pressures
• decrease of the bank revenues from exchange
transactions
• loss of independent monetary policy
• growth of the prices of the real estates
• decline of the interest rates will reduce the
deposit yields
• savings will be converted from SKK to EURO by
conversion exchange rate at the day
convergence - savings depreciation
Conclusions
• Slovakia is a small, exceptionally open and a
subsistent - depending economy economic
growth of the Slovak Republic is relatively high
• considering the analysis, confrontation of
positive and negative impacts of the current
currency adoption on the SR indicates that the
EURO would improve the situation along this
line
• most crucial trading partners of our economy
use EURO not only within the monetary union,
but also in the trade with our enterprises position of EURO in our economy is
considerable already
Thank you for your attention