Slide 1The Birth of EuroThree Pillars for EUMap of Euro Area 2011The Euro Zone MembersEuropean Central BankThe European IntegrationThe Waves of EuroEurope’s DestinyReasons for DepreciationQuestions for YouReasons for AppreciationSub-Prime CrisisEuropean Sovereignty Debt CrisisThe Original Issue For Euro CurrencySolution A for Euro ZoneSolution B for Euro ZoneSolution C for Euro ZoneThe Future of EuroResourcesQuestions?The Euro Its History and FutureQiaorong ZhangThe Birth of Euro1957 Roma Treaties1970 Plan on EMU1979 EMU established1989 3 Phases for EMU1990 1ST Phase Capital Free Transfer1992 Maastricht Treaty1994 2nd Phase Economy Policy Closer1998 European Union Committee Meeting1999.1.1 3rd Phase Euro Introduction2002.2.2 Bank Notes and Coins in Circulation2002.7.1 Euro is the Sole CurrencyThree Pillars for EUMap of Euro Area 2011The Euro Zone Members17 member states of European Union use the Euro as their Currency: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain.Non-Participants Bulgaria, Czech Republic, Denmark, Latvia, Hungary, Poland, Romania, Sweden and UK are EU member states but not currently use the single European currency.European Central BankIndependent of the pressures of national governments Mandate to keep inflationary pressures low Does not have a second objective to sustain growth and employment ((unlike the Federal Reserve in the United States of America) )The European IntegrationCheaper transaction costs Currency risks and costs reduced Price transparency and increased price-based competitionThe Waves of EuroEurope’s Destiny1999~20022003~20082008.10~ NowReasons for Depreciation1:1.2740 on Jan. 4,1999 drop to 0.8425 total depreciation of 29.8% Macro economic- development differenceThe interests of individual sovereign country VS concerns for EMUQuestions for YouWhat’s the advantages for a country to weaken its currency? A. Help on exportation B. Increase the Purchase PowerReasons for Appreciation911 attack in USAAlan Greenspan : low-interest-rate policySub-Prime CrisisMortgage Companies mid 2000s Mar 2009Company Price Shares (millions) Mkt Cap (millions) Price Mkt Cap (millions) Notes Fannie Mae80 1000 80000 0.4 400 government conservator ship Freddie Mac50 1400 70000 0.17 238 government conservator ship Washington Mutual45 1700 76500 0.05 85Bankruptcy banking ops sold to JP Morgan ChaseCountrywide Financial52 580 30160 6 3480 acquired by bank of America New Century Financial Corp- - 1750 - 55 bankruptcyEuropean Sovereignty Debt CrisisPIIGS (Irish, Italy, Greek, Portuguese and Spanish) Cumulative current-account deficits 2008 through 2010– €365 billion. Demonstrators at a rally in Lisbon in April protested rising unemployment amid the Portuguese crisis From ReutersThe Original Issue For Euro CurrencySolution A for Euro ZoneTake Over PIGS governmentsEMU performs as one countrySolution B for Euro ZoneExit mechanisms for PIGSNegative impact: less influence of Euro currencySolution C for Euro ZoneBail-out fund pooled by healthy members to save PIGSNegative impact: encourage the irresponsible attitudes with poorly performed countriesThe Future of EuroDepends on the solution to the PIGS crisis Collapse?Depends on Federal Reserves management on USA international deficitResources1.Impact Of US Sub-prime Crisis On Europehttp://www.economywatch.com/us-subprime/impact-europe.html2.Maastricht Treatyhttp://en.wikipedia.org/wiki/Maastricht_Treatymap of Euro area, 1999~20113.EU paints bleak picture for PIGs May 14, 2011 - 11:56PMhttp://www.smh.com.au/business/world-business/eu-paints-bleak-picture-for-pigs-20110514-1emz8.html4.The ECB's secret bailout strategyBy Hans-Werner Sinn (chinadaily.com.cn)Updated: 2011-05-03 11:18http://www.chinadaily.com.cn/opinion/project/2011-05/03/content_12435750_2.htm5.Evidence that the Fed Caused the Housing BoomMises Daily: Monday, December 15, 2008 by Robert P. Murphy http://mises.org/daily/3252 The Rise and Fall of the Housing Market and its Impact on the U.S. Financial Systemhttp://www.wikinvest.com/concept/2008_Financial_Crisis6.European sovereign debt crisis worsens as investors bet against Ireland, Portugal and Greece12:28PM BST 18 Apr 2011http://www.telegraph.co.uk/finance/economics/8458336/European-sovereign-debt-crisis-worsens-as-investors-bet-against-Ireland-Portugal-and-Greece.html7.Fiscal policyhttp://en.wikipedia.org/wiki/Fiscal_policy8.The Euro The politics of the New Global Currency by David MarshQuestions?Thank