DOCSLIB.ORG

Capital Flight

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Capital Flight Eurozone breakup report_Layout 1 08/01/2015 12:06 Page 1 It’s all Greek to me: A business guide to coping with the euro-crisis Author: James Sproule Chief Economist, Institute of Directors January 2015 Eurozone breakup report_Layout 1 08/01/2015 12:06 Page 2 Setting the scene • 2014 came to a close with the Greek parliament failing to elect a President, triggering a general election on 25 January. This raises the possibility of a new government seeking to substantially renegotiate the terms of the Economic Adjustment Package, originally negotiated with Troika 1 in May 2010, and revised in March 2012. • The euro-zone crisis of 2011/12 saw the imposition of strict austerity programmes designed to move public finances to a sustainable position. However implementation has proven to be difficult. • The battle is changing. It is now between those who fear financial contagion (and so do not wish to raise the possibility of one or more countries being forced from the euro) and those who are afraid of the political contagion that comes from bowing to the demands of populist politicians seeking to reject fiscal austerity. Key points • The euro was introduced in stages over seven years, and yet the departure of a member of the single currency club may well come over the space of a single weekend. • Given the potential impact and challenges resulting from a country leaving the Euro-zone, we believe organizations should once again begin to plan and prepare their response to such a possibility. • There will be considerable commentary over the coming weeks as to the possibility of a Greek Exit of the euro (Grexit), but considerably less on what businesses might do to prepare for such an event. This paper seeks to address that gap. 1 Indeed departure from the Euro was seen by the ECB and others to necessitate departing the European Union, although during the last crisis German officials were reported to have given informal assurances to the Greeks that they would not enforce their departure from the EU. 2 Eurozone breakup report_Layout 1 08/01/2015 12:06 Page 3 Potential implications include • What’s it really worth and how interconnected are we? An exit of any member of the Euro would result in a strong market reaction and bank balance sheets would once again come under pressure as a wide range of assets were revalued through repeated iterations. • Separating good from bad. Assets would need to be segregated into differing currencies and accounts. • Capital flight. Fear of inflation and further devaluations in at risk countries would drive savings from Southern Europe to accounts in more fiscally responsible countries, denuding local banks of their capital base, curtailing lending and driving affected economies further into recession. • Can you pay? Concerns over counter-party risk between businesses will emerge as domestic banks of the countries affected face funding difficulties. • Recalibrate risk. Risk assessments have proven again to be too narrow and thus inadequate. Firms, for a start, will be demanding increased collateral for certain financial products or trade agreements. • Panic trading. There would be a spike in financial trading activity, at the same time tactical solutions to clearing and settlement in a new currency would have to be implemented. 3 Eurozone breakup report_Layout 1 08/01/2015 12:06 Page 4 On background How plausible is it that a country would leave the single European currency? For much of its first decade of existence, the answer was clear: not at all plausible. The architects of the euro had meant it to be irreversible, to the point where there is a mechanism by which countries can leave the European Union itself, yet not the euro 2. Then the events of 2011/12 occurred and the spectre of a Greek exit (Grexit) of the euro became a very real possibility, with the result that a good deal of thinking was done as to what Grexit would mean in practice as opposed to theory. The irreversibility of the euro was initially thought of as being crucial to financial market credibility. And credibility was achieved, to the immense benefit of euro-zone members. The biggest benefit accrued to those governments where, because of a history of inflation or comparatively small financial markets, borrowing costs had traditionally been high. However the idea that the lower debt-servicing costs would be used responsibly by government to consolidate finances proved misplaced. Instead, lower borrowing costs were used to prolong unsustainable fiscal policies to the point where the system itself has become fundamentally imperilled. Since the crisis of 2011/12 the exposure of European banks to Greece has diminished dramatically, having been helped by a 75% devaluation of bank holdings of Greek debt in Feb 2012. But depending on how far any potential contagion spreads, bank exposure to other EU governments remains considerable. If there is one lesson that has been learnt from the Lehman Brothers crisis, it is that financial markets are far more interconnected than had been thought and no plan, however detailed, is likely to be able to figure out fully the impact of an economic shock. The view of an increasing number of economists is that the longer such a situation goes on without addressing the underlying factors that are causing the strain, the more likely the result is going to be sudden and shocking. Against this are a more recent set of political concerns, where populist far left (and in other countries, far right) parties seem intent on gaining power through promising to renegotiate fiscal consolidation plans. For many, particularly those who are likely to be picking up the bill for any easing of austerity, views on allowing any renegotiation range between highly undesirable and completely unacceptable. The euro was ratified under the Maastricht treaty of 1992, introduced on 1 January 1999 with notes and coins coming three years later. So after an introductory period of more than seven years, a country’s exit of the euro-zone may take place over a weekend. If a country were to leave the euro, a short transition time frame may be necessary as there may be significant capital flight as soon as any plans are 2 Indeed departure from the euro was seen by the ECB and others to necessitate departing the European Union, although during the last crisis German 4 officials were reported to have given informal assurances to the Greeks that they would not enforce their departure from the EU. Eurozone breakup report_Layout 1 08/01/2015 12:06 Page 5 announced, with investors anticipating a significant devaluation. Any departure scenario is, therefore, likely to involve complete denial of any plans to withdraw until the moment of actual departure. The immediate aftermath of a departure from the euro is going to see a rapid easing of austerity policies in the departing country with predictable falling of exchange rates. There are numerous examples of countries departing from an ‘irreversible’ currency peg. Breaking such a pegging arrangement is simply a matter of declaring the link dead and letting the markets determine a new exchange rate. Leaving the euro would be much less straight-forward. There are any number of potential scenarios that might come about in the euro area, from a complete break-up to a country being ejected or “deciding” to leave, which amounts to the same thing. We are going to examine the scenario discussed most frequently: a financially recalcitrant country being asked to leave, or departing as it refuses to meet the requirements enabling it to stay. PlAUSIBlE SCEnArIoS Scenario 1: Scenario 1.5: Scenario 2: A solution is found Just sufficient, but never A country departs the enough euro Economic growth resumes: a Economic growth proves elusive. Economic divergence proves prerequisite for an optimal unbridgeable and country departs scenario from euro. • ECB accommodates and • Risk reassessed with greater rigor • Devaluation inevitable in provides the necessary liquidity / in credit assessments and wider departing country, triggering confidence to satisfy investors’ risk premiums prevail; questions as to which assets are concerns into the medium term governments will face difficulties affected financing open ended deficits; • Debt restructuring the solution higher bank reserve requirements • ECB acts decisively to ensure could well be that government constrain lending contagion does not spread; (semi- sovereign) debt is significant program of restructured/defaults, but • Deflation looms as consumers quantitative easing is country remains in euro in Europe remain nervous and announced even terrified • Deflation avoided; consumer • Banks fail in departing country demand remains subdued • Debt burden caps growth; as they face potentially through period of public and creditor nations dictate terms to insurmountable funding crisis; private debt consolidation, but debtors Exchange controls to limit recovers subsequently capital flight may be attempted • Savings flee out of Southern • Long term structural reforms Europe, curtailing banks’ ability • Trade stumbles as payments are enacted triggering corporate to lend and accounts become difficult investment, promotes for all at risk countries entrepreneurialism, and allows • Business relocates stock market growth to emerge listing/HQ, longer term brain drain • Minor country departure from euro will have marginal impact • Prolonged recession with on multi-national business constant threat of sliding into next scenario 5 Eurozone breakup report_Layout 1 08/01/2015 12:06 Page 6 Immediate impacts • Businesses will need to re-calculate exposures to new Greek drachma risks, as well as credit exposures to local institutions and to other banks with significant exposure to the new Greek drachma. This will need to be supported by new risk calculation frameworks and may also require other trading and credit limits and issues such as living wills to be examined following this credit event.
Load more

Recommended publications
  • Task Force on Economic and Monetary Union Briefing 22 First
    Task Force on Economic and Monetary Union Briefing 22 First revision Prepared by the Directorate General for Research Economic Affairs Division The opinions expressed are those of the author, and do not necessarily reflect the position of the European Parliament Although Greece is making remarkable progress towards economic convergence, it remains the only EU country that does not satisfy any of the Maastricht criteria. Luxembourg 28th. April 1998 PE 166.453/rev.1 EMU and Greece Contents Introduction 3 Fulfilment of the Criteria 4 a) Inflation 4 b) Long-term interest rates 5 c) Budget deficit as a percentage of GDP 6 d) Public debt as a percentage of GDP 7 e) Exchange rate stability 9 f) Independence of the Greek Central Bank 9 g) Growth and Unemployment 10 h) Balance of Payments 12 The Political background 13 a) Government policy 13 b) The Opposition 13 c) Industry 13 d) Trade Unions 14 e) Privatization 15 f) The Press 15 g) Public opinion 15 Tables and Charts Table 1: Convergence criteria for Greece 4 Table 2: Gross public debt - structural characteristics 8 Table 3: Sustainability of debt trends 9 Chart 1: Inflation (1990-1999) 5 Chart 2: Long-term interest rates 6 Chart 3: Budget deficits as a percentage of GDP (1990-1999) 7 Chart 4: Public debt as a percentage of GDP (1990-1999) 8 Chart 5: Growth of GDP (1990-1999) 10 Chart 6: Unemployment (1990-1999) 11 Chart 7: Occupation of the labour force in 3 sectors of the economy 11 Chart 8: Balance of payments 12 Authors: Alexandros Kantas and Jérome Durand Editor: Ben Patterson 2 PE 166.453/rev.1 EMU and Greece Introduction On the 25th March the Commission and the European Monetary Institute published their separate reports on progress towards meeting the convergence criteria for Economic and Monetary Union.
    [Show full text]
  • Dr. Theodoros G. Stamatiou1,2,3
    DR.THEODOROS G. STAMATIOU1,2,3 Business: Division of Economic Analysis & Financial Markets Research, (+30)214 4059708 Eurobank Ergasias SA [email protected] 8 Othonos st., Athens, 105 57, Greece [email protected] Current Employment • Eurobank-Ergasias SA, Division of Economic Analysis & Financial Markets Research— – Senior Economist, April 2015 to present – Voting Member & Ambassador for Greece, Working Group for Euro Risk-Free Rates (jointly organised by the ECB, the FSMA, the ESMA and the EC, with the task of identifying and recommending alternative risk-free rates), January 2018 to present4 Academic Appointment • Dpt. of Banking and Financial Management, University of Piraeus—July 2013 to present – Research Fellow Previous Employment • Ministry of Finance, Hellenic Republic—September 2014 to March 2015 – Member, Council of Economic Advisors • Eurobank-Ergasias SA, Division of Economic Research & Forecasting—October 2009 to September 2014 – Research Economist Education • Dpt. of Banking and Financial Management, University of Piraeus—2004 to 20095 – PhD Thesis: Essays in Market Microstructure Supervisor: Professor Gikas A. Hardouvelis • Athens PhD Program in Economics, Joint PhD Program organized by the Dpt. of Economics, Uni- versity of Athens & Dpt. of Economics, Athens University of Economics and Business—2000-2002 – MSc in Economic Analysis • Cardiff Business School,University of Wales—1999-2000 – MSc in International Economics, Banking & Finance – MSc Dissertation: Purchasing Power Parity and the Greek Drachma: A Cointegration Analysis Supervisor: Professor David Peel • Dpt. of Economics, University of Athens—1994-1999 – BA in Economics 1Linkedin Profile: http://www.linkedin.com/pub/theodoros-stamatiou/35/9ab/883. 2Fullfiled military service: Hellenic Navy (February 2008 – February 2009). 3I can provide references.
    [Show full text]
  • The Real Exchange Rate of Euro and Greek Economic Growth ∗ Gregory T
    The Journal of Economic Asymmetries 12 (2015) 100–109 Contents lists available at ScienceDirect The Journal of Economic Asymmetries www.elsevier.com/locate/jeca The real exchange rate of euro and Greek economic growth ∗ Gregory T. Papanikos a,b, a University of Stirling, UK b Athens Institute for Education and Research (ATINER), Greece a r t i c l e i n f o a b s t r a c t Article history: This study argues that an overvalued euro has caused the largest ever drop in Greece’s Received 19 June 2014 GDP growth since the World War II. Sharp declines of GDP growth would have been Received in revised form 27 April 2015 avoided had ECB’s monetary and exchange rate policy been different and more conducive Accepted 27 April 2015 to countries that suffered the most from the world economic crisis of 2007. Greece was Available online xxxx the last to be hit, but was unfortunately ‘battered’ really hard. In this study, it is found Keywords: that (a) the real effective exchange rate of euro was 20% overvalued and (b) this has had Euro a negative impact on Greek economic growth. A 10% undervaluation would have increased Real exchange rate the rate of growth of per capita GDP by almost an additional 1.25% per annum. This would Economic growth have made the economic recession less severe. During the crisis years, it seems that the Greece ECB’s monetary and exchange rate policy favored particular countries in the eurozone, and Germany emerges as the big winner.
    [Show full text]
  • Exchange Rates
    Greece Last Updated: Apr-24-2003 Exchange rates Contact Person(s) Mr. D. Angelis, Foreign Exchange Department, Bank of Greece, 21, E Venizelos Avenue, Athens, Greece 102 50 Phone : 30 210 3202880 / 3202878 / 3202882 Fax : 30 210 3255500 Email: [email protected] Mrs. F. Economidou, Foreign Exchange Department, Bank of Greece, 21, E Venizelos Avenue, Athens, Greece 102 50 Phone : 30 210 3202880 / 3202878 / 3202882 Fax : 30 210 3255500 Email: [email protected] Mrs. E. Papacharalambous, Foreign Exchange Department, Bank of Greece, 21, E Venizelos Avenue, Athens, Greece 102 50 Phone : 30 210 3202880 / 3202878 / 3202882 Fax : 30 210 3255500 Email : [email protected] The Data: Coverage, Periodicity, and Timeliness Coverage As of January 1, 1999, the Euro has been introduced as a characteristics new currency unit of the European Economic and Monetary Union (EMU) in which Greece participates as of January 2001. The exchange rate of the Greek Drachma (GRD) was fixed at GRD 340,75 per euro. For information on the Euro please click on Euro exchange rates. The Bank of Greece disseminates daily data on exchange rates as follows: 1. "ECB Euro Foreign Exchange Reference Rates" vis-à-vis all 28 currencies announced and published daily by the ECB. 2. "Exotic currencies banknote rates" against the Euro", for transactions carried out by the branches of the Bank of Greece and for limited amounts. Rates are quoted vis-à-vis 18 currencies, of which 10 are not included in the euro reference rates data of the ECB. Periodicity Daily. Timeliness Each business day: Monday to Friday at 16.00 (local time).
    [Show full text]
  • 6 Saving Monetary Union? a Market Solution for the Orderly Suspension of Greece
    6 SaVING MONETARY UNION? A MARKET SOLUTION FOR THE ORDERLY SUSPENSION OF GREECE Pedro Schwartz with Francisco Cabrillo and Juan E. Castañeda The Greek misadventure has given birth to mistaken remedies that have neither healed Greece nor stopped contagion. The original design of the euro, as the only legal tender currency in the euro zone, has turned out to be socially and politically costly. It implies transforming nominal convergence of deeply diverse economies into real convergence. Simply bailing out an errant member, while imposing ill-planned expenditure cuts and inordinate tax increases, is turning out to be counterproduc- tive. More generally, the attempt to keep ailing members within the euro against all the odds is endangering European Economic and Monetary Union (EMU) and even the EU itself. The interested parties are at logger- heads as to what to do to save the single currency. The debtors want mutualisation of sovereign debts; the creditors resist any mitigation of the rules governing the European Central Bank (ECB). Despair is setting in. Even if one thinks that monetary union was a good idea to start with, a collapse of the euro now would result in painful monetary chaos. The mismanagement of the Greek crisis could turn out to be a blessing. Expelling Greece from the euro system is legally difficult if not impossible. For the Greeks to leave the euro zone voluntarily is also complicated: they would have to exit the EU and then return as an aspiring member of EMU on the same terms as recent new entrants. There is another way.
    [Show full text]
  • Three Essays on European Union Advances Toward a Single Currency and Its Implications for Business and Investors Charlotte Anne Bond Old Dominion University
    Old Dominion University ODU Digital Commons Theses and Dissertations in Business College of Business (Strome) Administration Winter 1998 Three Essays on European Union Advances Toward a Single Currency and Its Implications for Business and Investors Charlotte Anne Bond Old Dominion University Follow this and additional works at: https://digitalcommons.odu.edu/businessadministration_etds Part of the Finance and Financial Management Commons, International Business Commons, and the International Relations Commons Recommended Citation Bond, Charlotte A.. "Three Essays on European Union Advances Toward a Single Currency and Its Implications for Business and Investors" (1998). Doctor of Philosophy (PhD), dissertation, , Old Dominion University, DOI: 10.25777/mc19-6f14 https://digitalcommons.odu.edu/businessadministration_etds/77 This Dissertation is brought to you for free and open access by the College of Business (Strome) at ODU Digital Commons. It has been accepted for inclusion in Theses and Dissertations in Business Administration by an authorized administrator of ODU Digital Commons. For more information, please contact [email protected]. Three Essays on European Union Advances Toward A Single Currency and its Implications for Business and Investors by Charlotte Anne Bond A dissertation submitted to the Faculty of Old Dominion University in partial fulfillment of the requirements for the degree of Doctor o f Philosophy (Finance) Old Dominion University College of Business Norfolk, Virginia (December 1998) Approved by: Mohammad Najand (Committee Chair) \ tee Member) Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. UMI Number: 9921767 Copyright 1999 by Bond, Charlotte Anne All rights reserved. UMI Microform 9921767 Copyright 1999, by UMI Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code.
    [Show full text]
  • Download (93Kb)
    .. LIBRARY European Community No. 36/1984 November 30, 1984 Contact: Ella Krucoff (202) 862-9540 ECU BONDS LAUNCHED IN THE U.S. The European Community announced today that it is launching the first public offering in the United States of bonds denominated in European Currency Units (ECUs). The Community said it intends to offer 12-year bonds amounting to 200 million ECUs on u.s. public markets. The interest rate will be 9-7/8 percent. The bonds are priced at 99.5 percent plus accrued interest from December 6. The Community_believes these bonds will be the first non-dollar denominated public offering registered in the u.s. Gaston E. Thorn, President of the E.C. Commission, will attend the signing ceremony for this loan on December 7 in New York. The ECU* is a composite currency unit consisting of specified amounts of the currencies of the 10 E.C. member states. Backed by gold and dollars from the member states' central banks, the ECU plays a key role in the European Monetary System (E.M.S.) and it is the Community's accounting unit. Parallel to its official uses, the ECU is increasingly used by private market operators in the Community. The u.s. offering is being handled by a group of underwriters headed by The First Boston Corporation; Bear, Stearns & Co.; and Morgan Stanley and Co. Incorporated. Proceeds from the sale of the bonds will be used by the Community to provide loans for investment projects in E.C. member states. Under the "New Community Instrument" program, these loans are aimed at reducing regional economic imbalances within the Community, particularly in the energy, industry and infrastructure sectors.
    [Show full text]
  • Emu Protocol (Greece)
    ISDAÒ International Swaps and Derivatives Association, Inc. EMU PROTOCOL (GREECE) published on 10th October, 2000 by the International Swaps and Derivatives Association, Inc. The International Swaps and Derivatives Association, Inc. ("ISDA") has published this EMU Protocol (Greece) (this "Protocol") to enable the parties to an ISDA Interest Rate and Currency Exchange Agreement or an ISDA Master Agreement (Multicurrency—Cross Border) (each an "ISDA Master Agreement") to amend that ISDA Master Agreement to confirm their intentions in respect of certain matters arising in connection with Greece's participation in European Economic and Monetary Union. Accordingly, a party to an ISDA Master Agreement may adhere to this Protocol and be bound by its terms by completing and delivering a letter substantially in the form of Exhibit 1 to this Protocol (an "Adherence Letter") to ISDA, as agent, as set forth below. 1. Amendments (a) By adhering to this Protocol in the manner set forth in Section 2 below, a party (an "Adhering Party") to an ISDA Master Agreement may effect one or more amendments to each ISDA Master Agreement between it and any other Adhering Party, in each case on the terms and subject to the conditions set forth in this Protocol and the relevant Adherence Letter. (b) The amendments provided for in this Protocol are set forth in Annexes 1 to 6, and each Adhering Party may specify in its Adherence Letter its preference that one or more of these Annexes are applicable. (c) In respect of any ISDA Master Agreement between two Adhering Parties, where at least one Adhering Party has specified a preference that less than all the Annexes are applicable, that ISDA Master Agreement will be modified only by those amendments contained in the Annexes that both parties have specified.
    [Show full text]
  • How to Save the Euro by Simon Tilford
    How to save the euro By Simon Tilford ★ The gap between the rhetoric of an integrated Europe and the reality of national interests and politics usually does little damage other than to undermine the EU’s credibility. But this gap is proving lethal for the euro. A monetary union requires a very high degree of political and economic integration. Without it, a shared currency will do more harm than good. That is the stark reality now confronting the eurozone. ★ Poor economic growth prospects, rather than fiscal ill-discipline, lie at the heart of the eurozone’s problems. Without a sustained economic recovery, public finances in a number of member-states will remain in crisis. Reforms to the way the currency union is run must, therefore, centre on removing obstacles to growth. This requires a concerted drive to deepen the EU’s single market, improve policy co-ordination, recapitalise the banks and ensure a closer fiscal union. In short, reforms must tighten economic and political integration. ★ Unfortunately, current efforts to reform the eurozone are set to fall dramatically short of what is required to secure the future of the single currency. Eurozone governance will comprise little more than a beefed-up system for ensuring budgetary discipline. Trade imbalances within the currency union are to be treated as a matter for the deficit countries alone; surplus countries will not be obliged to strengthen domestic demand. And there will be no push to accelerate market integration or move to fiscal union. ★ Unless there is a rethink, the eurozone risks permanent crisis, with chronically weak economic growth across the region as a whole, and politically destabilising deflation in the struggling member-states.
    [Show full text]
  • Albania Case
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Kotorri, Adriatik; Korbi, Alban Article Can a South East European country have a strong currency? Albania case Contemporary Economics Provided in Cooperation with: University of Finance and Management, Warsaw Suggested Citation: Kotorri, Adriatik; Korbi, Alban (2009) : Can a South East European country have a strong currency? Albania case, Contemporary Economics, ISSN 1897-9254, Vizja Press & IT, Warsaw, Vol. 3, Iss. 1, pp. 43-52 This Version is available at: http://hdl.handle.net/10419/48776 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu Nr 1/2009(9) WSPÓŁCZESNA E KONOMIA Adriatik Kotorri*, Alban Korbi** Can a South East European Country Have a Strong Currency? Albania Case Summary The dilemma which is presented in this article is connected with problem of excessive for a currency.
    [Show full text]
  • GREEK and ROMAN COINS GREEK COINS Technique Ancient Greek
    GREEK AND ROMAN COINS GREEK COINS Technique Ancient Greek coins were struck from blank pieces of metal first prepared by heating and casting in molds of suitable size. At the same time, the weight was adjusted. Next, the blanks were stamped with devices which had been prepared on the dies. The lower die, for the obverse, was fixed in the anvil; the reverse was attached to a punch. The metal blank, heated to soften it, was placed on the anvil and struck with the punch, thus producing a design on both sides of the blank. Weights and Values The values of Greek coins were strictly related to the weights of the coins, since the coins were struck in intrinsically valuable metals. All Greek coins were issued according to the particular weight system adopted by the issuing city-state. Each system was based on the weight of the principal coin; the weights of all other coins of that system were multiples or sub-divisions of this major denomination. There were a number of weight standards in use in the Greek world, but the basic unit of weight was the drachm (handful) which was divided into six obols (spits). The drachm, however, varied in weight. At Aigina it weighed over six grammes, at Corinth less than three. In the 6th century B.C. many cities used the standard of the island of Aegina. In the 5th century, however, the Attic standard, based on the Athenian tetradrachm of 17 grammes, prevailed in many areas of Greece, and this was the system adopted in the 4th century by Alexander the Great.
    [Show full text]
  • The Euro – a Stable Currency for Europe Lecture for SUERF by Prof
    The Euro – a stable currency for Europe Lecture for SUERF by Prof. Otmar Issing Member of the Executive Board of the European Central Bank Sixth S U E R F Annual Lecture Athens, 9 June 1999 1. The Launch of the euro Following a period of intense preparatory work and considerable progress in macroeconomic convergence, the third and final stage of Economic and Monetary Union (EMU) started on 1 January 1999 with the introduction of the euro. The 11 Member States initially participating in the euro area have transferred their monetary policy sovereignty to the Euro system. Since 1 January 1999 the Euro system, that is, the European Central Bank (ECB) and the currently 11 participating national central banks, has been responsible for determining monetary policy for the entire euro area. All important decisions are taken centrally by the Governing Council of the ECB on the basis of the assessment of euro area-wide data. The introduction of the euro, five months ago, was accomplished successfully, and the enormous technical and logistic challenges that arose during early day of Monetary Union have been surmounted. Owing to the successful profess of disinflation and convergence within Europe over the past decade, the launch of the euro occurred in an environment of price stability that few observers would have imagined only a few years ago. The challenge that lies ahead of us is to maintain price stability and thus to make the euro a stable currency. Clearly, the introduction of the euro has had important implications not only for the euro area, but also for other economies which have close ties with the participating countries, and for international capital markets.
    [Show full text]