THE EURO: BIRTH of a CURRENCY Contents the Euro Is Not Only a New Currency, It Is Also a Concept and a Cultural Representative O
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THE EURO: BIRTH OF A CURRENCY Contents The euro is not only a new currency, it is also a concept and a cultural representative of a significant political, social, and economic shift in Europe. Symbolizing the changing face of Europe, the euro also embodies the historical process that has been going on for some time, a process of transition and adjustment that is not easy for the nations involved, for their citizens, or for the changing political and cultural dynamic that the adoption of a common currency represents. Given the nature of the global economy with its free trade zones, the birth of the euro is also a significant event internationally (Start: 2:26; Length: 10:45). Introduction Countdown to Unity A New Day in Euroland Eurochange Concord and Commerce United by Design A Blueprint For North America? Discussion, Research, and Essay Questions Indicates material appropriate or adaptable for younger viewers. Comprehensive News in Review Study Modules Using both the print and non-print material from various issues of News in Review, teachers and students can create comprehensive, thematic modules that are excellent for research purposes, independent assignments, and small group study. We recommend the stories indicated below for the universal issues they represent and for the archival and historic material they contain. German Reunification, October 1990 Asian Economies: Toothless Tigers? February 1998 Indonesia: Falling to Pieces? September 1998 The Changing World Economy, October 1998 Other Related Videos Available from CBC Learning Does Your Resource Collection Include These CBC Videos? China Architects: Building the Future China Boom: Nurturing the Socialist Marketplace Free Trade: 10 Years Later Japan: Tarnished Miracle Living with a Low Dollar Mexican Peso Racing the Rising Sun Red Capitalism Singapore: Authoritarian Capitalism Trading Futures: Living in a Global Economy THE EURO: BIRTH OF A CURRENCY Introduction I have often been told that the euro was a technocratic idea, invented by finance ministers, remarked Christian Noyer, vice- president of the European Central Bank, in a recent New York Times article. That is clearly not the case. They had the simple idea that the money, the currency that people use every day, was a way to foster integration. At the stroke of midnight on January 1, 1999, a currency was born. Eleven countries, with territories stretching from the Arctic Circle to the Mediterranean and combined economies worth $6.5-trillion, united their existing currencies to create a new one: the euro. In a live telecast from Brussels, the birth was heralded with much fanfare, champagne, and balloons. It was a moment for celebration after a long gestation period and a difficult labour, for the story of the new euro starts well before January 1, 1999. In the 1950s, while Europe was still trying to recover from the devastation caused by the Second World War, leaders were busy shaping a vision for economic and political unity. The impetus for unification, according to leaders such as Jean Monnet, the president of the precursor to the European Union, was to avoid another war in the future. If each nation needed to rely on the others for economic and political security, they would be more reticent to declare war on their neighbours. Although the vision of a unified Europe had been discussed since the 1950s, the urgency for such unification was not truly felt until the fall of the Berlin Wall in 1989. The prospect of a reunified Germany made the rest of Europe nervous, and commitment to the idea of a single European currency and monetary policy grew. François Mitterrand, then president of France, agreed to support the reunification of Germany only if the German chancellor, Helmut Kohl, committed to a single currency overseen by an independent central bank. On February 7, 1992, the Treaty of European Union was signed at Maastricht in the Netherlands, and the terms for a single European currency were drafted. Strict economic criteria were put into place for those nations wishing to adopt the unified currency. The individual countries had to have a budget deficit of no more than three percent of gross domestic product, and inflation would have to be limited to the level found in the three best performing countries, also approximately three per cent. In addition, the overall government debt had to be less than 60 per cent of the gross domestic product. Many of the critics of the euro pointed to these stringent criteria and forecast that the new currency would be limited to only about eight countries since the weaker economic powers would be unable to meet these demands. But, much to the surprise of those same detractors, poorer countries such as Italy, Spain, and Portugal have brought their deficits and inflation rates down sufficiently to be able to join the euro club. And so, on January 1, 1999, the individual currencies of Germany, France, Italy, Belgium, the Netherlands, Luxembourg, Finland, Austria, Portugal, Spain, and Ireland were pegged to the euro and their conversion rates fixed. The 11 countries will have essentially the same inflation targets, interest rates, and economic policy goals. The transition was remarkably smooth, and the future of the euro appears to be bright. Many nations, including neighbouring countries such as Britain, Denmark, and Sweden, which have currently opted out of the plan, are watching with great interest. Introduction Countdown to Unity A New Day in Euroland Eurochange Concord and Commerce United by Design A Blueprint For North America? Discussion, Research, and Essay Questions Indicates material appropriate or adaptable for younger viewers. THE EURO: BIRTH OF A CURRENCY Countdown to Unity If the human race wishes to have a prolonged and indefinite period of material prosperity, they have only got to behave in a peaceful and helpful way toward one another. Winston Churchill It is easy to dismiss a news story about a new currency as strictly an economic tale, of interest to bankers and those that play the stock market, but of little importance to the rest of society. But the story of the euro is really much more than just an economic one. A story about money is essentially a story about relationships, because money by its very definition requires at least two people to have value. Money is something generally accepted as a medium of exchange and, therefore, without another human being to exchange money with, it is just a worthless piece of paper. It is not surprising then that the story of the euro, a story about a relationship between 11 European countries, did not start as the brainstorm of bankers, but of statesmen. Already in 1946, Winston Churchill, saddened by the devastation he saw all around him, called for the United States of Europe. He understood that it was only in unity, both political and economic, that conflicts such as the Second World War could be prevented in the future. The economic unity he so longed for became a reality at the stroke of midnight on December 31, 1998. With the dawning of a new year came a new currency and a new hope for the future. Auld Lang Syne In the song Auld Lang Syne, Robert Burns reminds both those singing and those listening to the lyrics that it is a good thing to remember old times. This song is traditionally sung at the stroke of midnight on December 31 because people recognize that New Years Eve is a time to reflect and look back on the events of the past. It is fitting then that 11 European countries chose this moment to say goodbye to their old currencies before embracing the new. As you watch this News in Review video on the euro try to identify the following: ● The events in the past that had a direct impact on the decision to create a unified currency ● The main participants in the formation of this new currency ● The changes that occurred with the adoption of a new currency ● The changes associated with the euro that will not occur until the future. When will these events occur? What are some of the hopes and challenges facing a united Europe in the years to come? Follow-up Discussion How do the images of the video suggest the sentiments of Auld Lang Syne? Introduction Countdown to Unity A New Day in Euroland Eurochange Concord and Commerce United by Design A Blueprint For North America? Discussion, Research, and Essay Questions Indicates material appropriate or adaptable for younger viewers. THE EURO: BIRTH OF A CURRENCY A New Day in Euroland January 1. There is something about a brand new year that brings with it a desire for change. People resolve that they will lose weight, quit smoking, re-establish old friendships, eat properly, and exercise more. Often these resolutions last for a day, a week, or even a month or two before one slips back into old habits and forgets ones dreams of change. But for those who woke up on January 1, 1999, in Germany, France, Italy, Spain, Ireland, Austria, Portugal, the Netherlands, Belgium, Luxembourg, and Finland, change was much more than a dream. They woke up to the reality that they were now citizens of what the media have dubbed Euroland, an economic union with a unified currency, common monetary policy, and a new vision of collaboration and peace. The new Euroland has a population of approximately 291 million people and a total gross domestic product (GDP) that rivals that of the United States. The unified currency, the euro, is now the second largest currency in the world and could prove to be a serious challenge to the U.S. dollar. However, many of these changes wont be automatically apparent to the citizens of the countries directly affected.