As the international rules and institutions governing the currency relations of various countries, the international monetary system reflects a series of developments and changes in international struggles and international cooperation.
By examining the evolution from the gold standard to the Bretton Woods monetary system and the start of the euro, it can be found that the law of unbalanced economic development in capitalist countries is closely related to the evolution of the international currency structure.
Today we will introduce to you how the euro was born, its historical background and development process, and the far-reaching impact of the euro on the international monetary system.
How was the euro born?
Europe is eager to weaken the hegemony of the US dollar by creating a strong currency and a strong regional monetary system arrangement in order to seek European interests, which will have a profound impact on the international monetary system.
1. The historical background of the euro
The euro is the result of the most significant monetary reform in Europe since the Roman Empire. The euro not only perfects the European single market and facilitates free trade among countries in the euro zone, but is also an important part of the integration process of the European Union.
Monaco, San Marino, Vatican City, Andorra are not EU countries, but since they used to use the French franc, Italian lira or Spanish peseta as currency, they also use the euro and authorize a small number of their own euro coins. Some non-EU countries and regions, such as Montenegro and Kosovo, also use the euro as a payment instrument.
2. The development history of the euro
In 1957, the "Treaty of Rome" (Treaty of Rome), in December 1969 proposed the establishment of the European Economic and Monetary Union plan.
In 1969, the Hague Conference of the European Community proposed the idea of establishing a European Monetary Union, and entrusted Pierre Werner, then Prime Minister of Luxembourg, to make specific proposals on this.
In 1979, under the advocacy and efforts of France and Germany, the European Monetary System was established, and the European Currency Unit "Ecu" was born at the same time.
In 1986, the European Community signed the "Single European Document", proposing to establish a unified market by early 1993 at the latest.
In 1989, the "Delors Report" was passed. The report advocated the creation of the European Economic and Monetary Union in three stages: the first step is to fully realize the free flow of capital; the second step is to establish the European Monetary Bureau (the predecessor of the European Central Bank); The third step is to establish and implement the Economic and Monetary Union and replace member countries' currencies with a single currency.
After the first phase was officially launched in 1990
The Council of Central Bank Governors began to play an increasingly important role. Subsequently, the status of the European Central Bank was finally established in the Treaty of Maastricht.
On December 10, 1991, the European Community Summit adopted the "European Union Treaty", and decided to change the name of the European Community to the European Union.
In November 1993, the Treaty on European Union entered into force.
The second phase starts after 1994
In January 1994, the European Monetary Bureau was tasked with coordinating monetary policy, strengthening cooperation among central banks of member states and preparing for the establishment of the European Central Bank System. The power to formulate and implement monetary policy remains with the member governments.
In December 1995, the Madrid summit decided to name the European single currency the euro, thus was born.
3. The positive effect of the euro
The start-up of the euro is a huge project. According to economists' calculations, the cost from the issuance of the euro to its use is as high as 160 billion to 180 billion euros. However, the benefits brought by the launch of the euro to the EU will be immeasurable.
The Eurozone, composed of 12 countries, is a huge market with unlimited business opportunities. Its annual internal trade volume is as high as 1.4 trillion US dollars, accounting for about 15% of the global trade volume.
After the implementation of the unified currency, it not only saves huge transaction costs, but also optimizes the allocation of talents, capital, technology and resources, so as to obtain the greatest economic benefits. According to preliminary estimates, the single currency will quickly double or even triple the volume of intra-European trade.
The Influence of the Launch of the Euro on the International Monetary System
The impact of the euro on the international monetary system is another major change in the currency of the contemporary world.
1. The euro improves the status of European currency and changes the international currency pattern
In the past, due to the disunity of the European currency, the international currency structure was "one strong (US) and two weak (Mark, Japanese yen)" or the US dollar "unipolar structure". Now that the euro has emerged, there will be "two strong (US dollar, euro) and one weak Yen)” or the “two-pole pattern” of international currencies.
2. The euro will increase its status in international foreign exchange reserves
After the birth of the euro, the central banks of various countries will adjust the structure of their foreign exchange reserves. Within ten years, the euro will account for 30-40% of the international foreign exchange reserves, and the dollar will be reduced to 40-50%, which is more than 60% at present.
3. The euro improves the settlement status of the EU in world trade
At present, about 50% of the world's exports are settled in US dollars, Mark accounts for 19%, and Japanese yen accounts for 7%. The relative proportion of the euro and the US dollar in trade settlement has increased, with the euro accounting for 30% and will continue to rise.
The euro reduces the exchange rate risk of trade between countries in the world and the EU; saves currency exchange costs between EU countries (50 billion US dollars per year), thereby reducing the cost of EU goods, which will improve the status of the EU in world trade.
4. The euro will enhance Europe's position in world financial markets
After the use of the euro, the transparency of the European capital market will be greatly increased, capital liquidity will be enhanced, and exchange rate risks will be reduced. It is estimated that there will be a large amount of international investment that may change from dollars to euros.
In fact, this estimate became a reality in 1999, when the euro surpassed the US dollar for the first time in the capital market and became the number one international financing tool. In addition, the stability of the euro will strengthen its foreign exchange rate and increase its purchasing power, thereby stimulating the expansion of foreign capital in the euro zone.
5. The euro will have a major impact on the international exchange rate mechanism
On the one hand, the euro is a factor that enhances the stability of the international exchange rate system in the long run. But on the other hand, in a certain period of time, the exchange rate of the euro may also be unstable and exacerbate the instability of the exchange rates among the world's major currencies.
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