- Improve information on benefits of the single currency
- Support for new Member States to join the Euro zone
- Make it as easy, cheap and secure to make cross-border payments
The Euro is the currency of twelve European Union countries, stretching from the Mediterranean to the Arctic Circle (namely Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland). Slovenia will join the Euro area in 2007 as the first of the new Member States.
Euro banknotes and coins have been in circulation since 1 January 2002 and are now a part of daily life for over 300 million Europeans living in the Euro area.
The introduction of the Euro was successful.
The European citizens greeted it with great curiosity. At the very beginning, people responded positively to the change-over and embraced the concept of the Euro. Initially there was talk that the change-over had pushed up the prices of goods and services but more recent statistics show that inflation has not been higher than the corresponding period for the previous year. Moreover, we might have learnt a lesson in countries where both the old national currency and the new currency the Euro was displayed as it was more difficult for the commerce to hide the price increases.
Benefits of the single currency
- Citizens can travel more easily within the Euro area without the hassle of changing currencies every time they cross a border, and are better able to compare prices since they can use their own currency anywhere in the Euro area.
- Travelling outside the Euro area is also easier since the Euro is an international currency and therefore widely accepted in many places outside the Euro area, particularly in tourist destinations.
- Price stability: This is the primary objective pursued by the European System of Central Banks (ESCB), which operates in full independence.
- Low interest rates: The level of interest rates benefits from low inflation expectations, improved control of government debt (which allows for improved borrowing possibilities for private companies) and the increased size of Euro securities markets, which improves liquidity.
- Shelter from external shocks: Because of the important size of the Euro area economy and the fact that the majority of its trade takes place inside this area (between 50 and 75% depending on the country concerned), the Euro area is far better equipped than the previous national currencies to withstand external economic shocks or fluctuations in the external exchange rate vis-à-vis the US dollar and other major currencies.
- Elimination of exchange rate fluctuations: this provides a more stable environment for trade within the Euro area by reducing risks and uncertainties for both importers and exporters, who previously had to factor currency movements into their costs.
- Businesses are better able to plan their investment decisions because of reduced uncertainties. A single currency makes Europe a strong partner to trade with and facilitates access to a genuine single market for foreign companies, who will benefit from lower costs of doing business in Europe.
- Elimination of the various transaction costs related to the exchange and/or the management of different currencies due to elimination of exchange rate fluctuations.
- Price transparency: consumers and businesses can compare prices of goods and services more easily when always expressed in the same currency.
- Enhanced competition: easier price comparisons foster competition and hence lead to lower prices in the short to medium run. Consumers, wholesalers and traders can buy from the cheapest source, thus putting pressure on companies trying to charge a higher price. Companies can no longer charge the highest price each national market will bear.
- More opportunities for consumers: the single currency makes it simpler for consumers to travel and to buy goods and services abroad, particularly when coupled with the progress of e-commerce.
- More attractive opportunities for foreign investors: a large single market with a single currency means investors can do business throughout the Euro area with minimal disruption and can also take advantage of a more stable economic environment.
- The Euro helps provide a single market for financial operators (i.e. banks, insurers, investment funds, pension funds, etc.).
- At the same time, small and fragmented national capital markets evolve into a larger, deeper and more liquid financial market.
- Use of the Euro in international trade is also expanding, reflecting Europe's weight in the world economy. The Euro is also becoming a major transaction currency, enabling a significant proportion of European exports and imports to be invoiced in Euros.
The Euro gives countries and citizens involved a stable currency which helps guarantee that the fruits of growth are not lost through inflation. The single currency also implies a joint monetary policy supervised by the European Central Bank(ECB) and its introduction should, in the view of European Socialists, lead to increased co-ordination of the economic policies of the participating countries and to an efficient information policy on the Euro and its introduction. In the view of the European Socialist, the Euro is indispensable to achieving the European Single Market and to the development sustainable growth, high-qualified jobs and social cohesion for European citizens.
Support for an enlarged Euro zone
Managing the proper functioning of the 'Euro introduction' is the job of the ECB and national central banks. The European Commission draws up a monthly balance sheet of progress and it is evident that significant difficulties have arisen.
Euro Information campaigns have been launched by the European Commission and the ECB in all applicant countries with active support from the European Parliament and the PES Group. The PES Group asks for clear public campaigns which stress that the only weapon against unjustified price increases is the consumer's power to choose freely their suppliers; points out that special attention should be paid to price setting in public or private monopolies and invites public authorities to put into place, for a period of at least two years, an agency responsible for publishing data on the evolution of, say, ten particularly significant consumer prices.
The Euro marks the achievement of full integration in the monetary field. In purely functional terms, it is therefore an endpoint, rather than an intermediate step. However, with the Euro, we now form a " Schicksalsgemeinschaft". Our economies are tied together, and so our policy decisions become a matter of concern for all. We have a legitimate interest in enlarging the Euro zone with the new member states as soon as possible but this requires full adherence to the Maastricht criteria, to the protocol to article 121 of the EC-Treaty and to the economic convergence regulations without any specific arrangements in order to guarantee a stable and growing economic situation and a strong currency for all.
The PES Group believes that decisions on the accession of individual member states should be based on high-quality data and evaluation based on the EC Treaty and relevant protocols; therefore, calls on the European Commission and the European Central Bank to make a comprehensive evaluation which would be more than just a formal comparison of numbers and figures and to take into account the track records of convergence and achievements in ensuring macroeconomic stability. It points out in this context that both the definition of the three best performing member states in terms of price stability as well as the method of calculating the reference value need to be clarified to reflect the fact that at present twelve EU member states the monetary union and use one single currency which is managed by common monetary policy, and that the differentials in their individual inflation performance reflect structural factors rather than differences in macroeconomic policy stances.
Last but not least, this implies that the process of enlargement of the Euro-area should follow up, more than before, the need for enforcement of the economic governance within the Euro area. Therefore the PES Group calls on the member states of the Euro-area to strengthen their efforts towards effective coordination of economic and monetary policies.
Regulate cross-border bank charges
At present the state of payment systems varies greatly from one country to the next, as regards the players, the rules, regulation, efficiency and cost. According to the latest figures, 231 billion transactions (cash and non-cash) take place per year in the Community with a total value of EUR 52 trillion. However, the current payment system has a high cost. The European Commission's ultimate aim is to make it as easy, cheap and secure to make a cross-border payment by credit card, payment card, electronic bank transfer, direct debit or any other means as it is to make a payment within a Member State.
In December 2005, the European Commission proposed a directive on payment services, based on Articles 47(2) and 95(1) of the EC Treaty. The European Commission's proposal will establish a common framework for the Community payments market creating the conditions for integration and rationalisation of national payment systems. The Commissions' initiative will focus on electronic payments as an alternative to expensive cash. This is complemented by industry's initiative for a Single Euro Payment Area (SEPA), aimed at integrating national payment infrastructures and payment products for the Euro-zone . The existing different regulations for payments are to a large extent based on national rules, which leads to a fragmentation of the Internal Market.
The PES Group actively support the European Commission for a proper and coherent implementation of regulations to align the bank charges on cross-border transfers in Euro to those of domestic transfer so as to facilitate and reduce costs on transactions within the Euro zone and realise a veritable single market for every European citizen.