What is European Union and Euro zone

European Union

•Political Union•Started 1952•27 Members•Economic co-operation•EU member states and affects 326 million people.

Euro Zone

•Fiscal area where the Euro is used as common currency•Started 1999•As of 17 Countries•Currency union, monetary by European Central Bank.Outside EU countries

Montenegro, KosovoAndorra , MonacoSan Marino ,Vatican City

European Union• 1952

Belgium, France, Germany, Italy, Luxembourg, Netherlands

• 1973 Denmark, Ireland, United Kingdom

• 1981 Greece

• 1986 Portugal, Spain

• 1995 Austria, Finland, Sweden

• 2004 Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia

• 2007Bulgaria, Romania

Euro Zone• 1999

Austria, Belgium Finland, France Germany, Ireland, Italy, Luxembourg Netherlands,Portugal, Spain

• 2001Greece

• 2007Slovenia

• 2008Malta, Cyprus

• 2009Slovakia

• 2011Estonia

Who are they …???

Daniel Craig Mario Draghi

European Central Bank• The European Central Bank

ECB, based in Frankfurt, Germany) Est. on 1st June 1998.

• Preceded by : 17 National banks • President: Mario Draghi former

governor of the Bank of Italy • Manages

– the EU's single currency –safeguards price stability in the EU.

• The ECB is also responsible for framing and implementing the EU’s economic and monetary policy.

Purpose Prices stable

–(keep inflation under control), especially in countries that use the euro.

Financial system stable – by making sure financial markets and institutions are properly supervised.

The Bank works with the central banks in all 27 EU countries. Together they form the European System of Central Banks (ESCB).

Close co-operation between central banks in the euro area – the 17 EU countries known as the Eurozone. – group of banks is referred to as the ‘Eurosystem’.

Tasks Key interest rates for the euro zone and controlling the money supply. Managing the euro zone's foreign-currency reserves and buying or

selling currencies when necessary to keep exchange rates in balance Helping to ensure financial markets and institutions are adequately

supervised by national authorities, and that payment systems function smoothly.

Authorizing central banks in euro zone countries to issue euro banknotes

Monitoring price trends and assessing the risk they pose to price stability.

Structure• Executive Board

– oversees day-to-day management– 6 members (1 president, 1 vice-president and 4 other members) appointed for 8 years by the leaders of the eurozone countries.

• Governing Council – defines eurozone monetary policy and fixes the interest rates at which commercial banks can obtain money from the Bank. – It consists of the Executive Board plus the governors of the 17 national central banks in the eurozone.

• General Council – contributes to the ECB's advisory,

– coordination work and helps prepare for new countries joining the euro. It consists of the ECB president and vice-president and the governors of the national central banks of all 27 EU countries.

Euro € On 1999 as an electronic trading currency.

On January 1 2002 the € came into being a actual currency.

Freely usable in Euro zone, as common currency in euro zone.

To promote prosperity in regions of European Union.

Encourage the creation of a Single European Market.

Removal of the trade barriers that divide EU economies labor, finance and movement of goods in the markets of Europe.

Britain, Denmark and Sweden – no intention to join the Euro-area.

AdvantagesCost of transactions.

Convert currencies .

When travelling and shopping in the euro area.

Use of the euro in international trade as major currency. Elimination of exchange-rate fluctuations.

Increased trade across borders, also helps employment.

Financial market stability.

Structural reform for European economies.

DisadvantagesReduced market share for local businesses Increased potential for price wars Loss of political control of monetary policy Heavier tax burden (especially in the non Euro countries )Interest rates not suitable for whole Eurozone The Euro is not an optimal currency area Limits Fiscal Policy Lack of Incentives. No scope for Devaluation

European Financial Stability Facility[EFSF]• On 9th May 2010. Assistance to unstable economies, managed by the European

Investment Bank.

• The fund raises money by issuing debt, and distributes the funds to euro zone countries whose lending institutions need to be recapitalized, who need help managing their sovereign debt or who need financial.

• EFSF is authorized to borrow up to €440 billion, of which €250 billion remained available after the Irish and Portuguese bailout.

• Rating agency to assigned a AAA rating to its bonds, which would be eligible for European Central Bank refinancing operations.

• In September 2010, when Fitch, and Standard & Poor's awarded it AAA Moody's awarded it Aaa .

• On 16 January 2012, the (S&P) lowered its rating on the EFSF to AA+ from AAAjust after the downgrade of France and eight other euro-zone nations which has sparked worries that EFSF will have further difficulties raising funds

European countries can seek moneyfrom

– European Financial Stabilization Mechanism (EFSM), which is guaranteed by the European Union's budget, International Monetary Fund (IMF).

These funding mechanisms are supported by the EU because, while not all countries have debt problems, the failure of one European economy can have a widespread effect on the health of other economies.

Starting in 2013, the EFSF will be replaced by the ESM, or the European Stability Mechanism.

Europe's debt crisis: Where things stand

Signs of progress in Italy and Spain Outlook for Greece remains uncertain And Portugal has come under pressure Greece is also negotiating the terms of a second bailout package with the

EU, IMF and ECB. EU leaders agreed in October to a €130 billion rescue, but there are signs Greece may need up to €145 billion given its deteriorating economy.

To implement the European Stability Mechanism in July. The €500 billion ESM, which was originally set to come into force next

year, is a permanent bailout fund for euro area governments. It will replace the temporary European Financial Stability Facility,

The declining economic activity across the Eurozone Unemployment rate among young people in the Eurozone stands at 22% in

December by EU statisticians In crisis-hit Greece, youth unemployment is a whopping 47%, while nearly

49% of young people in Spain are out of work.

Thank you.