1. The Euro Its History and Future Qiaorong Zhang

2. The Birth of Euro  1957 Roma Treaties  1970 Plan on EMU  1979 EMU established  1989 3 Phases for EMU  1990 1 ST Phase Capital Free Transfer  1992 Maastricht Treaty  1994 2 nd Phase Economy Policy Closer  1998 European Union Committee Meeting  1999.1.1 3 rd Phase Euro Introduction  2002.2.2 Bank Notes and Coins in Circulation  2002.7.1 Euro is the Sole Currency

3. Three Pillars for EU

4. Map of Euro Area 2011

5. The Euro Zone Members  17 member states of European Union use the Euro as their Currency: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain.  Non-Participants Bulgaria, Czech Republic, Denmark, Latvia, Hungary, Poland, Romania, Sweden and UK are EU member states but not currently use the single European currency.

6. European Central Bank  Independent of the pressures of national governments  Mandate to keep inflationary pressures low  Does not have a second objective to sustain growth and employment ((unlike the Federal Reserve in the United States of America) )Federal Reserve

7. The European Integration  Cheaper transaction costs  Currency risks and costs reduced  Price transparency and increased price- based competition

8. The Waves of Euro

9. Europe’s Destiny  1999~2002  2003~2008  2008.10~ Now

10. Reasons for Depreciation  1:1.2740 on Jan. 4,1999 drop to 0.8425 total depreciation of 29.8%  Macro economic- development difference  The interests of individual sovereign country VS concerns for EMU

11. Questions for You  What’s the advantages for a country to weaken its currency? A. Help on exportation B. Increase the Purchase Power

12. Reasons for Appreciation  911 attack in USA  Alan Greenspan : low-interest-rate policy

13. Sub-Prime Crisis Mortgage Companie s mid 2000sMar 2009 CompanyPrice Shares (millions) Mkt Cap (millions) Price Mkt Cap (millions) Notes Fannie Mae 801000800000.4400government conservator ship Freddie Mac 501400700000.17238government conservator ship Washingt on Mutual 451700765000.0585 Bankruptcy banking ops sold to JP Morgan Chase Countrywi de Financial 525803016063480acquired by bank of America New Century Financial Corp --1750-55bankruptcy

14. European Sovereignty Debt Crisis  PIIGS (Irish, Italy, Greek, Portuguese and Spanish)  Cumulative current-account deficits 2008 through 2010– €365 billion. Demonstrators at a rally in Lisbon in April protested rising unemployment amid the Portuguese crisis From Reuters

15. The Original Issue For Euro Currency

16. Solution A for Euro Zone  Take Over PIGS governments  EMU performs as one country

17. Solution B for Euro Zone  Exit mechanisms for PIGS  Negative impact: less influence of Euro currency

18. Solution C for Euro Zone  Bail-out fund pooled by healthy members to save PIGS  Negative impact: encourage the irresponsible attitudes with poorly performed countries

19. The Future of Euro  Depends on the solution to the PIGS crisis Collapse?  Depends on Federal Reserves management on USA international deficit

20. Resources  1.Impact Of US Sub-prime Crisis On Europe  http://www.economywatch.com/us-subprime/impact-europe.html2.Maastricht Treaty http://www.economywatch.com/us-subprime/impact-europe.html  http://en.wikipedia.org/wiki/Maastricht_Treaty http://en.wikipedia.org/wiki/Maastricht_Treaty  map of Euro area, 1999~2011  3.EU paints bleak picture for PIGs May 14, 2011 - 11:56PM  http://www.smh.com.au/business/world-business/eu-paints-bleak-picture-for-pigs-20110514-1emz8.html http://www.smh.com.au/business/world-business/eu-paints-bleak-picture-for-pigs-20110514-1emz8.html  4.The ECB's secret bailout strategy  By Hans-Werner Sinn (chinadaily.com.cn) Updated: 2011-05-03 11:18  http://www.chinadaily.com.cn/opinion/project/2011-05/03/content_12435750_2.htm http://www.chinadaily.com.cn/opinion/project/2011-05/03/content_12435750_2.htm  5.Evidence that the Fed Caused the Housing Boom  Mises Daily: Monday, December 15, 2008 by Robert P. MurphyRobert P. Murphy  http://mises.org/daily/3252 http://mises.org/daily/3252   The Rise and Fall of the Housing Market and its Impact on the U.S. Financial System  http://www.wikinvest.com/concept/2008_Financial_Crisis http://www.wikinvest.com/concept/2008_Financial_Crisis  6.European sovereign debt crisis worsens as investors bet against Ireland, Portugal and Greece  12:28PM BST 18 Apr 2011  http://www.telegraph.co.uk/finance/economics/8458336/European-sovereign-debt-crisis-worsens-as-investors-bet-against-Ireland-Portugal- and-Greece.html http://www.telegraph.co.uk/finance/economics/8458336/European-sovereign-debt-crisis-worsens-as-investors-bet-against-Ireland-Portugal- and-Greece.html  7.Fiscal policy  http://en.wikipedia.org/wiki/Fiscal_policy http://en.wikipedia.org/wiki/Fiscal_policy  8.The Euro The politics of the New Global Currency by David Marsh

21. Questions?  Thank you