This is a very important discussion I am wishing to have with the Union. As we endeavour on a new chapter, we realize that the regional currency is the euro and we must do something about it. The existing Eurozone as we know it is broken and we need to revamp the whole thing. It is highly important to every single nation in the European Union because:
It is the regional currency and the European Government finances everything through Euros.
Monetary policy is currently risky if we continue to let nations have the euro and print their own. Who is to say the euro is worth more or less if we allow that to happen?
It is an opportunity for a European Central Bank, something else that is mandated by the constitution because of the reasoning above. We need to fulfil this constitutional requirement or get rid of the Euro as a regional currency. It is very obvious those are the two options.
Please, any and all opinions must and should be heard on this extremely important issue, and any questions you may pose, I will be happy to answer.
The view of the Government of the Democratic Republics of Framptonia is that the options are exactly as you have detailed them in your final sentence.
1. If countries are to use the Euro as a currency, then those Countries must accept their loss of control over the money supply and setting of interest rates. For the use of the Euro to continue, these nations would need to agree to the roles of their Central Banks being centralised into a European Central Bank. As a state that does not use the Euro as its currency Framptonia does not take a view on this, and believes that it is a decision for those countries that have adopted the Euro as their currency. If a state does not agree to the centralisation of their Central Bank in this manner, then they cannot be permitted to print the Euro.
2. If the Euro is not to be a hard currency and be a pseudo currency unit, then the role of any Central Bank is to be organisation that holds the foreign currencies on behalf of the Union. It isn't necessary for a Central Bank to be created for the purpose of simply holding the foreign currency. The Union could simply tender this function out to a commercial bank. Indeed the view of the Government of the Federal Republics of Framptonia believes that it would be anti-competitive for the Union to establish a bank simply to undertake what could be done by a commercial bank. under these circumstances the Euro would simply become the currency in which the Union reports its finances and as a comparitor between the differing currencies of Union members. Transactions between any state and the Union would take place in the currency of the state, but be reported in Euros.
The Government of the Federal Democratic Republics of Framptonia is not averse to joining a formal currency union, but fears that the economic circumstances in Framptonia would preclude our involvement at the current time.
Mr Dimness Healey
Comptoller General of the Federal Democratic Republics of Framptonia
Any further opinions would be great as the Office has worked with Commissioner Rushanara Ali to prepare a bill that could potentially be ready to go to the floor.
We are against this. Every nation has the right to use its own currency, not a mandated one by another nation/s.
Let us make it perfectly clear to everyone while we are discussing this.
No one is being forced to use the Euro. It has been said nowhere that nations will be forced to adopt the euro.
It is, however, the currency in which the European Government pays its debts and conducts its business, and is a responsibility to all of Europe that it is at the very least functional.
Commissioner of Economics
If I may be so bold Madam Commissioner, could I suggest that we first of all decide how we wish the Euro to operate. The Constitution states that the Euro is the official currency of the EU and that the Commission for Economics is responsible for the control of the Euro. It doesn't state though that the Euro has to be a hard currency or that the transactions between the EU and its members have to be in Euros.
The nature of the ECB will depend upon that decision. We hear a great deal about countries printing Euros without constraint, but we don't appear to hear from those countries. If these countries wish to keep the Euro as their currency, then they have to agree to the removal of their ability to print Euros. In the absence of such an agreement, then the Euro cannot be a hard currency.
Until we hear from the countries that have the Euro as their currency, we cannot make a decision as to the hardness of the currency.
Mr Dimness Healey
In market economies, people are free to choose among alternatives in line with their preferences. The fact that many economic agents ? be they private individuals, investors, savers, traders or public authorities ? outside the euro area increasingly choose the euro as their preferred currency testifies to the trust which they place in its stability and credibility. This is a sign of distinction. At the same time, it also serves as a constant reminder of the importance to preserve this confidence, by maintaining the euro?s internal purchasing power, by enhancing the growth potential of our economy, and by further integrating and deepening Europe?s financial markets.
The status of the euro as a global currency, combined with the size and economic weight of the euro area, is leading international economic organisations, such as the IMF and the G8, increasingly to view the euro-area economy as one entity. This gives the European Union a stronger voice in the world.
With a single currency, there will be no longer a cost involved in changing currencies; this will benefit tourists and firms who trade within the Euro area. It has been estimated that this benefit will be equal to 1% of GDP so will be quite significant. (this is sometimes known as frictional costs) Some studies have suggested that the Euro has led to a 6% increase in tourism, (though many other factors may be at work.)
With a common currency it will be easier to compare prices in different European countries because they would all be in Euros. This enables firms to source cheaper raw material and consumers to buy cheaper goods For example, arguably new car prices are higher in the UK than elsewhere, a single currency could help reduce these price differentials or make it easier for UK consumers to buy from the Eurozone. Within the Eurozone, there has been a degree of convergence in car prices since the Euro was introduced.
Volatile swings in the exchange rate can destroy the profitability of exports (e.g. a rapid appreciation). This exchange rate uncertainty undermines business confidence in investing. Therefore with a single currency business confidence should improve leading to greater trade and economic growth.
Inward investment may increase from outside the EU as firms take advantage of lower transaction costs within the EU area. Some firms have said they prefer to invest within the Eurozone area.
the cost of trading in bonds, equity, and banking assets within the eurozone.
Lady Mary Of Coure, Duchess of Duke
Chancellor of Exchequer
Special European Comissioner of Montenbourg
Mrs Lucinda Bareham walks into the Chamber for the first time since her husband's funeral, dressed all in black.
Madame Commissioner, this debate appears to be going nowhere.
I do not think it would be right to place an Act before the Council for debate at this point. Any Act creating a Central Bank would impose a massive intrusion into the sovereignty of any State using the Euro as its currency. It would be be inequitable that a vote in the Council by members using their own currency should impinge on the sovereignty of the States using the Euro.
A far better suggestion for implementation would be to implement it by Treaty.
I would be interested, Madame Commissioner, to know how many and which Euro as their currency and would be affected by the creation of a Central Bank.
The entirety of Europe will be affected as it is the regional currency. The functioning of the European government as we know it is in danger.
We need to make a decision as to how the Euro must be run and the Union's relationship to the Euro.
May I also remind everyone in the discussion that this is indeed a mandate by the constitution and by not having an ECB, we are in breach of the constitution.
Robert Kligenberg walked up to speak, sweeping a strong scent of marijuana across the room.
"Hey everyone, chill out, I've been discussing this at length with my cousin Renata and we've worked out a sensible solution."
He paused to grin, very widely, at Lady Mary's complete naivet?.
?, ?, ?, ?"It's very clear that the Constitution requires a European Central Bank, so we need to establish it regardless of member sentiment. It's also set as the region's currency, not necessarily of the member states, but of the Commission, Council, and Court. It makes sense to run these institutions with the Euro.
As to whether nations wish to use the Euro, they are welcome to or not, but if they do, they must give up monetary policy to the European Central Bank.
Instead of a treaty, those wishing to use the Euro should simply apply to the ECB, which we do need to formally establish via an Act of the Council.
In terms of how we should fund the Eurozone, Renata and I discussed initially bankrolling it through the regular EU budget, with non-Eurozone countries becoming the ECB's initial creditors. As the ECB manages the Euro, it acts like any other bank, extending credit and bringing in revenue that it can use to pay its creditors back. The end goal is to have the ECB pay off the European Union and become financially independent, with the Eurozone being able to sustain itself.
There has been further discussion regarding maintaining a pegged rate for the Euro (OOC: 1 Euro = 1 NS$). Maintaining a peg will cost a considerable amount, however, the alternative is to let the Euro take wild swings in value as nations of varying economic strength enter and exit the zone. This is a subject that the ECB's board should address when it is created.
Finally, the Duxburian Union wishes to reaffirm its dedication to the Kael, which will always be backed by the full faith and force of the Duxburian government.
Robert sat back down and took a particular interest in the ceiling, it's SO HIGH!
Officer of Economics, Duxburian Union