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Home arrow newsitems arrow ECB's "New Face of €uro" doers to EuroFora : Towards a New Global Phase for €uro ?

ECB's "New Face of €uro" doers to EuroFora : Towards a New Global Phase for €uro ?

Written by ACM
Thursday, 10 January 2013

 

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*Frankfurt/ECB/Angelo Marcopolo/- After a 1st Decade (2002-2012) during which €uro emerged out of the blue and succeeded to equal US Dollar in the Value of Banknotes circulating Worldwide, as ECB's Head, Mario Draghi stressed tonight in Frankfurt at a ceremony with journalists, including "€uroFora", ECB staff, Diplomats, Experts, etc., the "New Face of the €uro", as was called the beginning of a New Series of BankNotes from 2013, due to replace those initially used until now (See Infra), might well go far beyond that initial achievement, as €uroArea's real potential, despite a recent strengthening of its Financial Governance Tools, has not yet been unleashed in Real Economy, still weak in 2013, before a gradual amelioration later this year, particularly because crucial Structural Reforms are still delayed, but also since Global Uncertainties, among which, (even if he didn't mention it explicitly), USA's forthcoming Fiscal Deal between President Obama and the New US Congress on March 2013, seems to be a main factor, that the ambition for a €uro's stronger role in Global Economy might equilibrate in the Future.

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ECB's experienced Press Director, Regina Schûller, speaking to "EuroFora", didn't exclude that such USA developments might indeed affect €uroZone, in one way or another, but prefered to keep a "no comment" stance vis a vis the American Economy, since ECB, as a matter of general principle,  usually doesn't give advise on what Others should do, or not.


Nevertheless, Draghi had already pinpointed, earlier today, at "GeoPolitical issues and Imbalances in Major Industrial Countries," (f.ex. as USA's Record -High Foreign Debt, strongly criticized by the Republican opposition which persist to ask for drastic Spending Cuts), as one among the "Risks surrounding the Economic Outlook of the €uroArea".  


Because ECB's estimation that €uroZone's current "Economic Weakness ..(is)  expected to extend into 2013", but, "later in 2013, Economic Activity should gradually Recover", as Draghi anounced today, depends also on the assumption that "Global Demand should Strengthen", "supporting (€uroZone's) Export Growth".     

 

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But, when he was asked by a collegue Journalist about ECB's views on what "seems to be a broad Rethinking  among some ...around the World on Monetary Policy strategy", since "the Bank of England is rethinking Inflation targeting", while "the (American) Fed has indicated their long-term guidance on Rates", etc.,  and whether he had " any Comments on what (his)colleagues around the World are doing", and if "there any consideration that (ECB)might do anything like that in the Future ?", Draghi, indeed, avoided a full reply :


-  "I don’t want to comment in detail, really", "on (that) Question", he admitted (keeping the attitude that Schûller indicated to "EuroFora" : Comp. Supra). "But", "the bottom line of this, after some reflection", is that "each Central bank has its Own Institutional set-up, has its own statutory Objectives, and its Mandate. Within this institutional set-up, within the statutory objectives, each central bank tries to steer Private sector Expectations. As far as our (ECB's) Mandate goes, namely maintaining Price Stability, I think we’ve shown how to do it. And, basically, Markets Understood", Draghi simply replied, referring to the Measures taken by €uroArea since 2011-2012, (See "EuroFora"s NewsReports mainly from December 2011 up to December 2012 EU Summits from Brussels, as well as Infra).
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Similarly, at another Question on "the issue of Global central banking in 2013", where "it appears that more Central Banks may be either explicitly or implicitly looking at the Exchange Rate as a Tool, when other policy tools are exhausted", Draghi rejected the view that "if the ECB is just focusing on Price Stability", then, there would "be collateral damage to the euro area, if (he was) the Only one out there talking about Price Stability, while other central banks are experimenting in these Different ways to help their Economies" :


-  "I Never Comment on Exchange Rates", ECB's Chief merely stressed from the outset, but he went on to immediately add also that, "however", the exchange rate is certainly a very Important element as far as Growth and Price Stability are concerned, and we certainly use it as one of the elements in our economic Assessment".


- "But it is Not a Policy target. That is to be kept in mind". Moreover, the "international Consensus is in the (latest) G20 statement, and we stick by that. The G20 said: “ We reiterate our Commitments to move more rapidly toward more Market-determined exchange rates systems, and exchange rate flexibility to Reflect underlying Fundamentals, Avoid persistent exchange rate Misalignments and Refrain from competitive Devaluation of currencies.” That is a solemn commitment that the G20 entered into . “We reiterate that access volatility of financial flows and Disorderly movements in Exchange Rates have Adverse implications for economic and financial Stability", he warned. Therefore, "so far, both the real and the effective exchange rate of the €uro are at their long-term Average", Draghi ensured.
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However, reacting to the fact that "Fragmentation in the Labour markets (inside €uroZone) seems to be getting even more pronounced, especially in Youth Unemployment, which is almost 60% in Spain and 8% in Germany", while even "Overall Unemployment is over 25% in Spain and a little over 5% in Germany", so that a question was raised about "why can’t the ECB maybe think about ways to lower this fragmentation if it gets to such an extreme level?", he replied rather soberly :


    - "Just keep in mind that our (ECB's) Mandate is Not full Employment, unlike the Dual mandate of the (American) Federal Reserve. Our mandate, and our statutory objective, is to maintain Price Stability", Draghi observed, as a matter of principle.


    But, "having said that, unemployment and the level of economic activity are very important factors in our (ECB's) assessment of Price Stability, and we certainly want to look at the unemployment rate, and analyse how much of it is Structural", or "Cyclical", as he added :


    From this point of view, Draghi pointed at the fact that "there are certainly some elements of Structurally high Unemployment in what we see today", citting mainly, to the existence of " Dual labour Markets  in which there are the Young with very Little Protection, and the Old, the others, with a Lot of Protection, so unemployment gets concentrated in the young", "because the greater Flexibility that has been introduced since the beginning of the year 2000, was basically concentrated on the Young part of the population, so when the (Global) Crisis came, they were the first ones to lose their jobs", as well as that "there is very little Mobility in this unemployment", so that "Workers (are) not Moving from the Areas where there is no demand, to areas where the demand for labour is better : These are all Structural factors", as well as "significant levels of output gaps (which) would justify lower levels of inflation than we actually have, (and) again seems to suggest that there are certain Structural components in the unemployment rate", on which, ECB's "Monetary policy, even in general, cannot do much about that", as things stand, even if, "finally, we believe that ensuring Price Stability actually gives you the long-term Foundation for Growth and job creation".
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But, meanwhile, a Decade after the "1st series" of €uro Banknotes were "introduced" and put into Circulation, back since "January 2002", "when the €uro finally became “real” for 300 Million Citizens in the then 12 euro area Countries", "Today, (it's more than) 332 Million People, in 17 Countries (who) use euro banknotes every day", while, "Worldwide, the value of €uro banknotes circulating is roughly the Same as that of US Dollar bills !", ECB's Head stressed, later on, at a subsequent Event for the official launching of a brand New, 2nd Series of €uro BankNotes, where "EuroFora" was invited together with other Journalists who participated at ECB's Press Conference on the opening of the New Year 2013 :


- Indeed, "the €uro is in fact being increasingly used as a Global Currency", Worldwide, "and its Banknotes have been circulating inside and outside Europe with ease", proudly observed Draghi, shortly after anouncing ECB's Decision not to lower Interest Rates in €uroZone, but to keep them unchanged.


=> F.ex., " Last month (on December 2012) that value (of €uro Banknoyes circulating Worldwide) was almost 913 Billions euro, with around one-quarter (1/4) of that value circulating Outside the €uroAea, (notably in its Neighbouring regions)", he revealed. Thus, "with 15.7 Billion of them in circulation, €uro Banknotes are a Success story", ECB's Head praised.


Today, since "besides our (ECB's) core function and mandate, to guarantee price stability in the €uro area as a whole, one of our Tasks is to develop what we could call “ our Product”, the €uro banknotes", as Draghi observed, we launch a "New Series of Banknotes", by  adding, for the 1st time, in "the New Series of (2013+) Banknotes, "The word ‘€uro’ is now written in the Cyrillic, as well as in the Latin and Greek Alphabets", he anounced, as if Neighbouring Ukraine and Russia's thriving Economy, etc., were eyed in order to use more and more €uro Currency....


The brand New Series of €uro Banknotes, which started Today in Frankfurt with the official ceremony where ECB's Head signed the 1st Banknote of 5 €uros, i.e. with the largest circulation, due to start to be used from the 2 of May 2013, " will be “Smarter” and even more Secure than the current series", dated from 2002, that it will gradually replace, Draghi anounced.

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Since "over the years, €uro banknotes have become the most Visible Symbol of European Integration", "the Single Currency, the €uro", having been "conceived as a Key Step towards that Goal", as he observed, "the New Series of Banknotes will continue to reflect the Unity and diversity of our Continent", (painted Bordered by Stars, now including also Malta, Cyprus and Iceland, but surrounded by Arab Countries towards Northern Africa, and Turkey, towards Asia Minor, in different colours).

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- In this context, "it is quite appropriate for Europa, a Figure from Greek Mythology, ("from where comes also the Name of our "European" Continent", as it was reminded in Frankfurt's 2013 ceremony), to be on show here and for us to unveil the new Banknote that includes her Portrait", also as a Security Mark in all the "New "Europa" Series Banknotes", ECB's President officially anounced, before visiting an Exhibition with the Ancient Greek Vase from the World-Famous Paris Museum of Louvre, whose paintings inspired the Modern Design of a Lady's Head which will, from now on, be inscribed in all New €uro Banknotes, starting now with that of "5 euro", which "will be the 1st  banknote of the 2nd series of euro banknotes, the so-called “Europa” series".

But this new "Symbol of EU Integration" seems to be, in fact, much more than just a badly needed Modern "Security" feature due to progressively appear in all New €uro Banknotes :

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- Indeed, "the Choice made, among various other representations of "Europe"'s relation with the God "Zeus" who transformed himself into a Flying Bull with Wings, in order to take her in his back and fly from the Mediterranean Sea towards the European Mountains, according to the well known Ancient Greek Mythology, prefered finaly the image painted in this particular vase, simply because, contrary to many others, this painting didn't show any Violence at all, but, on the contrary, Lady Europe's "Soft Power" capacity to Charm Zeus/Bull, i.e. symbolizing also EU's and €uroCurrency's "Attractive" value, revealed to "EuroFora" the competent Curator of Louvre Museum's Greek Ceramics, Dr. Anne Coulié.


+ Moreover, timely adding to the Symbolic value of the New €uroBanknote, the ECB-selected Ancient Greek Painting of "Europa" dates from the 4rth Century B.C., "at the period of King Philip", i.e. the Father of "Alexander the Great", famous for having explored a huge area and considerably expanded his Kingdom, according to his Dream to Unite Together all Civilisations known at that period of Ancient History, Louvre's key official reminded to "EuroFora"....


- This was the  result of a rigorously examined, Collective ECB choice, which is a perfect symbol of Europe added earlier to "EuroFora" Jean-Michel Dumas, Head of ECB's Currency Development service.

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=> Indeed, a crystal-clear Ambition to expand the "New face of the €uro", as was named the interesting Exhibition focusing mainly on the Ancient Greek Vase's painting of Lady "Europe", and its Modern Design by German Artist Gastteter at a filigram in ECB's Banknotes, was visible also at Frankfurt's Archeological Museum's Director, Egon Wamers' inaugural observations :


- In fact, Ancient Greek Mythology's figure of Lady "Europe", which named our Continent, has been already used in the ... Deutschmarks printed as early as since 1947 in Germany, Dr. Wamer reminded, while, Charlemagne had earlier decided, from 794 AC, to forge and impose one Single Currency throughout all European area located between the Atlantic Ocean and Mittel-Europa, and from the Baltic Sea until Northern Italy, becoming a first New Currency for all Europe of that time, as he said. Even more interesting : Dr. Wamer revealed that Charlemagne's Historic European Single Currency, has inspired also the ... Brittish "Pound", with its specific Numeric system which remains until today in use at the UK !

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=> Conclusion :  - "If you want to save €uro for 400 Years, (i.e. as long as Charlemagne's single Currency survived), then, bring it back into the UK !", Dr Wamer advised President Draghi, half smiling, half seriously....

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However, in order for €uro Currency to really become sufficiently "Attractive", the €uroArea Countries must first boost their Competitiveness, and complete their Fiscal Consolidation as well as the on-going building of their Economic Governance, a sine qua non Condition for their huge Potential to become really effective, ECB's Head, Mario Draghi, also stressed earlier  today in Frankfurt :
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Naturally, Draghi also noted, this same day, that "we have to acknowledge that Significant Progress has been made in all countries in the €uro area :"


At first, " in all (EU) Countries", "all aspects of economic activity have been affected by Reforms of different kinds, whether fiscal or structural", ", whether you look at their fiscal situation, current account balance, competitiveness, unit labour costs or exports", ECB's Head observed.

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Nevertheless, "the point now, is not to be complacent about what has taken place and relax, but rather to keep on, to Persevere, because we ...are (just) Starting to see the benefits", which "do not only come from the OMTs, from ECB's actions", but,  "first and foremost, from the substantial progress that has been made at National level", he pointed out.


+ "But also let’s not forget the significant Progress that the year 2012 has brought in terms of Governance at the level of the €uro Area", Draghi added. Indeed, "we (EuroZone) made Significant Steps towards greater Integration. The beneficial effects that we see today, ...are really the result of all of these factors combined", he found. So, "we speak a lot about contagion when things go poorly, but I believe that there is also contagion, Positive Contagion, when things go Well. And I think this is in play now. There is positive contagion", ECB's Head found from these points of view.
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However, - " as regards the Risks to economic activity, ... they stem essentially from a Lack of Action by the (EuroZone) Governments on the Fiscal side", where, "not only is continuing fiscal Consolidation Essential, but it also needs to be implemented in a Balanced way, through a proper combination of government expenditure reduction, and taxation", Draghi stressed.


=> But, "the second point (which .. is becoming more and more important in reducing Long-term Imbalances in the euro area), is Structural Adjustment. That is Essentially the only thing that matters, with regard to imbalances in the euro area: Structural adjustment, regaining Competitiveness, and creating a situation where you do not have a (one) permanent Creditor, and lots of permanent Debtors", he denounced. "That is where Action is Needed, and will Continue to be needed for the foreseeable future", ECB's Head pointed out.


Because, despite some "Progress" made mainly "on 2012", particularly on Steps to build Economic Governance's institutional tools, and even if several "Markets are Calmer" recently, compared to the Past, in fact, "to be fair, .. the Jury is still Out. It is Too Early to claim Success", Mario Draghi concluded.
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F.ex., concerning "another Mistake at a National central bank last summer", Draghi was questioned whether "is it not time to think about Centralising the valuation of collateral at the ECB, and taking this competence away from the National central banks to some extent?"


- ECB's Head foud that to be "a Good Question", Because "the way collateral is managed and handled", had been "decided at the Beginning of the ECB", But, "right now we have to Strengthen the Governance of this process, and we are doing so. We have to implement all the decisions that have been taken", he advised.


+ "Then we will certainly Reassess the situation after that, and we will see whether the Steps we have taken are really satisfactory, because... we are taking this very Seriously", he warned.
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