[home page][map of the server][news of the server][forums][publications][hot issues]
"Ekonomika Rossiyi. 21 vek" *

New Year under the Sign of Euro

No 1(6), March 2002

Mikhail Zadornov, Deputy Head of the State Duma Committee on Budget and Taxes:

Today we can assess the prospects of transition of Western countries to the Euro. The Euro has played a considerable role at some of the financial markets during the past month. For example, if we take the newly distributed issue of state bonds, i.e. loans performed by the government, and corporate loans, i.e. securities issued by corporations to attract investments, Euros account for about 40% of the new issues. This is considerably higher than the Euro's role in international payments and hard currency reserves.

Where is the influence of a currency most evident and what is its role? It becomes clear in its place in the markets. First, the debt market, i.e. where a currency issue is conducted in the international market. Secondly, the share of this or that currency in trade transactions. Thirdly, the share of a currency in the international reserves of countries and international organisations. Fourthly, one can estimate the prevalence of cash currency from the extent of its use - it should be used not only on the territory of one country, but also in other countries.

In terms of loans, the Euro has already exerted significant pressure on the dollar. Regarding gold and hard currency reserves, many countries, in particular China, passed a decision to increase significantly the share of Euros in the total volume of gold and hard currency reserves. They will sell part of their dollars to buy Euros. I am also speaking about China, as this country possesses USD 200 billion in hard currency reserves, and this is a great deal. Some other countries have also followed China's example. Our Central Bank has been increasing its share of Euros in the gold and hard currency reserves instead of European currencies. The dollar will gradually face more and more pressure, although dollars still account for the bulk of our reserves.

What changed after January 1? The Euro became a cash currency. In addition the attitude of the population in the countries that had previously used the dollar and Deutschmarks as a means of saving changed. The attitude to the Euro has also been changing in countries that did not join the Payment Union. I would like to remind you here that 15 countries are members of the European Union and only 12 countries joined the Payment Union. Britain, Sweden and Denmark did not agree to join the Payment Union and are using their national currencies.

The first month of the Euro demonstrated that population had accepted the new currency and the process of ousting the old currencies had been developing more rapidlin the Payment Union considerably increased in Sweden and Denmark, and even in Britain, even though less than 50% of the population support the introduction of the Euro there.

Naturally the EURO will replace the Deutschemark, Pound Sterling and other currencies in East European countries.

In Russia the Euro will partially replace the Deutschmark. But for our financial organisations and the population as a whole, the dollar will still continue to be the main hard currency. The Euro will account for an increasing share of payments and the population's savings, but not as rapidly as in Europe. Euro deposits emerged in August 2001, but their share is still insignificant. While the dollar remains a strong currency and the Euro/dollar rate is quite low, the population will not use the Euro for its savings. However, once the Euro/dollar rate begins growing, the population will switch towards this currency. Everything will be determined by rational considerations.


* "Russia's Economy. The 21st Century"

"Ekonomika Rossiyi. 21 vek" * No 1(6), March 2002

[home page][map of the server][news of the server][forums][publications][hot issues]