| 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
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"