What Is the Eurozone?

The euro area refers to the European Union's unified currency, the European Union's national currency, among the members of the European Union. On January 1, 1999, EU countries began to implement a single currency, the euro, and to implement a unified currency policy in countries that implement the euro. ^[1]

Eurozone

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To join the euro zone, EU member states must meet the following criteria:

First, the annual government fiscal deficit of each member state is controlled below 3% of GDP; second, national debt must remain below 60% of GDP or is rapidly approaching this level; third, price stability On the other hand, the inflation rate of the member states the inflation rate of the three best member states of the previous year + 1.5%. Fourth, the long-term nominal annual interest rate (measured by the long-term government bond rate) does not exceed the three countries with the best inflation performance. The average long-term interest rate is 2 percentage points. Fifth, the country's currency must remain within the normal fluctuations of the European monetary system for at least two years. The European Union does not set a fixed time for member states to join the euro area. Each member state will join according to its own situation and according to its own schedule.

Eurozone enters the era of negative interest rates

Before the European Central Bank announced its interest rate decision, the market has generally expected that the bank may for the first time reduce the deposit interest rate to a negative zone. Unsurprisingly, the European Central Bank cut its main refinancing interest rate by 10 basis points from 0.25% to 0.15%, which is less than market expectations. Lowering the overnight deposit rate to a negative value means that euro zone commercial banks will pay "fines" for funds deposited with the European Central Bank.

The European Central Bank also decided to launch monetary policy measures to further enhance liquidity, including a series of targeted long-term refinancing operations with a validity of about 4 years. It is expected to inject 400 billion euros of liquidity into the market. At the same time, the European Central Bank said it would step up preparation Asset-backed securities market purchase plan, within which the European Central Bank will be able to purchase private sector securitized assets.

After the release of the negative interest rate resolution, the euro fell rapidly against the US dollar, reaching a minimum of 1.3559, a low of nearly four months, and the US dollar index of 80.77, a new high of four months.

Regarding the latest resolution, relevant experts said that the European Central Bank has not really issued quantitative easing measures, but is moving closer to the relevant actions; the European Central Bank may introduce more stimulus measures.

The United States "Wall Street Journal" published an analytical article on January 5, 2015, stating that 2014 should have been a year when the euro area emerged from the debt crisis, the economy returned to growth, which brought confidence and promoted employment. However, this is not the case. Three factors have contributed to this situation.

Eurozone approves Greek reform package

Recently, the euro area formally approved the list of reform measures presented by Greece, which means that the validity period of the rescue plan obtained by Greece can be extended by four months. This round of bailouts should have expired on February 28, and the conclusion of this agreement is "just in time" for the current state of Greece's economy. It saves Greece from bankruptcy due to "no money available" in the next 4 months, and thus has to withdraw from the bad luck of the euro area.

Eurozone saves Greece

After 17 hours of marathon negotiations, European Commission President Tusk announced on July 13, 2015 that the euro zone leaders have reached an agreement on the Greek aid agreement and will provide a new round of assistance to Greece to avoid its departure from the euro. Area.

Tusk said that the euro zone leaders' summit reached an agreement on Greece, which will provide support for Greece's reform and finance.

At the Eurozone Leaders' Meeting on the 13th, German Chancellor Angela Merkel, French President Francois Hollande, President of the European Council Donald Tusk and Greek Prime Minister Alexis Tsoi Plath has proposed a compromise solution to the Greek debt crisis.

Eurozone leaders told the approaching bankrupt Greece at an emergency summit on July 12 local time that this week must identify key reforms to restore external trust in the country so they can start financial bailout negotiations and leave Greece in Within the euro zone.

The meeting called for Greek left-wing Prime Minister Tsipras to push parliament to pass legislation, persuade other eurozone partners to immediately release bailouts to avoid national bankruptcy, and start a third round of negotiations for a bailout plan. The size of the bailout is estimated at 86 billion (US $ 95.5 billion).

The draft decision submitted by the euro zone finance ministers to leaders shows that six comprehensive measures including tax and pension reform must be determined by midnight on Wednesday (July 15), and the Greek Parliament must approve the entire plan before the rescue negotiations begin .