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Euro Disney S.C.A. Business Information, Profile, and History

BP 100
77777 Marne-la-Vallee
Cedex 4
France

Company Perspectives:

Together, let's bring the Disney Magic to life. Our vocation is to give way to our imaginations and to tell beautiful stories, the type of stories that leave children and adults starry eyed. At Disneyland Resort Paris, each one of us has a part to play and each part has its setting. Everywhere, in each "land" in our world, in each restaurant, in each hotel, in each boutique, we take part in the magic of the moment. We wish for everything to be perfect and call upon the most talented creative artists, the most surprising innovations, and the most attentive of servers. Our "raison d'etre" is to continually surprise and enchant our guests.

History of Euro Disney S.C.A.

Euro Disney S.C.A. operates Disneyland Resort Paris, the leading tourist destination in Europe. Securing 12.2 million visitors in 2001 alone, the 1,943 hectare site includes Adventureland, Frontierland, Discoveryland, Fantasyland, and Main Street USA, along with Walt Disney Studios, a new theme park that opened in 2002. Euro Disney also encompasses seven hotels, two convention centers, 68 restaurants, 52 boutiques, Disney Village--an entertainment venue linking the theme parks and hotels--and a 27-hole golf course. After a rocky start in 1992, Euro Disney began posting profits in 1995. However, an economic slowdown, falling attendance, and rising debt related to the opening of Walt Disney Studios left the company strapped for cash in 2002. Euro Disney has turned to its major shareholders, including The Walt Disney Company and Saudi Prince Alwaleed bin Talal, to rescue it from its financial woes.

Mickey Goes to Europe: 1980s

Flush with the huge and instant success of the Tokyo Disneyland, which opened in 1983, the Walt Disney Company immediately began looking for a site to build a European version of the popular tourist destination. On the one hand, Disney sought to capitalize on their first experience gained from operating a theme park in a foreign market--and, given the long-established European embrace of Disney's products, especially its films, which found even larger audiences in Europe than in America--Europe, with a population of 320 million within airplane distances of less than three hours, seemed a logical choice. On the other hand, Disney looked to correct what it saw as mistakes made with its previous parks. The Tokyo Disneyland was not owned by the Disney company, which meant that Disney was forced to content itself only with royalties on that theme park's massive revenues. At Walt Disney World in Florida, the company had not foreseen the mushrooming development of hotels and other theme parks and recreation centers outside of the relatively limited confines of the park, reducing Disney's hotel room take to merely 14 percent of the area's total.

Between 1983 and 1987, Disney considered sites in various countries, including the United Kingdom, Germany, and Italy, but by 1985 the choice had been narrowed down to the Costa del Sol in Spain and the suburban area around Paris. In 1987, the choice fell to Paris--despite the fairer Spanish climate--in part because of Paris's larger population, its well-developed transportation system, and its role as one of the primary tourism destinations in the world, but also because of a number of important concessions made by the French government, which was eager to secure the plum job- and revenue-generating theme park, including use of the government's right of eminent domain to sell the large, principally farmland Marne-de-Vallee site at the cut-rate price of $7,500 per acre; the French guarantee of some FFr 1.5 billion for new road construction, including access to the nearby autoroute; the extension of the RER train system to the theme park, as well as the building of a rail link and station for the TGV train line; an agreement to drop the value-added tax rate on ticket sales from 18.6 percent to just 7 percent; and, finally, the French agreement to provide water, sewage, gas, electricity, and other services. Signing the contract with Jacques Chirac in March 1987, Disney head Michael Eisner was confident that the Paris theme park would be a success, despite France's winter climate. Indeed, the Tokyo Disneyland experienced much the same weather conditions but remained a year-round tourist draw for an eager and freely spending Japanese public.

The 4,400-acre site purchased by Disney was far larger than the company--now operating through a wholly owned development subsidiary, Euro Disney Associes SNC, which in turn would give way to theme park operator and publicly held company Euro Disneyland S.C.A.--needed to build its theme park. However, remembering the experience of the Orlando-area Disney World, the company proposed to develop the site in several phases, excluding "mosquitoes" from the area. In addition, with the booming French real estate market of the 1980s, the company expected easily to recoup much of its development costs--initially slated at FFr 15 billion for the Phase I construction--by selling off the properties it developed while retaining ownership of the land and maintaining control of both the commercial use and design of the properties surrounding the theme park. These real estate sales were projected to supply 22 percent of Euro Disneyland's revenues in 1992, when the park was scheduled to be opened, and rise to 45 percent of revenues by 1995.

The Disney Company limited itself to a 49 percent stake in the enterprise, satisfying the French government's requirement that at least 51 percent of the company would be owned by Europeans. With the backing of the powerful Disney brand name and financial clout, the initial financing for the venture, completed in 1989, took two primary forms. The first was a loan package covering much of the projected Phase I cost raised among seven French banks. The second was a public offering of 51 percent of Euro Disneyland S.C.A., which raised $1 billion to complete the financing. Disney was determined to build a state-of-the art theme park, "perfecting" the concept of its other theme parks, which in turn led to a number of so-called "budget breakers," that is, last-minute design changes, many of which were initiated by Disney chief Eisner himself. As the Phase I project neared completion two years later, Euro Disneyland, in order to cover construction cost overruns was forced to arrange additional capitalization of $144 million and added loans of $522 million, raised from a collection of what eventually became more than 60 banks. Confidence in the venture ran high, with Euro Disneyland forecasting an attendance figure of 11 million visitors in the park's first year, rising past 16 million annual visitors soon after the turn of the century.

Disney's French Folly of the Early 1990s

Euro Disneyland opened on schedule in April 1992--and from there its fortunes quickly dwindled. By the end of 1993, the company was facing bankruptcy--with a first-year loss of more than FFr 5 billion and a rise in its debt load to over FFr 21 billion--and Eisner was publicly suggesting his willingness to close the park altogether. A variety of factors had brought the company to this point.

Euro Disneyland had severely miscalculated the health of the French real estate market. When this collapsed in the early 1990s, the company's hoped-for property development sales failed to materialize. Indeed, the company was forced to abandon its planned 1994 start of the Phase II development of the theme park, from which Euro Disneyland had expected to pay down much of its debt load. At the same time, interest rates on the company's vast loans were rising rapidly.

Meanwhile, the company had underestimated the impact of the recession of the early 1990s, by then already taking hold in Europe, and refused to postpone the opening of the theme park or to reduce its risk by allowing outside investors into the park's hotels and other properties, reasoning that it could weather the course of the economic downturn. However, the recession slashed severely at consumer spending budgets; while Euro Disneyland nearly reached its first-year goal of 11 million, visitor rates swiftly declined, dipping to a low of just 8.8 million. Even worse, visitors proved reluctant to provide the company with important concession revenues, including gift sales and restaurant and hotel revenues. As sales slumped and visitor attendance fell, virtually stalling through much of the winter season, the company was confronted with another serious miscalculation. Pre-opening calculations had projected labor costs would demand just 13 percent of total revenues; instead, labor costs drained 24 percent of revenues in 1992 and rose to 40 percent of revenues by 1993.

While the recession--and the company's delay in recognizing its effects--bore responsibility for many of Euro Disneyland's startup pains, the company itself had to be held accountable for a series of cross-cultural gaffes that reduced much of the consumer goodwill it had expected. Chief among these was the company's seeming ignorance of the fact that its European audience was significantly unlike its American and Japanese audiences. Trouble started in the theme parks marketing efforts, which emphasized the grand size and scope of the project, an issue which played well to an American or Japanese visitor but which left the Europeans largely indifferent. In addition, admission costs--running some 30 percent higher than a Disney World ticket--and a refusal to offer discounted prices for winter admission helped discourage European visitors, who, unlike their American and Japanese counterparts, were less likely to take frequent short vacation trips, particularly during the school year, but preferred instead to spend their vacation budget on fewer and longer vacations. Euro Disneyland hotels, which had geared up for receiving guests for average four-day stays, were surprised to find that the majority of their room bookings were only for overnight stays.

Inside the park, visitors found other oversights. Euro Disneyland's restaurants, geared toward the American feeding style of eating snacks at various times of the day, were not prepared for the more fixed schedules of France--projected to account for as much as 50 percent of all visitors--where the country all but shuts down at 12:30 every day to allow a leisurely lunch. Thus, the park's restaurants had not been provided with the seating or staffing to accommodate the sudden influx of diners, resulting in long lines. Most famous among the company's failures to accommodate cultural differences, Euro Disneyland maintained the alcohol-free policy of its other parks, arousing the ire of a country where wine is an integral part of the culture. The company proved no more popular with its employees. Largely French and highly jealous of their individualism, the park's cast members chafed at the strict and elaborate dress and behavior codes imposed on its employees. Even at the corporate level, the Disney culture found itself at odds with its French hosts, which found the company's manner to be overbearing and patronizing, an attitude which seemed to reach its peak when Eisner all but threatened to shut down the park in December 1993, arousing bad feelings among Euro Disneyland's creditors. By then, however, with its losses mounting to FFr 5 billion and its debt load nearing FFr 22 billion, Euro Disneyland was in desperate need of its bankers' goodwill.

A Princely Rescue in 1994

By the end of 1993, Euro Disneyland had run out of cash. The Disney Company agreed to keep the company afloat but only until the end of March 1994, when it required Euro Disneyland to have completed a restructuring of its finances. Euro Disneyland hoped to convince its creditors to waive up to half of its debt load; in return, the banks, concerned that the Disney Company should bear its share of the liability, sought concessions from Disney as well, specifically in the form of a waiver of the company's management fees of 3 percent of revenues and a reduction in the Disney Company's royalty fees of 10 percent on ticket sales and 5 percent on concession sales. Negotiations faltered between the Disney Company and its creditors, in part because of Eisner's suggestion that he allow the park to close--which was seen as a bullying tactic by the banks--and in part because the Disney Company refused to reduce its royalty fees.

Less than a month before the deadline, the parties reached an agreement to rescue Euro Disneyland. The restructuring plan featured a rights issue, jointly subscribed to by the banks and the Walt Disney Company, which raised some $1 billion in cash. The Walt Disney Company also agreed to pay FFr 1.4 billion to purchase some of Euro Disneyland's assets in a sale-leaseback agreement; in addition, Disney waived its management and royalty fees for five years--worth some $450 million per year--and thereafter to halve its royalty fees. The banks also agreed to waive interest payments for 18 months and then to defer subsequent payments for three years, adding additional yearly savings of nearly FFr 2 billion to Euro Disneyland's relief.

With its debt load cut in half, Euro Disneyland next found help from a surprise rescuer: Prince al-Waleed, nephew of King Fahd of Saudi Arabia and a businessman who in just a decade had built up a personal fortune estimated at over $4 billion. The prince announced his intention to buy into Euro Disneyland, eventually spending over $500 million to take a 24 percent stake in the company.

On with the Business of Fun in the Mid-1990s

With its refinancing completed, and with new management in place--American Robert Fitzpatrick, who had overseen the Phase I construction, was replaced by Frenchman Phillippe Bourguignon in 1993--Euro Disneyland began addressing its internal problems. In 1994, the park's name was changed to Disneyland Paris, emphasizing its proximity to the French capital. The company also made concessions toward resolving its poor labor and press relations. The no-alcohol policy was changed, allowing wine and beer to be served at the park's restaurants, while the company lowered its admission prices, some of its hotel room rates, introduced lower-priced menu choices, and instituted discount pricing for winter admission. In addition, the TGV link to the theme park was completed in 1994, complete with a direct linkup with the Eurostar Chunnel train service.

After narrowing its losses to FFr 1.8 billion on FFr 4.1 billion in revenues in 1994, Euro Disneyland turned profitable in 1995. The company also began moving forward on its Phase II development, attracting a Planet Hollywood restaurant and an eight-screen, state-of-the-art movie complex, owned by Gaumont, to the company's free-admission Festival Disney (renamed Disney Village in June 1997) entertainment complex located next to the theme park. The company also started construction on a second convention center and began eyeing plans to open a Disney Studios theme park on the site. Meanwhile, the passing European recession and stronger marketing campaigns were spurring increasing attendance, rising from 10.7 million visitors in 1995 to 11.7 million in 1996. Posting its second year of profits in 1996, Euro Disneyland seemed finally to be rousing from its European nightmare and moving into the dreamland Disneyland Paris should have been all along.

Attendance had surpassed 12 million visitors by 1997, making the theme park Europe's leading tourist destination. Hotel occupancy was also strong, encouraging Disney management to go ahead with its plans to open a second park. Construction began in 1999 on Walt Disney Studios, a destination featuring attractions based on cinema, animation, and television. The company believed that the addition would not only bring in over five million new visitors each year but entice travelers to stay longer.

Problems Arise in the New Century

The construction of the new $530 million facility put a strain on the company's debt load, which had risen to $2.2 billion by 2000. Profits began a downward trend, falling from EUR 38.7 million in 2000 to EUR 30.5 million in 2001, due mostly to expansion costs and royalty payments to Walt Disney Co.

Despite its faltering financial situation, Euro Disney--by now the company had shortened its name from Euro Disneyland to Euro Disney--went ahead with its plans, and on March 16, 2002, Walt Disney Studios Park opened for business. In sharp contrast with the original park's opening in 1992, Walt Disney Studios was well received by France and the media. A Disney executive commented on the difference in a 2002 Amusement Business article, stating, "We have learned an amazing amount about each other during those ten years and we've learned, more than anything, how to be integrated, both socially and culturally, with the French."

However, since the opening of Walt Disney Studios coincided with a drop in tourism and an overall slowdown in the global economy, it soon became apparent that Euro Disney had once again stretched itself too thin. The firm posted a EUR 33.1 million loss in 2002 and announced--for the second time in its history--that it needed financial help from its major shareholders. To make matters worse, attendance dropped during the spring and early summer of that year. In early 2003, Euro Disney's parent stopped collecting its royalty fees in an attempt to alleviate some of its financial burdens.

By August 2003, Euro Disney announced that it would be unable to make its debt payments in the following fiscal year. As such, the company began negotiating with the Walt Disney Company and its three major banks in an attempt to restructure its debt. Desperate for a second princely rescue, chairman and CEO Andre Lacroix turned to Prince Alwaleed in September. Euro Disney faced an uncertain future, and it appeared as though the company needed a dose of Disney Magic to get itself back on track.

Principal Subsidiaries: Disneyland Resort Paris.

Principal Competitors: Grevin & Compagnie SA; Six Flags Inc.; The Tussauds Group.

Related information about Euro

The common currency unit used in 12 countries of the European Union (from 1 Jan 1999 in Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, Netherlands, Austria, Portugal, Finland, and from 1 Jan 2001 in Greece), and also from 1999 in Andorra, Monaco, San Marino, and the Vatican. Euro notes and coins entered general circulation on 1 Jan 2002, at which point each country had a period of time to phase out its old currency, replacing it with Euro currency to be used throughout the Euro area (‘Eurozone’). Notes are in units of 5, 10, 20, 50, 100, 200, and 500. In the business world, all payment and accounting systems began to use the Euro on 1 January 1999, each national currency unit being irrevocably fixed in relation to it; for example, the exchange rate with the Deutschmark was set at 1·95583, and in the UK 1 Euro was worth approximately 70p. The 2002 launch was celebrated with ceremonies and special events throughout the Eurozone. Thanks to elaborate forward planning, the changeover generally proceeded without difficulty, though problems of availability of the new currency affected a few areas for a while (notably, in Italy).

Austria, Belgium, Finland, France, Germany, Greece, Republic of Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Andorra, Monaco, San Marino, Vatican City, Montenegro,

Kosovo, French Guiana, Réunion, Saint-Pierre et Miquelon, Guadeloupe, Martinique, Mayotte. pegged_by = BAM, BGN, CVE, KMF, XPF, XOF, XAF, EEK, LTL, LVL, MTL
| frequently_used_coins = 1, 2, 5, 10, 20, 50 cents, ?1, ?2
unless otherwise stated as rarely used
| rarely_used_coins = 1 and 2 cents (only in Finland, the Netherlands and Republic of Ireland)
| Oberthur
Giesecke & Devrient
Johan Enschedé & Zn.
National Bank of Belgium
Österreichische Banknoten und Sicherheitsdruck
Setec Oy
}}

For other uses, see Euro (disambiguation) or EUR (disambiguation).

The euro (currency sign: ?; banking code: EUR) is the official currency of the European Union member states of Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain, also known as the Eurozone. It is the single currency for more than 300 million people in Europe.

The euro was introduced to world financial markets as an accounting currency in 1999 and launched as physical coins and banknotes in 2002. All EU member states are eligible to join if they comply with certain monetary requirements, and eventual use of the euro is mandatory for all new EU members.

The euro is managed and administered by the Frankfurt-based European Central Bank (ECB) and the European System of Central Banks (ESCB) (composed of the central banks of its member states). As an independent central bank, the ECB has sole authority to set monetary policy. The ESCB participates in the printing, minting and distribution of notes and coins in all member states, and the operation of the Eurozone payment systems.

Characteristics of the euro

Coins and banknotes

Main articles: euro coins, euro banknotes.

The euro is divided into 100 cents (sometimes referred to as eurocents). All euro coins (including the ?2 commemorative coins) have a common side showing the denomination (value) with the EU-countries in the background and a national side showing an image specifically chosen by the country that issued the coin.

The euro coins are ?2, ?1, 50c, 20c, 10c, 5c, 2c and 1c (known as tinies for their small size), though the latter two are not minted in Finland or the Netherlands (but are stilli likie bubbles legal tender). Some of the higher denominations, such as ?500 and ?200, are not issued in a few countries, though are legal tender.

The ECB has set up a clearing system for large euro transactions (TARGET). these are still domestic-based.

The currency sign ?

A special euro currency sign (?) was designed after a public survey had narrowed the original ten proposals down to two. The official story of the design history of the euro sign is disputed by Arthur Eisenmenger, a former chief graphic designer for the EEC, who claims to have created it as a generic symbol of Europe.

The glyph is (according to the European Commission) "a combination of the Greek epsilon, as a sign of the weight of European civilization; While the official recommendation is to place it before the number (contravening the general ISO recommendation to place unit symbol after the number citation needed), people in many countries have kept the placement of their former currencies.citation needed

Economic and Monetary Union

History (1990-2006)

Main article: Economic and Monetary Union of the European Union. For earlier monetary history in Europe, see: European Monetary System.

The euro was established by the provisions in the 1992 Maastricht Treaty on European Union that was used to establish an economic and monetary union. In order to participate in the new currency, member states had to meet strict criteria such as a budget deficit of less than three per cent of their GDP, a debt ratio of less than sixty per cent of GDP, low inflation, and interest rates close to the EU average.

Economists that helped create or contributed to the euro include Robert Mundell, Wim Duisenberg, Robert Tollison, Neil Dowling and Tommaso Padoa-Schioppa. (For macro-economic theory, see below.)

Due to differences in national conventions for rounding and significant digits, all conversion between the national currencies had to be carried out using the process of triangulation via the euro. The definitive values in euro of these subdivisions (which represent the exchange rates at which the currency entered the euro) are shown at right.

Currency	Abbr.	Rate	Fixed on
Austria}} Austrian schilling	ATS	13.7603	31/12/1998
Belgium}} Belgian franc	BEF	40.3399	31/12/1998
Netherlands}} Dutch gulden	NLG	2.20371	31/12/1998
Finland}} Finnish mark	FIM	5.94573	31/12/1998
France}} French franc	FRF	6.55957	31/12/1998
Germany}} German mark	DEM	1.95583	31/12/1998
Ireland}} Irish pound	IEP	0.787564	31/12/1998
Italy}} Italian lira	ITL	1936.27	31/12/1998
Luxembourg}} Luxembourg franc	LUF	40.3399	31/12/1998
Portugal}} Portuguese escudo	PTE	200.482	31/12/1998
Spain}} Spanish peseta	ESP	166.386	31/12/1998

Greece}} Greek drachma	GRD	340.750Greece failed to meet the criteria for joining initially, so it did not join the common currency on 1 January 1999. It was admitted two years later, on 1 January 2001, with a Greek drachma (GRD) exchange rate of 340.750.	19/06/2000

The rates were determined by the Council of the European Union, based on a recommendation from the European Commission based on the market rates on 31 December 1998, so that one ECU (European Currency Unit) would equal one euro. it was not a currency in its own right.) These rates were set by Council Regulation 2866/98 (EC), of 31 December 1998. They could not be set earlier, because the ECU depended on the closing exchange rate of the non-euro currencies (principally the pound sterling) that day.

The procedure used to fix the irrevocable conversion rate between the drachma and the euro was different, since the euro by then was already two years old. While the conversion rates for the initial eleven currencies were determined only hours before the euro was introduced, the conversion rate for the Greek drachma was fixed several months beforehand, in Council Regulation 1478/2000 (EC), of 19 June 2000.

The currency was introduced in non-physical form (travellers' cheques, electronic transfers, banking, etc.) at midnight on 1 January 1999, when the national currencies of participating countries (the Eurozone) ceased to exist independently in that their exchange rates were locked at fixed rates against each other, effectively making them mere non-decimal subdivisions of the euro. The euro thus became the successor to the European Currency Unit (ECU). The notes and coins for the old currencies, however, continued to be used as legal tender until new notes and coins were introduced on 1 January 2002.

The changeover period during which the former currencies' notes and coins were exchanged for those of the euro lasted about two months, until 28 February 2002. the mark officially ceased to be legal tender on 31 December 2001, though the exchange period lasted two months. The final date was 28 February 2002, by which all national currencies ceased to be legal tender in their respective member states. The earliest coins to become non-convertible were the Portuguese escudos, which ceased to have monetary value after 31 December 2002, although banknotes remain exchangeable until 2022.

Current Eurozone (2002-2006)

[[Image:European union emu map en.png|thumb|right|300px|

]]

The euro is the sole currency in Austria, Belgium, France, Finland, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. These 12 countries together are frequently referred to as the Eurozone or the euro area, or more informally "euroland" or the "eurogroup". The euro is also legal currency in the Eurozone overseas territories of French Guiana, Réunion, Saint-Pierre et Miquelon, Guadeloupe, Martinique and Mayotte.

By virtue of some bilateral agreements the European microstates of Monaco, San Marino, and Vatican City mint their own euro coins on behalf of the European Central Bank.

Andorra, Montenegro and Kosovo adopted the foreign euro as their legal currency for movement of capital and payments without participation in the ESCB or the right to mint coins. Andorra is in the process of entering a monetary agreement similar to Monaco, San Marino, and Vatican City.

Future prospects (2007-)

Pre-2004 EU members

From the launch of the euro in 1999 until the EU enlargement in 2004, Denmark, Sweden and the United Kingdom were the only EU member states outside the monetary union. all three have no clear roadmap for adopting the euro:

Sweden: According to the 1995 accession treaty, Sweden is required to join the euro and therefore must convert to the euro at some point. Notwithstanding this, on 14 September 2003, a consultative Swedish referendum was held on the euro, the result of which was 55.9% against adopting the common currency versus 42.0% in favour. Some of Sweden's major parties continue to believe that it would be in the national interest to join, but they have all pledged to abide by the results for the time being and show no interest in raising the issue again.

The United Kingdom's eurosceptics believe that the single currency is merely a stepping stone to the formation of a unified European superstate, and that removing United Kingdom's ability to set its own interest rates will have detrimental effects on its economy. An interesting parallel can be seen in the 19th century discussions concerning the possibility of the United Kingdom joining the Latin Monetary Union www.oup.co.uk/pdf/0-19-924366-2.pdf. Many British people also simply like Sterling as a currency as it is part of UK heritage. The UK government has set five economic tests that must be passed before it can recommend that the United Kingdom join the euro; In November 1999, in preparation for the introduction of the euro notes and coins across the eurozone, the European Central Bank announced as policy a total ban on the issuing of banknotes by entities that were not National Central Banks ('Legal Protection of Banknotes in the European Union Member States'). Unless a derogation could be negotiated by the UK as a condition of entering the eurozone, a change from Sterling to the euro would mean an immediate end to the circulation of Scottish and Northern Irish banknotes (see Sterling banknotes). The European Union has so far strongly resisted attempts to issue euro-equivalent notes by non-EU states unless steps are taken to enter into a suitable monetary agreement, including the adoption of EU banking and finance regulations (see Andorran euro coins).

Denmark negotiated a number of opt-out clauses from the Maastricht treaty after it had been rejected in a first referendum. On 28 September 2000, another referendum was held in Denmark regarding the euro resulting in a 53.2% vote against joining. In addition, Denmark has pegged its krone to the euro (?1 = DKr7.460,38 ± 2.25%) as the krone remains in the ERM.

Post-2004 EU members

In 2004 the 10 new EU member states had a currency other than the euro; however, those countries are required by their Accession Treaties to join the euro.
Some of the following countries have already joined the European Exchange Rate Mechanism, ERM II. They and the others have set themselves the goal to join the euro (EMU III) as follows:

Currency	Abbr.	Rate	Fixed in
Slovenia}} Slovenian tolar	SIT	239.640	2006-07-11
Currency	Abbr.	Rate	Conv goal
Cyprus}} Cypriot pound	CYP	0.585274	2008-01-01
Estonia}} Estonian kroon	EEK	15.6466	2008-01-01
Latvia}} Latvian lats	LVL	0.702804	2008-01-01
Malta}} Maltese lira	MTL	?	2008-01-01
Bulgaria}} Bulgarian lev	BGN	?	2009-01-01
Slovakia}} Slovak koruna	SKK	?	2009-01-01
Lithuania}} Lithuanian litas	LTL	3.4528	2009-01-01
Czech Republic}} Czech koruna	CZK	?	2010-
Hungary}} Hungarian forint	HUF	?	2010-
Poland}} Polish z?oty	PLN	?	2011-
Romania}} Romanian leu	RON	?	2011-

1 January 2007 for Slovenia.
1 January 2008 for Cyprus, Estonia, Latvia and Malta
1 January 2009 for Bulgaria, Slovakia and Lithuania
1 January 2010 for the Czech Republic.
2011 or later for Hungary, Poland and Romania

Too high an inflation rate postponed the entry of Lithuania as planned on 1 January 2007.

Estonia, Latvia, Lithuania, Malta, Slovakia and Slovenia have already finalised the design for the country's coins' obverse side.

Bulgaria and Romania are not yet members of the EU, but are scheduled to enter on January 1 2007.

Public opinion on secession from the euro

Although the failure of the European Constitution to be ratified would have no direct impact on the status of the euro, some debate regarding the euro arose after the negative outcome of the French and Dutch referenda in mid 2005.

A poll by Stern magazine released 1 June 2005 found that 56% of Germans would favour a return to the mark.www.stern.de/presse/vorab/?id=541124&q=eichel%20category:presse
Members of the Northern League northern Italian separatist political party have discussed calling a referendum to return Italy to the lira. washingtontimes.com/world/20050614-114629-8803r.htm
Members of the far-right nationalist Movement for France political party have proposed holding a referendum to return France to the Franc. news.scotsman.com/international.cfm?id=664902005
In contrast to Germany, a poll in Austria on 7 June 2005 showed the overwhelming support of the euro as 73% of the sample said they preferred to keep the common currency with only 21% in favour of returning to the old currency, the schilling. www.vienna.at/engine.aspx/page/vienna-article-detail-page/cn/vol-news-willie-20050607-011305/dc/tp:vol:oesterreich
Soon after these suggestions were made, the European Commission issued a statement denying any possibility of this, stating "the euro is here to stay". These criteria are often called the optimum currency area (OCA) criteria. Mundell formulated the idea that perfect capital and labour mobility would mitigate the adverse consequences of asymmetric shocks in a currency area. While capital is quite mobile in the Eurozone, labour mobility is relatively low, especially when compared to the U.S. and Japan.

Peter Kenen formulated the idea that widely diversified production and export structures that are similar between the areas that form the currency area lower the effect and probability of asymmetric shocks. The Eurozone scores quite well on this criterion, and monetary integration seems to further improve the diversification of production structures.

Ronald McKinnon formulated the idea that areas which are very open to trade and trade heavily with each other form an optimum currency area. This is because the high trade intensity will lower the significance of the distinction between domestic and foreign goods as competition will equalize the prices of most goods, independently of exchange rates. The Eurozone members trade heavily with each other (intra-European trade is greater than international trade), and all evidence so far seems to indicate that the monetary union has at least doubled trade between members.

The term "fiscal transfers" refers to the transfer of money between areas. In theory however there is a no-bail out clause in the Stability and Growth Pact, meaning that fiscal transfers are not allowed, but it's impossible to know what they will do in practice.

In general, economic research state that is impossible to say whether Eurozone members would benefit from a currency area, as two important criteria support a monetary union, while at the same time two important criteria oppose such an union.

Effects of a single currency

The introduction of a single currency for many separate countries presents a number of advantages and disadvantages for the participating nations.

Removal of exchange rate risk

One of the most important benefits of the euro will be lowered exchange rate risks, which will make it easier to invest across borders.

Removal of conversion fees

A benefit is the removal of bank transaction charges that previously were a cost to both individuals and businesses when exchanging from one national currency to another. credit cards, debit cards and cash machine withdrawals), banks in the Eurozone must now charge the same for intra-member cross-border transactions as they charge for domestic transactions. Banks in France have attempted to circumvent this regulation by charging for all bank transfers (domestic and cross-border) unless the transfer is instructed via online banking — par.societegenerale.fr/EIP/resources//static/tarifs/tarifs_juillet_06.pdf

Deeper financial markets

Another significant advantage of switching to the euro is the creation of deeper financial markets. National and corporate bonds denominated in euro are significantly more liquid and have lower interest rates than was historically the case when denominated in legacy currency. As the Eurozone has a single monetary policy and a single interest rate set by the ECB, it cannot be fine-tuned for the economic situation in each individual country. Public investment and fiscal policy in each country is thus the only way in which government-led economic stimulus can be introduced specific to each region or nation. This effect was already visible in the last European currency crises of 1992, when the Bundesbank was effectively coordinating monetary policy for the whole continent.

Some proponents of the euro point out that the Eurozone is similar in size and population to the United States, which has a single currency and a single monetary policy set by the Federal Reserve. Furthermore, Labour mobility is also much lower in the Eurozone than across the United States, largely due to the vast differences in language and culture between European nations despite labour, capital and goods full mobility rules.

A new reserve currency

The euro will probably become one of two, or perhaps three, major global reserve currencies. foreign reserves act as subsidy to the country minting the currency (see Seigniorage).

Euro and petroleum

The Eurozone consumes more imported petroleum than the U.S., meaning more euros than U.S. dollars would flow into the OPEC nations. In 2006, Iran announced its plans to open an International Oil Bourse for the express purpose of trading oil priced in other currencies, including petroeuros. If implemented by OPEC, the changeover to the euro would be a transfer of a 'float' that presently subsidises the United States to subsidise the European Union instead.

Criticism

Some European nationalist parties oppose the euro as part of a more general opposition to the principle of a European union. The more significant of these include the members of the Independence and Democracy bloc in the European Parliament and the Conservative Party (UK). Additionally the Green Party (UK) is opposed for anti-globalisation reasons but their analysis is not shared by rest of the European Green Party bloc in the European Parliament.

Euro exchange rate

Flexible exchange rates

The ECB targets interest rates rather than exchange rates and in general does not intervene on the foreign exchange rate markets, because of the implications of the Mundell-Fleming Model, being the fact that a central bank can not maintain an interest rate target and an exchange rate target simultaneously, as increasing the money supply would result in a depreciation of the currency. In the years following the Single European Act, the EU has liberalized its capital markets, and as the ECB has chosen for monetary autonomy, the exchange rate regime of the euro is flexible, or floating. on 26 October 2000, it fell to an all time low of $0.8228 per euro. It declined again, although less than previously, reaching a low of $0.8344 on 6 July 2001 before commencing a steady appreciation. The two currencies reached parity on 15 July 2002, and by the end of 2002 the euro had reached $1.04 as it climbed further.

On 23 May 2003, the euro surpassed its initial ($1.18=?1.00) trading value for the first time. The fast increase in U.S. interest rates during 2005 had much to do with this trend.

By mid-2006, the euro had risen to $1.28.

Currencies pegged to the euro

There are a number of foreign currencies that were pegged to a European currency and are now currencies related to the euro: the Cape Verdean escudo, the Bosnia and Herzegovina convertible mark, the Bulgarian lev, the CFP franc, the CFA franc and the Comorian franc.

In total, the euro is the official currency in 15 states and territories outside the European Union.

Drivers

Part of the euro's strength in the period 2001-2004 was thought to be due to more attractive interest rates in Europe than in the United States. The U.S. Federal Reserve had maintained lower rates than the ECB for these years, despite key European economies, notably Germany, growing relatively slowly or not at all.

However, although the interest rate differential formed part of the backdrop, the main a posteriori justification for the euro's continuing ascent against the dollar was the concern over the huge unsustainable U.S. current account deficits. The U.S. budget deficit is about $427 billion, or 3.7% of gross domestic product (GDP), while the current account—the broadest trade measure since it adds investment flows—hit a record $166.18bn shortfall in the second quarter of 2004.

A key factor is that a number of Asian currencies are rising less against the dollar than is the euro. In the case of China, the renminbi was until recently pegged against the dollar, whilst the Japanese yen is supported by intervention (and the threat of it) by the Bank of Japan. In the time between 1999 and 2002, eurosceptics believed that the weak euro was a sign that the euro experiment was doomed to fail.

Another factor in the early decline of the euro was that many investors and central banks sold large portions of their legacy (national) currency holdings once the irrevocable exchange rates were set, as the goal of holding multiple currencies is to dampen losses when one currency falls. Once the exchange rates between Eurozone countries were pegged against each other, holdings in German mark and French francs (for example) became identical. Furthermore, the declining dollar makes foreign investment in the U.S. cheaper (although also reducing the return), so that continuing foreign investment may underpin the dollar to some extent.

The role of the U.S. dollar as the world's de facto reserve currency helps support both the U.S. dollar and the U.S. budget deficit — or the U.S. will have to raise interest rates, which would reduce economic growth.

The euro is emerging as a possible alternative reserve currency; Saddam Hussein's Iraq switched its currency reserves from U.S. dollars to euros in 2000. Moves by central banks with major reserve currency holdings such as those of India, China or OPEC countries to switch the currency they trade in from U.S. dollars to euros, may further reinforce the U.S. dollar's decline. In 2004, the Bank for International Settlements reported the proportion of bank deposits held in euros rising to 20%, from 12% in 2001, and it is continuously rising.

Name and linguistic issues

Several linguistic issues have arisen in relation to the spelling of the words euro and cent in the many languages of the member states of the European Union, as well as in relation to grammar and the formation of plurals. -->

Trivia

On 1 January 2002, the first purchase involving euros occurred on Réunion island when officials bought a bag of lychees at a market.

Although there have been other currencies predating the euro that were specifically designed in similar ways (different sizes, colours, and ridges) to aid the visually impaired, the introduction of the euro constitutes the first time that authorities have consulted associations representing the blind before, rather than after, the release of the currency.fact

Notes

References

Baldwin, Richard and Charles Wyplosz, The Economics of European Integration, New York: McGraw Hill, 2004.
European Commission, High Level Task Force on Skills and Mobility - Final Report, 14 December 2001.

Inline references

Chronology

Key Dates:
1987: Disney signs a contract with Jacques Chirac to build a theme park in Paris.
1992: Euro Disneyland opens.
1993: The company faces bankruptcy with losses of FFr 5 billion and debts of over FFr 21 billion.
1994: Saudi Prince Alwaleed purchases a stake in the firm; the park's name is changed to Disneyland Paris.
1996: The company secures profits for the second consecutive year.
2002: The Walt Disney Studios theme park opens.
2003: Euro Disney faces bankruptcy.

Additional topics

Company HistoryRecreation

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