The euro's introduction and impact on Bulgarian companies

Currencies Effects on Global Market

Recession and its Impact on Global Economy

Overview and Update on the Implementation of the Euro

The euro was introduced on the 1st of January 1999 to become the national currency of eleven state members. Its introduction lead to the transformation of national currencies into euros; foreign operations between the eleven countries begun to be carried out in euros; the new public debt would be issued in euros and the old public debt would be converted from the former currency into euros; all financial markets in the member states would issues their stocks and bonds in euros and the former national currencies would become denominations of the euro, to be completely eliminated by 2002.

The euro is the official currency of the European Union and it is predominantly used within the Eurozone, formed today from a total of fifteen countries which have adopted it as their national currency (Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Holland, Ireland, Italy, Luxembourg, Malta, Portugal, Slovenia and Spain). "The euro is the single currency shared by (currently) 15 of the European Union's Member States, which together make up the euro area. The introduction of the euro in 1999 was a major step in European integration. It has also been one of its major successes: around 320 million EU citizens now use it as their currency and enjoy its benefits, which will spread even more widely as other EU countries adopt the euro"

Relative to the United States Dollar, the euro has suffered significant valuations. Introduced at an exchange rate of 1.16740 dollars per one euro, the currencies are now exchanged at 1.5861 dollars per one euro. The forecasts see that the difference between the two currencies will decrease and that by February 2009, a euro will be exchanged for 1.456 dollars.

3. Opportunities of the Euro upon Bulgarian Companies

The creation of the European Union alongside with its currency lead to a territorial expansion of the business practices. Once Bulgaria adhered to the EU and became a member with full rights, numerous investors from wealthier countries of the EU became interested in the Bulgarian capabilities and resources. As a result, euros began to pour and to finance several investments. As a result, the Bulgarian entrepreneurs gained increased access to financial resources. But the capital was not the single commodity introduced. The foreign investors also brought in specialized assistance and various high technologies, which eased the operational processes within Bulgarian companies and made the more efficient; ergo, the gains registered by the Bulgarian companies manifested in capital inflows. (the capital inflows however had not always generated the desired outcome, as they only put more pressure on inflation and demanded more restrictions and price increases)

The European currency also meant increased access to financial resources for the general population, which was now able to contract credits in euros at smaller interest rates. However the benefits had only been available on the short run and for a limited period, the Bulgarian population had registered increased living standards. As a result, their demands increased and their purchasing behaviours changed. This basically materialized in increased consumerism, which once again benefited the Bulgarian companies, which found it easier to sell large quantities of the manufactured products.

Aside from the capital inflows received from the wealthy investors, the euros also came from the European Union itself. This money is then used to finance small and medium size organizations. They are also offered to the population directly through loans or social programs, but also through improvements in the healthcare system, the educational system, communications and so on. All these once again to increases in living standards, and increased consumerism, to materialize in increased sales.

4. Recommendations for National Policy and Bulgarian Companies

In order to best cope with the future adoption of the euro as a national currency, the government should consider the following:

they should continue to implement regulations to reducing inflations the regulations must not suffocate the Bulgarian population through excessive price increases and increase interest rates on loans the adoption should be delayed beyond 2012 if the country is not prepared the government should support the development of the national industries (could even offer subsidies) and should encourage exports; this would ensure a strengthening of the national product and a valuation of the lev, making the transition to the euro easier

In the economic background, companies should do the following:

limit the risky operations as much as possible and rely predominantly on the current operations that retrieve a steady and reliable income conduct intensive financial analysis on both national and international markets before launching a new venture or making a strategic decision try to economize rather than invest, at least until the economic and political contexts stabilize thy to limit the contracting of loans

All in all, prudence should be the basic principle behind all actions, be them of political or economic nature.