It is much simpler to forecast the conduct of foreign trade businesses because the exporters and importers doing business in the euro zone will, naturally, have to settle accounts in euros. Those doing business in the dollar zone are likely to make payments in dollars. During the first ten moths of last year, the most Ukraine’s exports went to Russia – 23.4 percent of all the exports, Turkey (6.1 percent), Italy (5.1 percent), Germany (4.3 percent), China (3.6 percent), the U.S. (3.7 percent), Poland (3 percent). The most imports to Ukraine came from Russia (37.3 percent), Turkmenistan (10.2 percent), Germany (8.5 percent), Kazakhstan (4.5 percent), Belarus, the U.S. and Poland (2.8 percent each). In fact, these data show certain dependence of Ukraine from Russia’s attitude to the euro. Experts forecast that Russia would activate foreign trade with the European Union after the introduction of the euro. Note of ForUm: The aim to introduce a single currency was set as far back as in 1969 in the Hague, and the new currency was supposed to be put in circulation in 1980. But, the world financial crisis in 1971 hindered this process. However, in 1979 the European currency system was created, and on Jan. 1, 1999 the Economic and Currency Union was established.
Presently 12 European countries are in the euro zone. They are: Germany, France, the Netherlands, Luxemburg, Austria, Ireland, Finland, Spain, Portugal, Greece, Belgium and Italy (the last two countries were put on the list with some reservations). Denmark, Great Britain and Sweden do not belong to the euro zone. Putting the euro in circulation is considered to be the most grandiose project of the XX century, which is likely to have global economic and political consequences. The euro zone on the European continent includes more than 300,000 people, 20 percent of the world GDP and international trade.
In my view, Ukraine is prepared for the euro even better than Russia. Firstly, our banking system already operates on the euro basis as far as forming the authorized fund and other procedures. Secondly, we have prospects for increasing our foreign trade with Europe, taking into account the complicated trade relations with the U.S. I do not think that the present optimistic forecasts that the euro will defeat the dollar this year will come true, because there is a purely psychological side to the euro entering our monetary market. The euro boom is likely to subside by next summer, and by late 2002 the currency exchange rates are likely to be balanced. People are still cautious about the new currency, and the propaganda is for the cautious policy. But by the end of the year the people are sure to have more confidence in the new currency in the background of the euro and dollar stability, but the euro is likely to be more attractive due to the regional specifics of the trade relations with Europe. I believe that the euro will gain most confidence not this year and not next year, but approximately in 2005. An increase in the euro circulation in Russia will play the key role in it. Because we are tied with close trade relations, the Russian factor will be prevailing for us from the viewpoint of final domination of the euro. On the whole, it seems that during the next few years the euro will oust the dollar both from the shadow economy and official circulation.
The population will have trust in the euro, but not at once. Because of specific mentality and psychological peculiarities, the dollar is more common hard currency for the Ukrainian citizens, and the value of many things, for example household things, has much to do with the dollar. It is somewhat difficult from the psychological point of view to divide the dollar by 0.9, which is the ratio between the dollar and euro. But it is sure to happen in a couple of years. As for the influence of the euro on the Ukrainian businesses, to my mind, bad competition is always better than a bad monopoly. So, the monopoly of the dollar as the global currency unit is much worse than the appearance of another global center, which is now the European Union. Anyway, if we take the dollar zone, it is 250 million people, while the euro zone today embraces 320 million people. Even according to these quantitative parameters these are quite comparable units. I do not think that the EU lags behind the U.S. as far as the economic power is concerned. Ukraine’s neighbors will enter the euro zone in the near future, and I believe that it is our strategic course for the future. Cash euros are sure to have an impact on the NBU policies, but this is an evolutionary process. While earlier all the contracts were concluded in dollars, and all the profits were calculated in dollars, this process will now undergo certain changes. If a foreign trade contract provides for payments in euros (trading with Europe for dollars is pointless now), euros will be offered on inter-bank markets, and the NBU will buy euros to regulate the exchange rates etc. The state will not convert the assets into euros deliberately, but as time passes some assets will be converted into the euro.
As far as Ukraine’s commercial circles are concerned, they mainly prefer the American dollar whose part is about four fifths in settling all foreign trade accounts. Taking into account the priority of Ukraine’s integration into Europe, I think that gradually the euro will play a more considerable role in settling those accounts. The more so, the euro, unlike the dollar, is a collective currency, and Europe is one of the major export markets for Ukraine today. At the same time, I do not see any revolutionary changes here, as the American economy still plays the role of a technological leader and is the major economy in the global economic environment and determines the tendencies of further development in the world. So, I think that it is a gradual and long-term process. The NBU also may show some signs of changes. Up to now the NBU set the currency exchange rates, proceeding from the U.S. dollar value. Carrying out a more flexible monetary policy taking into consideration the changes of the dollar, euro and ruble rates would be a wise thing to do. As for the population, the situation is different here. The dollar is the means of savings. I do not see any reason why this approach should change in a short time. Naturally, the disappearance of the national currencies will compel people to buy euros. But everybody knows that among those national currencies only the Deutsch mark played a more or less important role in accumulating people’s savings. The other European currencies were rare in Ukraine. I think that the situation with the euro will change very soon. At any rate, as long as Ukraine does not regulate its citizens’ job placement in the EU, I do not think that the currency situation will change very quickly.
Euro will beat the dollar not only in Ukraine, but the world over. Because the US dollar is not based on gold and the mass of commodities. This is an empty currency upholding America’s hegemony. It is the dollar’s current function. Of course, any country willing somehow to protect its independence, its interests will try to get rid of the dollars. Europe has come to be the first. And I welcome the introduction of euro. I will do the utmost for integration between Russia, Belarus and Ukraine to bring about the creation of a common currency for interstate settlements. The currency that would enable our countries to oust the dollar. We must settle interstate accounts in this new currency, and inside the country - only in the national. No dollar or any other exchange should reign in our state.
The euro has rather good prospects both in the international and Ukrainian market. In Ukraine it will replace the Deutschemark, as the Deutsche Bank has assumed the key functions of supporting that currency. Yet, the euro will be a little bit weaker than the mark under the pressure of many political factors, which will get settled with time. The euro will be somewhat more stable than the hryvnia or ruble. Yet, the Ukrainian business will continue using the dollar as the basic currency. This is quite objective, since the main goods turnover in Ukraine and the main transactions in foreign economic contacts still have a dollar equivalent. So, the dollar will yet long exist in Ukraine. The Ukrainian business is still based on contracts with the USA, Africa and Asia. Even in contacts with Russia, dollar operations prevail.