|Policy of||European Union|
|Established||1 January 1999|
|Group president||Paschal Donohoe|
|Issuing authority||European Central Bank|
|ECB president||Christine Lagarde|
|GDP (Nominal)||$12.712 trillion|
|Trade balance||€362 billion trade surplus|
|This article is part of a series on the|
politics and government of
the European Union
The eurozone, officially called the euro area,is a monetary union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender. The monetary authority of the eurozone is the Eurosystem. Eight members of the European Union continue to use their own national currencies, although most of them will be obliged to adopt the euro in the future.
The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. Other EU states (except for Denmark) are obliged to join once they meet the criteria to do so.No state has left, and there are no provisions to do so or to be expelled. Andorra, Monaco, San Marino, and Vatican City have formal agreements with the EU to use the euro as their official currency and issue their own coins. Kosovo and Montenegro have adopted the euro unilaterally, but these countries do not officially form part of the eurozone and do not have representation in the European Central Bank (ECB) or in the Eurogroup.
The ECB, which is governed by a president and a board of the heads of national central banks, sets the monetary policy of the zone. The principal task of the ECB is to keep inflation under control. Though there is no common representation, governance or fiscal policy for the currency union, some co-operation does take place through the Eurogroup, which makes political decisions regarding the eurozone and the euro. The Eurogroup is composed of the finance ministers of eurozone states, but in emergencies, national leaders also form the Eurogroup.
Since the financial crisis of 2007–2008, the eurozone has established and used provisions for granting emergency loans to member states in return for enacting economic reforms.[ citation needed ] The eurozone has also enacted some limited fiscal integration: for example, in peer review of each other's national budgets. The issue is political and in a state of flux in terms of what further provisions will be agreed for eurozone change.
In 1998, eleven member states of the European Union had met the euro convergence criteria, and the eurozone came into existence with the official launch of the euro (alongside national currencies) on 1 January 1999. Greece qualified in 2000, and was admitted on 1 January 2001 before physical notes and coins were introduced on 1 January 2002, replacing all national currencies. Between 2007 and 2015, seven new states acceded.
|Nominal GNI |
|Relative GNI |
of total, nominal
| GNI per|
|France||1999-01-01||67,028,048||2,846,910||22.41%||42,960||Franc|| New Caledonia |
Wallis and Futuna
Three of the dependent territories of EU member states not part of the EU have adopted the euro:
The euro is also used in countries outside the EU. Four states – Andorra, Monaco, San Marino, and Vatican City —have signed formal agreements with the EU to use the euro and issue their own coins. Nevertheless, they are not considered part of the eurozone by the ECB and do not have a seat in the ECB or Euro Group.
Akrotiri and Dhekelia (located on the island of Cyprus) belongs to the United Kingdom, but there are agreements between the UK and Cyprus and between UK and EU about their partial integration with Cyprus and partial adoption of Cypriot law, including the usage of euro in Akrotiri and Dekhelia.
Several currencies are pegged to the euro, some of them with a fluctuation band and others with an exact rate. For example, the West African and Central African CFA francs are pegged exactly at 655.957 CFA to 1 EUR. In 1998, in anticipation of Economic and Monetary Union of the European Union, the Council of the European Union addressed the monetary agreements France had with the CFA Zone and Comoros and ruled that the ECB had no obligation towards the convertibility of the CFA and Comorian francs. The responsibility of the free convertibility remained in the French Treasury.
Kosovo*and Montenegro officially adopted the euro as their sole currency without an agreement and, therefore, have no issuing rights. These states are not considered part of the eurozone by the ECB. However, sometimes the term eurozone is applied to all territories that have adopted the euro as their sole currency. Further unilateral adoption of the euro (euroisation), by both non-euro EU and non-EU members, is opposed by the ECB and EU.
The chart below provides a full summary of all applying exchange-rate regimes for EU members, since the European Monetary System with its Exchange Rate Mechanism and the related new common currency ECU was born on 13 March 1979. The euro replaced the ECU 1:1 at the exchange rate markets, on 1 January 1999. During 1979–1999, the D-Mark functioned as a de facto anchor for the ECU, meaning there was only a minor difference between pegging a currency against ECU and pegging it against the D-mark.
Sources: EC convergence reports 1996-2014, Italian lira [ dead link ], Spanish peseta, Portuguese escudo, Finnish markka, Greek drachma, UK pound
The eurozone was born with its first 11 member states on 1 January 1999. The first enlargement of the eurozone, to Greece, took place on 1 January 2001, one year before the euro had physically entered into circulation. The next enlargements were to states which joined the EU in 2004, and then joined the eurozone on 1 January in the year noted: Slovenia (2007), Cyprus (2008), Malta (2008), Slovakia (2009), Estonia (2011), Latvia (2014), and Lithuania (2015).
All new EU members joining the bloc after the signing of the Maastricht Treaty in 1992 are obliged to adopt the euro under the terms of their accession treaties. However, the last of the five economic convergence criteria which need first to be complied with in order to qualify for euro adoption, is the exchange rate stability criterion, which requires having been an ERM-member for a minimum of two years without the presence of "severe tensions" for the currency exchange rate.
In September 2011, a diplomatic source close to the euro adoption preparation talks with the seven remaining new member states who had yet to adopt the euro (Bulgaria, Czech Republic, Hungary, Latvia, Lithuania, Poland and Romania), claimed that the monetary union (eurozone) they had thought they were going to join upon their signing of the accession treaty may very well end up being a very different union entailing much closer fiscal, economic and political convergence. This changed legal status of the eurozone could potentially cause them to conclude that the conditions for their promise to join were no longer valid, which "could force them to stage new referendums" on euro adoption.
|Country||Old unit||Exchange rate|
(Euro in units of old currency)
|Spain, Andorra||Spanish peseta||166.386||1999|
|France, Monaco, Andorra||French franc||6.55957||1999|
|Italy, San Marino, Vatican City||Italian lira||1936.27||1999|
Eight countries (Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, and Sweden) are EU members but do not use the euro. Before joining the eurozone, a state must spend at least two years in the European Exchange Rate Mechanism (ERM II). As of September 2020, the Danish central bank, Bulgarian central bank, and Croatian central bank participate in ERM II.
Denmark obtained a special opt-out in the original Maastricht Treaty, and thus is legally exempt from joining the eurozone unless its government decides otherwise, either by parliamentary vote or referendum. The United Kingdom likewise had an opt-out prior to withdrawing from the EU in 2020.
The remaining seven countries are obliged to adopt the euro in future, although the EU has so far not tried to enforce any time plan. They should join as soon as they fulfill the convergence criteria, which include being part of ERM II for two years. Sweden, which joined the EU in 1995 after the Maastricht Treaty was signed, is required to join the eurozone. However, the Swedish people turned down euro adoption in a 2003 referendum and since then the country has intentionally avoided fulfilling the adoption requirements by not joining ERM II, which is voluntary.Bulgaria and Croatia joined ERM II on 10 July 2020.
Interest in joining the eurozone increased in Denmark, and initially in Poland, as a result of the 2008 financial crisis. In Iceland, there was an increase in interest in joining the European Union, a pre-condition for adopting the euro.However, by 2010 the debt crisis in the eurozone caused interest from Poland, as well as the Czech Republic, to cool.
In the opinion of journalist Leigh Phillips and Locke Lord's Charles Proctor,there is no provision in any European Union treaty for an exit from the eurozone. In fact, they argued, the Treaties make it clear that the process of monetary union was intended to be "irreversible" and "irrevocable". However, in 2009, a European Central Bank legal study argued that, while voluntary withdrawal is legally not possible, expulsion remains "conceivable." Although an explicit provision for an exit option does not exist, many experts and politicians in Europe, have suggested an option to leave the Eurozone should be included in the relevant treaties.
On the issue of leaving the eurozone, the European Commission has stated that "[t]he irrevocability of membership in the euro area is an integral part of the Treaty framework and the Commission, as a guardian of the EU Treaties, intends to fully respect [that irrevocability]."It added that it "does not intend to propose [any] amendment" to the relevant Treaties, the current status being "the best way going forward to increase the resilience of euro area Member States to potential economic and financial crises. The European Central Bank, responding to a question by a Member of the European Parliament, has stated that an exit is not allowed under the Treaties.
Likewise there is no provision for a state to be expelled from the euro.Some, however, including the Dutch government, favour the creation of an expulsion provision for the case whereby a heavily indebted state in the eurozone refuses to comply with an EU economic reform policy.
In a Texas law journal, University of Texas at Austin law professor Jens Dammann has argued that even now EU law contains an implicit right for member states to leave the Eurozone if they no longer meet the criteria that they had to meet in order to join it.Furthermore, he has suggested that, under narrow circumstances, the European Union can expel member states from the eurozone.
University of California, Berkeley professor of Economics and Political Science Barry Eichengreen, argued in 2007 that "Europe’s leap to monetary union was a mistake...compounded by...including [in the union] also...Italy, Spain, Portugal and Greece," and that "although a breakup was not impossible...it was unlikely," given the technical, political and above all economic obstacles. "On the first minute that word got out," Eisengreen argued, "that the [Greek] government was discussing the possibility [of a Grexit] investors would sell their Greek stocks and bonds" and there "would be a full-fledged financial panic... a full-out bank run."In 2011, he still believed the probability of Grexit was "very low" and in case of any bank run "the Greek government would almost certainly receive support for its banks from its European Union partners and the European Central Bank, because, in his view, more financial crises in other European countries are... the last thing that German business wants." As he put it, "the German economic miracle of the last ten years can be summed up in one word: exports. And the country’s export competitiveness has been greatly enhanced by a euro exchange rate that has been kept down at reasonable levels by the fact that Germany shares the currency with other weaker economies."
In Greece's case, one additional obstacle presented by analysts is that if Greece were to replace the euro with a new national currency, this would not be possible to achieve quickly enough. Paper banknotes must be printed and coins minted, which would take about "six months."The changeover, according to a blogger in The Economist , would likely require bank deposits to be converted from euros to the new currency and this prospect could lead to money leaving the country as well as Greek residents withdrawing cash from the banks, causing a bank run and necessitating capital controls. This was not only a blogger statement, as Greece actually had tendencies of bank runs, and capital controls were in effect, without any decision of withdrawal, only media rumours of it.
The monetary policy of all countries in the eurozone is managed by the European Central Bank (ECB) and the Eurosystem which comprises the ECB and the central banks of the EU states who have joined the eurozone. Countries outside the eurozone are not represented in these institutions. Whereas all EU member states are part of the European System of Central Banks (ESCB), non EU member states have no say in all three institutions, even those with monetary agreements such as Monaco. The ECB is entitled to authorise the design and printing of euro banknotes and the volume of euro coins minted, and its president is currently Christine Lagarde.
The eurozone is represented politically by its finance ministers, known collectively as the Eurogroup, and is presided over by a president, currently Paschal Donohoe. The finance ministers of the EU member states that use the euro meet a day before a meeting of the Economic and Financial Affairs Council (Ecofin) of the Council of the European Union. The Group is not an official Council formation but when the full EcoFin council votes on matters only affecting the eurozone, only Euro Group members are permitted to vote on it.
Since the global financial crisis of 2007–2008, the Euro Group has met irregularly not as finance ministers, but as heads of state and government (like the European Council). It is in this forum, the Euro summit, that many eurozone reforms have been decided upon. In 2011, former French President Nicolas Sarkozy pushed for these summits to become regular and twice a year in order for it to be a 'true economic government'.
In April 2008 in Brussels, European Commission President Jean-Claude Juncker suggested that the eurozone should be represented at the IMF as a bloc, rather than each member state separately: "It is absurd for those 15 countries not to agree to have a single representation at the IMF. It makes us look absolutely ridiculous. We are regarded as buffoons on the international scene".In 2017 Juncker stated that he aims to have this agreed by the end of his mandate in 2019. However, Finance Commissioner Joaquín Almunia stated that before there is common representation, a common political agenda should be agreed upon.
Leading EU figures including the commission and national governments have proposed a variety of reforms to the eurozone's architecture; notably the creation of a Finance Minister, a larger eurozone budget, and reform of the current bailout mechanisms into either a "European Monetary Fund" or a eurozone Treasury. While many have similar themes, details vary greatly.
|United States||328 million||$20.8 trillion|
|China||1400 million||$14.9 trillion|
|Eurozone||342 million||$12.7 trillion|
Nominal GDP (billions in USD) - Peak year as of 2020
|(01) United States (Peak in 2019)|
|(02) China (Peak in 2020)|
|(03) Eurozone (Peak in 2008)|
|(04) Japan (Peak in 2012)|
|(05) United Kingdom (Peak in 2007)|
|(06) India (Peak in 2019)|
|(07) Brazil (Peak in 2011)|
|(08) Russia (Peak in 2013)|
|(09) Canada (Peak in 2013)|
|(10) Korea (Peak in 2018)|
|(11) Australia (Peak in 2012)|
|(12) Mexico (Peak in 2014)|
|(13) Indonesia (Peak in 2019)|
|(14) Turkey (Peak in 2013)|
|(15) Saudi Arabia (Peak in 2018)|
|(16) Switzerland (Peak in 2019)|
|(17) Argentina (Peak in 2017)|
|(18) Taiwan (Peak in 2020)|
|(19) Poland (Peak in 2018)|
|(20) Sweden (Peak in 2013)|
The 20 largest economies in the world including Eurozone as a single entity, by Nominal GDP (2020) at their peak level of GDP in billions US$. The values for EU members that are not also eurozone members are listed both separately and as part of the EU.
HICP figures from the ECB, taken from May of each year:
Interest rates for the eurozone, set by the ECB since 1999. Levels are in percentages per annum. Between June 2000 and October 2008, the main refinancing operations were variable rate tenders, as opposed to fixed rate tenders. The figures indicated in the table from 2000 to 2008 refer to the minimum interest rate at which counterparties may place their bids.
The following table states the ratio of public debt to GDP in percent for eurozone countries given by EuroStat.The euro convergence criterion is 60%.
The primary means for fiscal coordination within the EU lies in the Broad Economic Policy Guidelines which are written for every member state, but with particular reference to the 19 current members of the eurozone. These guidelines are not binding, but are intended to represent policy coordination among the EU member states, so as to take into account the linked structures of their economies.
For their mutual assurance and stability of the currency, members of the eurozone have to respect the Stability and Growth Pact, which sets agreed limits on deficits and national debt, with associated sanctions for deviation. The Pact originally set a limit of 3% of GDP for the yearly deficit of all eurozone member states; with fines for any state which exceeded this amount. In 2005, Portugal, Germany, and France had all exceeded this amount, but the Council of Ministers had not voted to fine those states. Subsequently, reforms were adopted to provide more flexibility and ensure that the deficit criteria took into account the economic conditions of the member states, and additional factors.
The Fiscal Compact(formally, the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union), is an intergovernmental treaty introduced as a new stricter version of the Stability and Growth Pact, signed on 2 March 2012 by all member states of the European Union (EU), except the Czech Republic, the United Kingdom, and Croatia (subsequently acceding the EU in July 2013). The treaty entered into force on 1 January 2013 for the 16 states which completed ratification prior of this date. As of 1 April 2014, it had been ratified and entered into force for all 25 signatories.
Olivier Blanchard suggests that a fiscal union in the EZ can mitigate devastating effects of the single currency on the EZ peripheral countries. But he adds that the currency bloc will not work perfectly even if a fiscal transfer system is built, because, he argues, the fundamental issue about competitiveness adjustment is not tackled. The problem is, since the EZ peripheral countries do not have their own currencies, they are forced to adjust their economies by decreasing their wages instead of devaluation.
The financial crisis of 2007–2008 prompted a number of reforms in the eurozone. One was a U-turn on the eurozone's bailout policy that led to the creation of a specific fund to assist eurozone states in trouble. The European Financial Stability Facility (EFSF) and the European Financial Stability Mechanism (EFSM) were created in 2010 to provide, alongside the International Monetary Fund (IMF), a system and fund to bail out members. However the EFSF and EFSM were temporary, small and lacked a basis in the EU treaties. Therefore, it was agreed in 2011 to establish a European Stability Mechanism (ESM) which would be much larger, funded only by eurozone states (not the EU as a whole as the EFSF/EFSM were) and would have a permanent treaty basis. As a result of that its creation involved agreeing an amendment to TEFU Article 136 allowing for the ESM and a new ESM treaty to detail how the ESM would operate. If both are successfully ratified according to schedule, the ESM would be operational by the time the EFSF/EFSM expire in mid-2013.
In February 2016, the UK secured further confirmation that countries that do not use the Euro would not be required to contribute to bailouts for Eurozone countries.
In June 2010, a broad agreement was finally reached on a controversial proposal for member states to peer review each other's budgets prior to their presentation to national parliaments. Although showing the entire budget to each other was opposed by Germany, Sweden and the UK, each government would present to their peers and the Commission their estimates for growth, inflation, revenue and expenditure levels six months before they go to national parliaments. If a country was to run a deficit, they would have to justify it to the rest of the EU while countries with a debt more than 60% of GDP would face greater scrutiny.
The plans would apply to all EU members, not just the eurozone, and have to be approved by EU leaders along with proposals for states to face sanctions before they reach the 3% limit in the Stability and Growth Pact. Poland has criticised the idea of withholding regional funding for those who break the deficit limits, as that would only impact the poorer states.In June 2010 France agreed to back Germany's plan for suspending the voting rights of members who breach the rules. In March 2011 was initiated a new reform of the Stability and Growth Pact aiming at straightening the rules by adopting an automatic procedure for imposing of penalties in case of breaches of either the deficit or the debt rules.
Nobel prize-winning economist James Tobin thought that the euro project would not succeed without making drastic changes to European institutions, pointing out the difference between the US and the eurozone.Concerning monetary policies, the US central bank FRB aims at both growth and reducing unemployment, while the ECB tends to give its first priority to price stability under the Bundesbank's supervision. As the price level of the currency bloc is kept low, the unemployment level of the region has become higher than that of US since 1982.
When it comes to fiscal policies, 12 percent of the US federal budget is used for transfers to states and local governments. Also, when a state has financial or economic difficulties, a fair amount of money is automatically transferred to the state. The US government does not impose restrictions on state budget policies. This is different from the fiscal policies of the eurozone, where Treaty of Maastricht requires each eurozone member country to run its budget deficit smaller than 3 percent of its GDP.
In February 2019, a study from the Centre for European Policy concluded that while some countries had gained from adopting the euro, several countries were poorer than they would have been had they not adopted it, with France and Italy being particularly affected. The authors argued that this was down to its effect on competitiveness; usually countries would devalue their currencies to make their exports cheaper on the world market but this was not possible due to the common currency.
In 1997, Arnulf Baring expressed concern that the European Monetary Union would make Germans the most hated people in Europe. Baring suspected the possibility that the people in Mediterranean countries would regard Germans and the currency bloc as economic policemen.
The European Exchange Rate Mechanism (ERM) II is a system introduced by the European Economic Community on 1 January 1999 alongside the introduction of a single currency, the euro as part of the European Monetary System (EMS), to reduce exchange rate variability and achieve monetary stability in Europe.
The euro convergence criteria are the criteria which European Union member states are required to meet to enter the third stage of the Economic and Monetary Union (EMU) and adopt the euro as their currency. The four main criteria, which actually comprise five criteria as the "fiscal criterion" consists of both a "debt criterion" and a "deficit criterion", are based on Article 140 of the Treaty on the Functioning of the European Union.
Lithuania is an EU member state which joined the Eurozone by adopting the euro on 1 January 2015.
The Czech Republic is bound to adopt the euro in the future and to join the eurozone once it has satisfied the euro convergence criteria by the Treaty of Accession since it joined the European Union (EU) in 2004. The Czech Republic is therefore a candidate for the enlargement of the eurozone and it uses the Czech koruna as its currency, regulated by the Czech National Bank, a member of the European System of Central Banks, and does not participate in European Exchange Rate Mechanism II.
While the Hungarian government has been planning since 2003 to replace the Hungarian forint with the euro, as of 2014, there is no target date and the forint is not part of the European Exchange Rate Mechanism. An economic study in 2008 found that the adoption of the euro would increase foreign investment in Hungary by 30%, although current governor of the Hungarian National Bank (MNB) and former Minister of the National Economy György Matolcsy said they did not want to give up the country's independence regarding corporate tax matters.
Latvia replaced its previous currency, the lats, with the euro on 1 January 2014, after a European Union (EU) assessment in June 2013 asserted that the country had met all convergence criteria necessary for euro adoption. The adoption process began 1 May 2004, when Latvia joined the European Union, entering the EU's Economic and Monetary Union. At the start of 2005, the lats was pegged to the euro at Ls 0.702804 = €1, and Latvia joined the European Exchange Rate Mechanism, four months later on 2 May 2005.
Poland does not use the euro as its currency. However, under the terms of their Treaty of Accession with the European Union, all new Member States "shall participate in the Economic and Monetary Union from the date of accession as a Member State with a derogation", which means that Poland is obliged to eventually replace its currency, the złoty, with the euro.
Bulgaria committed to switching its currency, the lev, to the euro upon its joining the European Union in 2007, as stated in its EU accession treaty. The transition will occur once the country meets all the euro convergence criteria; it currently meets four of the five criteria, the exception being its membership for at least two years of the EU's official exchange rate mechanism. Bulgarian euro coins have not yet been designed, but their motif has been chosen to be the Madara Rider. Bulgaria officially joined the ERM II on 10 July 2020.
Romania’s current national currency is the leu. However, being bound by its EU accession agreement, Romania has to replace the leu with the euro, as soon as Romania will fulfil all of the four nominal euro convergence criteria as states in the Treaty of Functioning the European Union in article 140. At the moment, the only currency on the market is leu, euro is not yet used in shops. The Romanian leu is not part of the European Exchange Rate Mechanism, although the Romanian authorities are working to prepare the changeover to the euro. In order to achieve the change of the currency, Romania is required to undergo at least two years of stability within the limits of the convergence criteria. The current Romanian Government in addition established a self-imposed criterion to reach a certain level of real convergence, as a steering anchor to decide the appropriate target year for ERM II membership and euro adoption. As of March 2018, the scheduled date for euro adoption in Romania is 2024, according to the National Plan to Changeover to the Euro.
Sweden does not currently use the euro as its currency and has no plans to replace the krona in the near future. Sweden's Treaty of Accession of 1994 made it subject to the Treaty of Maastricht, which obliges states to join the eurozone once they meet the necessary conditions. Sweden maintains that joining the European Exchange Rate Mechanism II, participation in which for at least two years is a requirement for euro adoption, is voluntary, and has chosen to remain outside pending public approval by a referendum, thereby intentionally avoiding the fulfilment of the adoption requirements.
The euro came into existence on 1 January 1999, although it had been a goal of the European Union (EU) and its predecessors since the 1960s. After tough negotiations, particularly due to opposition from the United Kingdom, the Maastricht Treaty entered into force in 1993 with the goal of creating an economic and monetary union by 1999 for all EU states except the UK and Denmark.
The United Kingdom did not seek to adopt the euro as its official currency for the duration of its membership of the European Union (EU), and secured an opt-out at the euro's creation via the Maastricht Treaty in 1992: Bank of England was only a member of the European System of Central Banks.
Denmark uses the krone as its currency and does not use the euro, having negotiated the right to opt out from participation under the Maastricht Treaty of 1992. In 2000, the government held a referendum on introducing the euro, which was defeated with 46.8% voting yes and 53.2% voting no. The Danish krone is part of the ERM II mechanism, so its exchange rate is tied to within 2.25% of the euro.
Montenegro is a country in South-Eastern Europe, which is not a member of the European Union, Eurozone nor does it have a formal monetary agreement with the EU, but it is one of the two countries that has unilaterally adopted the euro in 2002 as its de facto domestic currency. This means that the euro is not a legal tender there, however it is treated as such by the government and the population.
The enlargement of the eurozone is an ongoing process within the European Union (EU). All member states of the European Union, except Denmark which negotiated opt-outs from the provisions, are obliged to adopt the euro as their sole currency once they meet the criteria, which include: complying with the debt and deficit criteria outlined by the Stability and Growth Pact, keeping inflation and long-term governmental interest rates below certain reference values, stabilising their currency's exchange rate versus the euro by participating in the European Exchange Rate Mechanism, and ensuring that their national laws comply with the ECB statute, ESCB statute and articles 130+131 of the Treaty on the Functioning of the European Union. The obligation for EU member states to adopt the euro was first outlined by article 109.1j of the Maastricht Treaty of 1992, which became binding on all new member states by the terms of their treaties of accession.
The international status and usage of the euro has grown since its launch in 1999. When the euro formally replaced 12 currencies on 1 January 2002, it inherited their use in territories such as Montenegro and replaced minor currencies tied to the pre-euro currencies, such as in Monaco. Four small states have been given a formal right to use the euro, and to mint their own coins, but all other usage outside the eurozone has been unofficial. With or without an agreement, these countries, unlike those in the eurozone, do not participate in the European Central Bank or the Eurogroup.
The Economic and Monetary Union (EMU) is an umbrella term for the group of policies aimed at converging the economies of member states of the European Union at three stages. The policies cover the 19 eurozone states, as well as non-euro European Union states.
Croatia's currency, the kuna, has used the euro as its main reference since its creation in 1994, and a long-held policy of the Croatian National Bank has been to keep the kuna's exchange rate with the euro within a relatively stable range.
The banking union of the European Union is the transfer of responsibility for banking policy from the national to the EU level in several countries of the European Union, initiated in 2012 as a response to the Eurozone crisis. The motivation for banking union was the fragility of numerous banks in the Eurozone, and the identification of vicious circle between credit conditions for these banks and the sovereign credit of their respective home countries. In several countries, private debts arising from a property bubble were transferred to sovereign debt as a result of banking system bailouts and government responses to slowing economies post-bubble. Conversely, weakness in sovereign credit resulted in deterioration of the balance sheet position of the banking sector, not least because of high domestic sovereign exposures of the banks.
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