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, the Maastricht Treaty entered into force in 1993 with the goal of creating an economic and monetary union (EMU) by 1999 for all EU states except the UK and Denmark (even though Denmark has a fixed exchange rate policy with the euro).
Pierre Werner's report began the first moves towards monetary union
The first ideas of an economic and monetary union in Europe were raised well before establishing the European Communities. For example, as earlier on as the League of Nations, Gustav Stresemann had enquired in 1929 for a European currency[1] against the background of an increased economic division due to a number of new nation states in Europe after World War I. At this time memories of the Latin Monetary Union[2] involving principally France, Italy, Belgium and Switzerland and which, for practical purposes, had disintegrated following the First World War, figured prominently in the minds of policy makers.
A first attempt to create an economic and monetary union between the members of the European Economic Community (EEC) arrived with an initiative by the European Commission in 1969, which set out the need for "greater co-ordination of economic policies and monetary cooperation".[3] This was followed up at a meeting of the European Council at The Hague in December 1969. The European Council tasked Pierre Werner, Prime Minister of Luxembourg, with finding a way to reduce currency exchange rate volatility. His report was published in October 1970 and recommended centralisation of the national macroeconomic policies entailing "the total and irreversible fixing of parity rates and the complete liberation of movements of capital". But he did not propose a single currency or central bank.[4] An attempt to limit the fluctuations of European currencies, using a snake in the tunnel, failed.
President Jacques Delors's three-point plan laid out the path to EMU
The Hannover European Council asked Commission PresidentJacques Delors to chair an ad hoc committee of central bank governors, known as the Delors Committee, to propose a new timetable with clear, practical and realistic steps for creating an economic and monetary union.[7] This way of working was derived from the Spaak method.
France and the UK were opposed to German reunification, and attempted to influence the Soviet Union to stop it.[8] However, in late 1989 France extracted German commitment to the Monetary Union in return for support for German reunification.[9]
The Delors report[10] of 1989 set out a plan to introduce the EMU in three stages and it included the creation of institutions such as the European System of Central Banks (ESCB), which would become responsible for formulating and implementing monetary policy. It laid out monetary union being accomplished in three steps. Beginning the first of these steps, on 1 July 1990, exchange controls were abolished, thus capital movements were completely liberalised in the European Economic Community. Leaders reached agreement on currency union with the Maastricht Treaty, signed on 7 February 1992. It agreed to create a single currency, although without the participation of the United Kingdom, by January 1999.[4]
Gaining approval for the treaty was a challenge. Germany was cautious about giving up its stable currency, i.e., the German Mark,[11] France approved the treaty by a narrow margin[12] and Denmark refused to ratify until they got such an opt-out from monetary union as the United Kingdom, an opt-out that they maintain as of 2019.[13] On 16 September 1992, known in the UK as Black Wednesday, the British pound sterling was forced to withdraw from the fixed exchange rate system due to a rapid fall in the value of the pound.[14]
Delors' second stage began in 1994 with creation of the European Monetary Institute, succeeding the EMCF, under Maastricht. It was created as the forerunner to the European Central Bank. It met for the first time on 12 January under its first president, Alexandre Lamfalussy.[4] After much disagreement, in December 1995 the name euro was adopted for the new currency (replacing the name Ecu used for the previous accounting currency),[4] on the suggestion of then-German finance minister Theo Waigel. They also agreed on the date 1 January 1999 for its launch.[4]
On 17 June 1997 the European Council decided in Amsterdam to adopt the Stability and Growth Pact, designed to ensure budgetary discipline after creation of the euro, and a new exchange rate mechanism (ERM II) was set up to provide stability above the euro and the national currencies of countries that hadn't yet entered the eurozone. Then, on 3 May 1998, at the European Council in Brussels, the 11 initial countries that would participate in the third stage from 1 January 1999 were selected. To participate in the new currency, member states had to meet strict criteria such as a budget deficit of less than 3% of their GDP, a debt ratio of less than 60% of GDP, low inflation, and interest rates close to the EU average. Greece failed to meet the criteria and was excluded from participating on 1 January 1999.
On 1 June 1998 the European Central Bank succeeded the European Monetary Institute. However, it did not take on its full powers until the euro was created on 1 January 1999. The bank's first President was Wim Duisenberg, former head of the EMI and the Dutch central bank.[4] The conversion rates between the 11 participating national currencies and the euro were then established. 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 would equal one euro. These rates were set by Council Regulation 2866/98 (EC), of 31 December 1998.[15] 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. 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.
Creation
Launch
Eurozone, 1999–2002
The currency was introduced in non-physical form (traveller's 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 (having been distributed in small amounts in the previous December). Starting on 1 January 1999, all bonds and other forms of government debt by eurozone nations were denominated in euros.
The value of the euro, which started at US$1.1686 on 31 December 1998, rose during its first day of trading, Monday, 4 January 1999, closing at approximately US$1.18.[16] It was rapidly taken up and dealers were surprised by the speed at which it replaced the national currencies. Trading in the Deutsche Mark was expected to continue in parallel but vanished as soon as the markets opened.[17] However, by the end of 1999 the euro had dropped to parity with the dollar[4] leading to emergency action from the G7 to support the euro in 2001.[18]
Later in 2000, Denmark held a referendum on whether to abandon their opt-out from the euro. The referendum resulted in a decision to retain the krone, and also set back plans for a referendum in the UK as a result.[19] The procedure used to fix the irrevocable conversion rate of 340.750 between the Greek 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 as a virtual currency, the conversion rate for the Greek drachma was fixed several months beforehand, in Council Regulation 1478/2000 (EC) of 19 June 2000.[20]
Minting
The designs for the new coins and notes were announced between 1996 and 1998, and production began at the various mints and printers on 11 May 1998.[21] The task was large, and would require the full three-and-a-half-years. In all, 7.4 billion notes and 38.2 billion coins would be available for issuance to consumers and businesses on 1 January 2002.[22] In seven nations, the new coins—struck in the run-up to 1 January 2002—would bear a 2002 date. In Belgium, Finland, France, the Netherlands, and Spain, the new coins would bear the date of striking, so those five countries would be the only ones to strike euro coins dated 1999, 2000, and 2001. Small numbers of coins from Monaco, Vatican City, and San Marino were also struck. These immediately became popular collector's items, commanding premiums well above face value. New issues continue to do so to this day.
Euro pocket calculators were sold or offered in many countries.
Meanwhile, a parallel task was to educate the European public about the new coins. Posters were issued showing the designs, which were used on items ranging from playing cards to T-shirts. As a final step, on 15 December 2001, banks began exchanging "euro starter kits", plastic pouches with a selection of the new coins in each country (generally, between 10 and 20 euros' worth—though Finland's contained one of each coin, totalling €3.88). They would not be usable in commerce until 1 January, when notes would be made available as well. Larger starter kits, containing a roll of each denomination, were available as well in some nations.
Retailers and government agencies had a considerable task as well. For items to be sold to the public, dual pricing was commonly utilised. Postage stamps for governments (as well as stamps issued by the United Nations Postal Administration for the UN offices in Vienna) often bore denominations both in the legacy currency and euros, assuring continued utility beyond 2001. Banks bore a huge task, not only in preparation for the change of the notes and coins, but also in the back office. Beginning in 1999, all deposits and loans were technically in euros, but deposits and withdrawals continued in the legacy currency. Statements would bear balances in both currencies beginning no later than 1 July 2001, and earlier if required by the customer's needs.
Starting on 1 December 2001, coins and notes were distributed from secure storage, first to large retailers, and then to smaller ones. It was widely expected that there would be massive problems on and after 1 January. Such a changeover, across twelve populous countries, had never been attempted before.
Currency transition
Euro banknotes and coins of various denominations.
The new coins and notes were first valid on the French island of Réunion in the Indian Ocean.[23] The first official purchase using euro coins and notes took place there, for one kilogram of lychees.[24] The coming of midnight in Frankfurt at the ECB offices, though, symbolised the transition.
In Finland, the Central Bank opened for an hour at midnight to allow citizens to exchange currency, while a huge euro pyramid decorated Syntagma Square in Athens. Other countries noted the coming of the euro as well—Paris's Pont Neuf was decorated in EU colours, while in the northern German town of Gifhorn a sombre, symbolic funeral for the Deutsche Mark took place.
Except for Germany, the plan for introduction of the new currency was basically the same. Banks would accept the exchange of legacy currencies, begin to dispense euros from ATMs, and only euros would be available as withdrawals were made, starting on 1 January. Merchants would accept legacy currency, but give change only in euros. In Germany, the Deutsche Mark would no longer be a legal tender on 1 January, but would have to be exchanged at the banks.
Despite the massive amounts of euros available, chaos was feared. In France, these fears were accentuated by a threatened postal workers' strike.[25] The strike, however, was settled. Similarly, workers at the French bank BNP Paribas threatened to disrupt the introduction of euro currency with a strike. That was also settled.[26]
In practice, the roll-out was smooth, with few problems. By 2 January, all ATMs in 7countries and at least 90percent in 4others were issuing euros rather than legacy currency, with Italy, the worst offender, having only 85% of ATMs dispensing euros.[28] The unexpected tendency of consumers to spend their legacy currency, rather than exchange it at banks, led to temporary shortages of euro small change, with some consumers being given change in legacy currency.[29]
Some businesses did take advantage of the currency exchange to raise prices. According to a study by the Deutsche Bundesbank, there was a price rise, but consumers refused to buy as much. A coffee bar in Italy that took advantage of the transition to raise coffee prices by a third was ordered to pay compensation to customers.[30]
Aftermath
Nations were allowed to keep legacy currency in circulation as legal tender for two months, until 28 February 2002. The official date on which the national currencies ceased to be legal tender varied from member state to member state. The earliest date was in Germany; the Deutsche Mark officially ceased to be legal tender after 31 December 2001. Most member states, though, permitted their legacy currency to remain in circulation the full two months. The legacy currency was exchangeable at commercial banks in the currency's nation for a further period, generally until 30 June 2002.
However, even after the official dates, they continued to be accepted for exchange by national central banks for varying periods—and indefinitely in Austria, Germany, Ireland, and Spain. Coins from those four countries and Finland remain exchangeable. The earliest coins to become non-convertible were the Portuguese escudos, which ceased to have monetary value after 31 December 2002, although banknotes remained exchangeable until 2022. All banknotes current on 1 January 2002 would remain valid until at least 2012.[31]
In Germany, Deutsche Telekom modified 50,000 pay phones to take Deutsche Mark coins in 2005, at least on a temporary basis.[32] Callers were allowed to use DM coins, at least initially, with the Deutsche Mark pegged to equal one euro, almost twice the usual rate.[33]
In France, as of 2007[until when?] receipts still indicated the value of products in the legacy currency (francs) along with the euro value.[citation needed] In other eurozone countries this had long been considered unnecessary. As of 2008, some small-town merchants in France still accepted franc notes.[34]
Euro usage in the world (blue and purple, click for detail).
After dropping to an interday low of US$0.8296 on 26 October 2001, and a brief crash to $0.8115 on 15 January 2002, the euro soon recovered from its early slump. Its value last closed below $1.00 on 28 September 2022 ($0.95361), and increased in value from there. It peaked at $1.35 in 2004, and reached its highest value versus the US dollar at $1.5916 on 14 July 2008.[35] As its values increased against the pound sterling in the late-2000s, peaking at 97.73p on 31 December 2008, its international usage grew rapidly.[36] The euro grew in importance steadily, with its share of foreign exchange reserves rising from nearly 18% in 1999 to 25% in 2003—while the dollar share fell by an equivalent margin.[37]Alan Greenspan in 2007 said the eurozone had profited from the euro's rise and claimed it was perfectly conceivable that it could trade equally or become more important than the US dollar in the future.[38]
Public support
Public support for the euro in each state between 2001 and 2006.[39]
Graphs are unavailable due to technical issues. There is more info on Phabricator and on MediaWiki.org.
Recession era
The Lisbon Treaty formalised Jean-Claude Juncker's post as President of the Eurogroup
As a result of the 2007–2008 financial crisis and the Great Recession, the eurozone entered its first official recession in the third quarter of 2008, official figures confirmed in January 2009.[40] The EU was in negative growth for the second, third and fourth quarters of 2008 and the first quarter of 2009 before returning to positive growth (for the eurozone as a whole).[41] Despite the recession, Estonia acceded to the eurozone and Iceland put in an EU application to join the euro, seeing it at the time as a safe haven.
Lisbon Treaty
In 2009, the Lisbon Treaty formalised the Eurogroup, the meeting of euro finance ministers, with an official president. Jean-Claude Juncker served as president before and after formalisation and has been an advocate of strengthening the group, economic co-operation and common representation. Appetite for stronger economic co-operation grew due to the recession and the potential failure of some weaker eurozone members.[42] However, Germany had opposed previous moves to strengthen the Eurogroup, such as French PresidentNicolas Sarkozy's attempts at Eurogroup summits, due to fears of undermining the ECB's independence. Jean-Claude Trichet, who succeeded Duisenberg as ECB president in 2003, fended off numerous attacks from Sarkozy at the start of the recession. Before that formalisation of the Eurogroup, eurozone leaders held an extraordinary summit in reaction to the financial crisis on 11 October 2008 in Paris. Rather than the Eurogroup meeting as finance ministers, they met as head of states or government (similar to the European Council) to define a joint action plan for the eurozone and the European Central Bank to stabilise the European economy. These such meetings would be where many euro governance reforms would be agreed.
Early responses
The leaders hammered out a plan to confront the financial crisis which will involve hundreds of billions of euros of new initiatives to head off a feared meltdown. They agreed a bank rescue plan: governments would buy into banks to boost their finances and guarantee interbank lending. Coordination against the crisis is considered vital to prevent the actions of one country harming another and exacerbating the bank solvency and credit shortage problems.[citation needed]
Despite initial fears by speculators in early 2009 that the stress of such a large recession could lead to the break-up of the eurozone, the euro's position actually strengthened as the year progressed. Far from the poorer performing economies moving further away and becoming a default risk, bond yield spreads between Germany and the weakest economies decreased easing the strain on these economies. Much of the credit for the turn around in fortunes has been attributed to the ECB, which injected €500bn into the banks in June.[43] Indeed, the euro came to be seen as a safe haven, as countries outside it such as Iceland fared worse than those with the euro. Iceland subsequently applied to the EU to get the benefit of using a larger currency with the support of the ECB.[44]
Bailout funds
However, with the risk of a default in Greece and other members in late 2009–10, eurozone leaders agreed to provisions for bailing out member states who could not raise funds (triggered for Greece in April 2010).[45][46] This was a U-turn on the EU treaties, which rule out any bailout of a euro member in order to encourage members to manage their finances better. Yet with Greece struggling to restore its finances, other member states also at risk and the repercussions this would have on the rest of the eurozone economy; a temporary bail out mechanism was agreed and devised in the form of a special-purpose vehicle (SPV) named "European Financial Stability Facility" (complemented by the European Financial Stabilisation Mechanism and funds form the International Monetary Fund), aiming at preserving financial stability in Europe by providing financial assistance to eurozone states in difficulty. The crisis also spurred consensus for further economic integration and a range of proposals such as a "European Monetary Fund" or federal treasury.[47][48][49]
However, in June 2010, 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.[50] 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.[50] In June 2010 France agreed to back Germany's plan for suspending the voting rights of members who breach the rules.[51]
In late 2010/early 2011, it was agreed to replace the European Financial Stability Facility and European Financial Stability Mechanism with a larger and permanent European Stability Mechanism (ESM). The ESM required a treaty amendment to allow it and a separate treaty to establish it but, if ratified successfully, would be established in time to take over when the old facilities expire in 2013. Meanwhile, to support Italy and prevent it having to ask for a bail-out later, the ECB controversially started buying Italian bonds, as it had done with Greece.
Fiscal agreements
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.[52][53] The Euro Plus Pact sets out a wide range of reforms to take place in the eurozone to ensure and the French and German governments further agreed to push for a 'true economic government' that would involve twice-yearly eurozone leader summits and a financial transactions tax.[54]
The European Fiscal Union is a proposal for a treaty about fiscal integration described in a decision adopted on 9 December 2011 by the European Council. The participants are the eurozone member states and all other EU members without the United Kingdom and the Czech Republic. The treaty entered into force on 1 January 2013 for the 16 states which completed ratification prior of this date[55] and on 1 April 2014 entered into force for all 25 signatories.
Despite speculation that the crisis in Greece could spread and that the euro might fail, some newer EU states from the 2004 enlargement joined the currency during the recession. Slovenia, Malta and Cyprus all acceded within the first two years of the recession, closely followed by Slovakia in 2009. The three Baltic states of Estonia, Latvia and Lithuania joined in 2011, 2014 and 2015, respectively. Eight years later, Croatia joined the eurozone in 2023.
Slovenia
Slovenia was the first country to join the eurozone after the launch of the coins and banknotes. Participation in ERM II began on 28 June 2004[56] and on 11 July 2006 the Council of EU adopted a decision allowing Slovenia to join the euro area as from 1 January 2007, becoming the first nation from the former Socialist Federal Republic of Yugoslavia to do so.[57] The euro replaced the Slovenian tolar on 1 January 2007. The exchange rate between the euro and tolar had been set on 11 July 2006 at 239.640SIT, but unlike the previous launches, cash and non-cash transactions were introduced simultaneously.
Cyprus
Cyprus replaced the Cypriot pound with the euro on 1 January 2008.[58]
A formal letter of application to join the eurozone was submitted on 13 February 2007.[59] On 16 May 2007 the European Commission, backed by the European Central Bank, gave its go-ahead for the introduction in January 2008.[60][61]
The campaign to inform the citizens of Cyprus about the euro officially began in Cypriot media on 9 March 2007. On 15 March 2007, the Cypriot House of Representatives passed the necessary laws for the introduction of the euro on 1 January 2008. The European Commissioner for Economic & Financial AffairsJoaquín Almunia, on 16 May 2007, recommended that Cyprus adopt the euro as scheduled, and the European Parliament concurred on 21 June 2007; the date was confirmed by the EU leaders. The final decision was taken by the EU finance ministers (Ecofin) on 10 July 2007 and the conversion rate was fixed at 0.585274 CYP.[62] On 23 October 2007, the coin designs were officially published in the Official Journal of the European Union.[63]
Valletta covered with floor designs of their new euro coins
Malta replaced the Maltese lira with the euro on 1 January 2008.[58] The aims were officially confirmed on 26 February 2007.[67] On 16 May 2007, the Commissioner for Economic & Financial Affairs of the EU, Joaquín Almunia, recommended that Malta adopt the euro as scheduled, a decision later confirmed by the Council of Finance Ministers of 10 July 2007. On the same day, dual displaying became mandatory and the first Maltese euro coins were struck at Monnaie de Paris. The first Maltese euro coins were available for the public on 1 December 2007, as business starter packs worth €131 each started being available for small businesses to fill up their cash registers with sufficient amount of euro coins before the €-day (Jum €). Mini-kits each worth €11.65 were available for the general public on 10 December 2007.[68] Maltese coins which were current at the time of the euro transition could be exchanged through 1 February 2010.[31]
Maltese citizens could obtain euro information directly from their town or village between December 2007 and January 2008. From the Euro Centres (Ċentru l-ewro) which opened during the day. People trained specifically on matters related to the changeover to the euro were available to provide council at euro centres along with information materials.[69]
In December 2007, as part of the euro changeover celebrations, streets of Valletta were covered with carpets depicting euro coins. Celebrations reached climax on New Year's Eve with a firework display near the Grand Harbour area, several other activities had to be moved indoors because of the stormy weather that struck the island on that night.
Slovakia adopted the euro on 1 January 2009. The koruna was part of ERM II from 28 November 2005, requiring that it trade within 15% of an agreed central rate; this rate was changed on 17 March 2007 and again on 28 May 2008. The rate of 30.1260SKK from May 2008 was finally confirmed on 8 July 2008.[70]
To assist the process of conversion to the euro, on 1 April 2008, the National Bank of Slovakia (NBS) announced their plan for withdrawal of the Slovak koruna notes and coins.[71] A few days later, on 5 April 2008, Slovakia officially applied to enter the eurozone.[72] On 7 May 2008, the European Commission approved the application and asked member states to endorse the bid during the EU finance ministers' meeting in July 2008.[73][74][75]
Slovakia fulfilled the euro convergence criteria. At 2.2%, Slovakia's twelve-month inflation was well below the 3.2% threshold. However, for March 2008 annual inflation was 3.6%. Fiscal deficit was 2.2% versus the reference value of 3.0%. Finally, the government debt ratio was 29.4% of GDP in 2007, well below the maximum ratio of 60.0%.[76] Public opinion supported the switch, with 58% in favour and 35% opposed, but 65% worried about the inflationary impacts of the adoption.[77] Three months after the adoption of the currency, 83 percent of Slovaks considered Slovakia's decision to adopt the euro to have been right.[78]
Publicity for the transition from the koruna to the euro on 1 January 2009 included a "euromobile", with a professional actor driving around the countryside holding impromptu quiz shows about the euro. Winners received euro T-shirts, euro conversion calculators, and chocolate euro coins.[79] Euro starter kits, available for 500 koruna, were a popular Christmas gift in 2008. The coins therein, however, were not valid as legal tender in the eurozone until 1 January 2009, with koruna exchanged through 17 January 2009, though redeemable at the central bank in Bratislava until a date to be determined. Anyone using Slovakian euro coins before 1 January could have been fined. Businesses using the transition to raise prices also were subject to penalty.[79]
Baltic states
In 2010, Estonia gained the support of the European Commission, European Central Bank and European Parliament for accession on 1 January 2011, with Estonia adopting the currency on that date and becoming the first nation from the former Soviet Union to do so.[80][81] In 2013, Latvia gained the support of the European Commission, European Central Bank and European Parliament for accession on 1 January 2014, with Latvia adopting the currency on that date.[82][83] On 23 July 2014 Lithuania became the last Baltic state to gain permission to join the euro, which was adopted on 1 January 2015.[84]
Croatia
Croatia completed its plans to adopt the Euro Currency as soon as possible after the July 1, 2013 EU accession. The country commenced participation in the ERM II on 10 July, 2020 and on 12 July, 2022 the Council of EU adopted a currency decision allowing Croatia to join the eurozone from the 1 January, 2023. The euro replaced the Croatian kuna on 1 January 2023. The exchange rate between the euro and kuna had been set on 12 July 2022 at 7.5345 HRK and similar to the previous launch of Slovenia, cash and non-cash transactions were introduced simultaneously on the same day and date the country also entered the Schengen Area.
Public opinion
Public support for the euro in each state from the start of the financial crisis in 2007 to Lithuania's accession in 2015[39]
Graphs are unavailable due to technical issues. There is more info on Phabricator and on MediaWiki.org.
Overview of eurozone enlargements and exchange-rate regimes for EU members
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.
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 mentioned year: Slovenia (2007), Cyprus (2008), Malta (2008), Slovakia (2009), Estonia (2011), Latvia (2014), Lithuania (2015), and Croatia (2023).
All new EU members having joined 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 needs 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 between the seven remaining new Member States from Eastern Europe 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.[85]
Public support
Percentage of respondents supporting the euro in each country, according to the Standard Eurobarometer [39]
James, Harold (2012). Making the European monetary union: the role of the Committee of Central Bank Governors and the origins of the European Central Bank. Cambridge, MA: Harvard University Press. ISBN 9780674066830.
The euro is the official currency of 20 of the 27 member states of the European Union. This group of states is officially known as the euro area or, more commonly, the eurozone. The euro is divided into 100 euro cents.
There are eight euro coin denominations, ranging from one cent to two euros. The coins first came into use in 2002. They have a common reverse, portraying a map of Europe, but each country in the eurozone has its own design on the obverse, which means that each coin has a variety of different designs in circulation at once. Four European microstates that are not members of the European Union use the euro as their currency and also have the right to mint coins with their own designs on the obverse side.
The euro area, commonly called the eurozone (EZ), is a currency union of 20 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU policies.
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 Slovak euro coins are the European monetary union euro coins issued by Slovakia since 2009. They feature three separate designs for the three series of coins.
The euro convergence criteria are the criteria 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, as an EU member state, joined the eurozone by adopting the euro on 1 January 2015. This made it the last of the three Baltic states to adopt the euro, after Estonia (2011) and Latvia (2014). Before then, its currency, the litas, was pegged to the euro at 3.4528 litas to 1 euro.
Cypriot euro coins feature three separate designs for the three series of coins. Cyprus has been a member of the European Union since 1 May 2004, and is a member of the Economic and Monetary Union of the European Union. It has completed the third stage of the EMU and adopted the euro as its official currency on 1 January 2008.
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.
Bulgaria plans to adopt the euro and become the 21st member state of the eurozone. The Bulgarian lev has been on a currency board since 1997, with a fixed exchange rate initially against the Deutsche Mark and subsequently its replacement the euro. Bulgaria's target date for introduction of the euro was 1 January 2025. However, the 2024 ECB convergence report concluded that Bulgaria did not meet the convergence criteria due to high inflation, so this timeline has been delayed. The Bulgarian National Bank and several Bulgarian politicians have expressed their desire to join as soon as possible, and project that inflation will be low enough by the end of 2024. If Bulgaria adopts the euro, it will become the second national currency of the country after the lev, which was introduced over 140 years ago. The fixed exchange rate is 1.95583 lev for 1 euro.
Romania's national currency is the leu. After Romania joined the European Union (EU) in 2007, the country became required to replace the leu with the euro once it meets all four euro convergence criteria, as stated in article 140 of the Treaty on the Functioning of the European Union. As of 2023, the only currency on the market is the leu and the euro is not yet used in shops. The Romanian leu is not part of the European Exchange Rate Mechanism, although Romanian authorities are working to prepare the changeover to the euro. To achieve the currency changeover, Romania must undergo at least two years of stability within the limits of the convergence criteria.
The 2 euro coin (€2) is the highest-value euro coin and has been used since the introduction of the euro in 2002. The coin is made of two alloys: the inner part of nickel brass, the outer part of copper-nickel. All coins have a common reverse side and country-specific national sides. The coin has been used since 2002, with the present common side design dating from 2007.
Sweden does not currently use the euro as its currency and has no plans to replace the existing Swedish 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 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, wherein the Bank of England would only be 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 53.2% voting no and 46.8% voting yes. 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 Southeast Europe, which is neither a member of the European Union (EU) nor the Eurozone; it does not have a formal monetary agreement with the EU either. However, it is one of the two territories that has unilaterally adopted the euro in 2002 as its de facto domestic currency and legal tender.
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 an opt-out 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 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 five-hundred-euro note (500 €) is the highest-value euro banknote; it was produced between the introduction of the euro in 2002 until 2019. Since 27 April 2019, the banknote has no longer been issued by central banks in the euro area, but it continues to be legal tender and can be used as a means of payment. It is one of the highest-value circulating banknotes in the world, worth around 549 USD; 3 851 CNY; 81 417 JPY; 418 GBP, or 471 CHF as of October 2024. The note is used in the 26 countries that have the euro as their sole currency, with a population of about 343 million.
The economic and monetary union (EMU) of the European Union is a group of policies aimed at converging the economies of member states of the European Union at three stages.
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