The Euro is the currency and monetary unit of the European Union, symbolized by the € sign. The euro was first launched as a noncash monetary unit in 1999, and currency coins and notes were released in 2002. The Euro replaced the currencies of EU members as well as certain non-EU countries.
What is the history behind the Euro?
The Maastricht Treaty (1991), which included the creation of an economic and monetary union (EMU), was signed by the then-12 member countries of the European Community (now the European Union)—the United Kingdom, Germany, Italy, France, Ireland, Belgium, Denmark, Spain, Portugal, Greece, Netherlands, and Luxembourg. The treaty proposed a single currency, the Euro, and established tight requirements for euro conversion and membership in the EMU. Annual budget deficits of no more than 3% of GDP, exchange rate stability, the public debt of no more than 60% of GDP, inflation rates within 1.5% of the EU's three lowest inflation rates, and long-term inflation rates of no more than 2% were among the conditions.
Even though several states held public debt ratios surpassing 60%, especially Italy and Belgium, where the rates reached 120%- the European Commission endorsed their admission to the EMU, highlighting the crucial steps each nation had taken to minimise its debt ratio.
Euro enthusiasts reasoned that a common European currency would stimulate trade by eliminating the volatility of foreign exchange and decreasing prices. Despite fears about losing national sovereignty, identity and counterfeiting, 11 nations joined the EMU officially in 1998. Although some firms in the United Kingdom had agreed to accept payment in euros, the United Kingdom and Sweden had delayed enrolling. In a referendum in September 2000, Danes barely managed to reject the Euro. Initially, Greece failed to reach the financial requirements. After reforming its economy, Greece made the final cut in January 2001.
What countries use the Euros?
Despite all EU nations being members of the Economic and Monetary Union (EMU), only 19 have exchanged their national currencies with the Euro. These countries which use the euro form a region known as the eurozone. Eurozone includes:
Non-euro area member countries have not yet adopted the Euro but will do so once the essential circumstances are met. It mainly consists of nations that joined the Union after the Euro was introduced in 2002, i.e. 2004, 2007, and 2013. They are:
Which bank manages the Euro?
The European Central Bank (ECB) was founded in 1998 to oversee the new currency. The European Central Bank (ECB) is based in Frankfurt, Germany, led by a nominated president elected by all the member countries for an eight-year period. On January 1, 1999, the Euro was introduced as a 1:1 replacement for the predecessor European currency unit. Financial markets and a few businesses solely utilised the Euro before launching currency coins and notes in 2002. Many experts believed that the Euro would eventually be able to compete with the US dollar as a global currency.
Unlike the previous national currencies, euro banknotes never featured any prominent national figure. Instead, the seven colourful notes, designed by an Austrian artist Robert Kalina, ranging in denominations of value €5 to €500, depict a map of Europe, the EU flag, bridges, arches, gateways, windows, etc. symbolise Europe's unity. The denominations of the eight euro coins range from one cent to two euros. The coins have a standard design on one side and different designs on the reverse sides in each participating country.
The Euro is the exclusive legal tender in all the EU member countries that have adopted it. These countries make up the eurozone, an area whose shared currency is the Euro. The Euro is also used as the official currency of four tiny non-EU countries (Andorra, Vatican City, San Marino, and Monaco), and numerous countries' currencies are tied to the Euro.
The European Union mandates the European Central Bank (ECB) to preserve price stability by protecting the Euro's value. The ECB and national central banks of all EU member states, even those that have not accepted the Euro, make up the European System of Central Banks (ESCB).
In the increasingly interconnected EU economy, accepting the Euro reduced foreign exchange risk for European businesses and financial organizations with cross-border activities. The monetary and fiscal constraints for adopting the Euro also have fostered increased political integration among member countries.
The eurozone, on the contrary, brings together economies with diverse national budgets and disparate characteristics without the power to undertake the sorts of cross-border fiscal transfers which occur in the United States between both the federal government and states.
As a result of the market instability created by the European sovereign debt crisis, the EU has been compelled to implement measures such as ECB guarantees for debt issued by member states. Because of their dependency on the ECB's fiscal policy and EU budget restrictions, governments and central banks are limited in their ability to respond to economical situations in their own countries.
For example, a country's central bank can no longer reduce interest rates by weakening its native currency versus its significant European trade relations to boost exports.
While the Euro cannot be discounted to ease EU economic reforms, it has become a more reliable store of value. The Euro continues to enjoy widespread acceptance among citizens of the nations that have accepted it.
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