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Wikipedia

Euro

December 02, 2023

This article is about the currency. For other uses, see Euro (disambiguation). "EUR" redirects here. For other uses, see EUR (disambiguation).

The euro (symbol: €; currency code: EUR) 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, commonly, the eurozone, and includes about 344 million citizens as of 2023. The euro is divided into 100 euro cents.[5][6]

Euro
see also euro in various languages
Euro banknotes1 euro coin
ISO 4217
CodeEUR (numeric: 978)
Subunit0.01
Unit
Uniteuro
PluralVaries, see language and the euro
Symbol€‎
NicknameThe single currency[note 1]
Denominations
Subunit
 1⁄100euro cent
(Name varies by language)
Plural
 euro cent(Varies by language)
Symbol
 euro centc
Banknotes
 Freq. used€5, €10, €20, €50, €100[2]
 Rarely used€200, €500[2]
Coins
 Freq. used1c, 2c, 5c, 10c, 20c, 50c, €1, €2   
 Rarely used1c, 2c (Belgium, Finland, Ireland, Italy, Netherlands[3])
Demographics
Date of introduction1 January 1999
User(s)primary: § members of Eurozone (20),
also: § other users
Issuance
Central bankEuropean Central Bank
 Websitewww.ecb.europa.eu
Printersee § Banknote printing
MintList of mints
Valuation
Inflation4.3% (September 2023)[4]
 Sourceec.europa.eu
 MethodHICP
Pegged bysee § Pegged currencies
Euro Monetary policy
  Euro Zone inflation year/year
  M3 money supply increases
  Marginal Lending Facility
  Main Refinancing Operations
  Deposit Facility Rate
  Euribor

The currency is also used officially by the institutions of the European Union, by four European microstates that are not EU members,[6] the British Overseas Territory of Akrotiri and Dhekelia, as well as unilaterally by Montenegro and Kosovo. Outside Europe, a number of special territories of EU members also use the euro as their currency. Additionally, over 200 million people worldwide use currencies pegged to the euro.

The euro is the second-largest reserve currency as well as the second-most traded currency in the world after the United States dollar.[7][8][9][10][11] As of December 2019, with more than €1.3 trillion in circulation, the euro has one of the highest combined values of banknotes and coins in circulation in the world.[12][13]

The name euro was officially adopted on 16 December 1995 in Madrid.[14] The euro was introduced to world financial markets as an accounting currency on 1 January 1999, replacing the former European Currency Unit (ECU) at a ratio of 1:1 (US$1.1743 at the time). Physical euro coins and banknotes entered into circulation on 1 January 2002, making it the day-to-day operating currency of its original members, and by March 2002 it had completely replaced the former currencies.[15]

Between December 1999 and December 2002, the euro traded below the US dollar, but has since traded near parity with or above the US dollar, peaking at US$1.60 on 18 July 2008 and since then returning near to its original issue rate. On 13 July 2022, the two currencies hit parity for the first time in nearly two decades due in part to the 2022 Russian invasion of Ukraine.[16]

Characteristics edit

Administration edit

 
The European Central Bank seat in Frankfurt am Main
Main articles: European Central Bank, Maastricht Treaty, and Eurogroup

The euro is managed and administered by the European Central Bank (ECB, Frankfurt am Main) and the Eurosystem, composed of the central banks of the eurozone countries. As an independent central bank, the ECB has sole authority to set monetary policy. The Eurosystem participates in the printing, minting and distribution of notes and coins in all member states, and the operation of the eurozone payment systems.

The 1992 Maastricht Treaty obliges most EU member states to adopt the euro upon meeting certain monetary and budgetary convergence criteria, although not all participating states have done so. Denmark has negotiated exemptions,[17] while Sweden (which joined the EU in 1995, after the Maastricht Treaty was signed) turned down the euro in a non-binding referendum in 2003, and has circumvented the obligation to adopt the euro by not meeting the monetary and budgetary requirements. All nations that have joined the EU since 1993 have pledged to adopt the euro in due course. The Maastricht Treaty was later amended by the Treaty of Nice,[18] which closed the gaps and loopholes in the Maastricht and Rome Treaties.

Eurozone members edit

Main article: Eurozone

The 20 participating members are

EU members not using the euro edit

The EU member states not in the Eurozone are Bulgaria, Czech Republic, Denmark, Hungary, Poland, Romania, and Sweden.

Future eurozone members edit

Main article: Enlargement of the eurozone

The government of Bulgaria aims to replace the Bulgarian lev by the euro on 1 January 2025.[19][20][21]

The government of Romania aims for the Romanian leu to be replaced by the euro on 1 January 2026.[22]

EU members Czech Republic, Hungary, Poland, and Sweden are legally obligated to adopt the euro eventually, though they have no required date for adoption, and their governments do not currently have any plans for switching. Denmark negotiated for the right to retain its currency.

Other users edit

Microstates with a monetary agreement:

EU special territories

British Overseas Territory

Unilateral adopters

Pegged currencies edit

The currency of a number of states is pegged to the euro. These states are:

Coins and banknotes edit

Coins edit

Main article: Euro coins

The euro is divided into 100 cents (also referred to as euro cents, especially when distinguishing them from other currencies, and referred to as such on the common side of all cent coins). In Community legislative acts the plural forms of euro and cent are spelled without the s, notwithstanding normal English usage.[31][32] Otherwise, normal English plurals are used,[33] with many local variations such as centime in France.

All circulating coins have a common side showing the denomination or value, and a map in the background. Due to the linguistic plurality in the European Union, the Latin alphabet version of euro is used (as opposed to the less common Greek or Cyrillic) and Arabic numerals (other text is used on national sides in national languages, but other text on the common side is avoided). For the denominations except the 1-, 2- and 5-cent coins, the map only showed the 15 member states which were members when the euro was introduced. Beginning in 2007 or 2008 (depending on the country), the old map was replaced by a map of Europe also showing countries outside the EU.[citation needed] The 1-, 2- and 5-cent coins, however, keep their old design, showing a geographical map of Europe with the 15 member states of 2002 raised somewhat above the rest of the map. All common sides were designed by Luc Luycx. The coins also have a national side showing an image specifically chosen by the country that issued the coin. Euro coins from any member state may be freely used in any nation that has adopted the euro.

The coins are issued in denominations of €2, €1, 50c, 20c, 10c, 5c, 2c, and 1c. To avoid the use of the two smallest coins, some cash transactions are rounded to the nearest five cents in the Netherlands and Ireland[34][35] (by voluntary agreement) and in Finland and Italy (by law).[36] This practice is discouraged by the commission, as is the practice of certain shops of refusing to accept high-value euro notes.[37]

Commemorative coins with €2 face value have been issued with changes to the design of the national side of the coin. These include both commonly issued coins, such as the €2 commemorative coin for the fiftieth anniversary of the signing of the Treaty of Rome, and nationally issued coins, such as the coin to commemorate the 2004 Summer Olympics issued by Greece. These coins are legal tender throughout the eurozone. Collector coins with various other denominations have been issued as well, but these are not intended for general circulation, and they are legal tender only in the member state that issued them.[38]

Coin minting edit

A number of institutions are authorised to mint euro coins:

Banknotes edit

Main article: Euro banknotes
 
Euro coins and banknotes of various denominations

The design for the euro banknotes has common designs on both sides. The design was created by the Austrian designer Robert Kalina.[39] Notes are issued in €500, €200, €100, €50, €20, €10, and €5. Each banknote has its own colour and is dedicated to an artistic period of European architecture. The front of the note features windows or gateways while the back has bridges, symbolising links between states in the union and with the future. While the designs are supposed to be devoid of any identifiable characteristics, the initial designs by Robert Kalina were of specific bridges, including the Rialto and the Pont de Neuilly, and were subsequently rendered more generic; the final designs still bear very close similarities to their specific prototypes; thus they are not truly generic. The monuments looked similar enough to different national monuments to please everyone.[40]

The Europa series, or second series, consists of six denominations and no longer includes the €500 with issuance discontinued as of 27 April 2019.[41] However, both the first and the second series of euro banknotes, including the €500, remain legal tender throughout the euro area.[41]

In December 2021, the ECB announced its plans to redesign euro banknotes by 2024. A theme advisory group, made up of one member from each euro area country, was selected to submit theme proposals to the ECB. The proposals will be voted on by the public; a design competition will also be held.[42]

Issuing modalities for banknotes edit

Since 1 January 2002, the national central banks (NCBs) and the ECB have issued euro banknotes on a joint basis.[43] Eurosystem NCBs are required to accept euro banknotes put into circulation by other Eurosystem members and these banknotes are not repatriated. The ECB issues 8% of the total value of banknotes issued by the Eurosystem.[43] In practice, the ECB's banknotes are put into circulation by the NCBs, thereby incurring matching liabilities vis-à-vis the ECB. These liabilities carry interest at the main refinancing rate of the ECB. The other 92% of euro banknotes are issued by the NCBs in proportion to their respective shares of the ECB capital key,[43] calculated using national share of European Union (EU) population and national share of EU GDP, equally weighted.[44]

Banknote printing edit

Member states are authorised to print or to commission bank note printing. As of November 2022, these are the printers:

Payments clearing, electronic funds transfer edit

Main article: Single Euro Payments Area

Capital within the EU may be transferred in any amount from one state to another. All intra-Union transfers in euro are treated as domestic transactions and bear the corresponding domestic transfer costs.[45] This includes all member states of the EU, even those outside the eurozone providing the transactions are carried out in euro.[46] Credit/debit card charging and ATM withdrawals within the eurozone are also treated as domestic transactions; however paper-based payment orders, like cheques, have not been standardised so these are still domestic-based. The ECB has also set up a clearing system, TARGET, for large euro transactions.[47]

History edit

Main article: History of the euro

Introduction edit

Historical currencies of the European Union
Currency Code Rate[48] Fixed on Yielded
Austrian schilling ATS 13.7603 31 December 1998 1 January 1999
Belgian franc BEF 40.3399 31 December 1998 1 January 1999
Dutch guilder NLG 2.20371 31 December 1998 1 January 1999
Finnish markka FIM 5.94573 31 December 1998 1 January 1999
French franc FRF 6.55957 31 December 1998 1 January 1999
German mark DEM 1.95583 31 December 1998 1 January 1999
Irish pound IEP 0.787564 31 December 1998 1 January 1999
Italian lira ITL 1,936.27 31 December 1998 1 January 1999
Luxembourg franc LUF 40.3399 31 December 1998 1 January 1999
Portuguese escudo PTE 200.482 31 December 1998 1 January 1999
Spanish peseta ESP 166.386 31 December 1998 1 January 1999
Greek drachma GRD 340.750 19 June 2000 1 January 2001
Slovenian tolar SIT 239.640 11 July 2006 1 January 2007
Cypriot pound CYP 0.585274 10 July 2007 1 January 2008
Maltese lira MTL 0.429300 10 July 2007 1 January 2008
Slovak koruna SKK 30.1260 8 July 2008 1 January 2009
Estonian kroon EEK 15.6466 13 July 2010 1 January 2011
Latvian lats LVL 0.702804 9 July 2013 1 January 2014
Lithuanian litas LTL 3.45280 23 July 2014 1 January 2015
Croatian kuna HRK 7.53450 12 July 2022 1 January 2023

The euro was established by the provisions in the 1992 Maastricht Treaty. To participate in the currency, member states are meant 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 (both of which were ultimately widely flouted after introduction), low inflation, and interest rates close to the EU average. In the Maastricht Treaty, the United Kingdom and Denmark were granted exemptions per their request from moving to the stage of monetary union which resulted in the introduction of the euro.

The name "euro" was officially adopted in Madrid on 16 December 1995.[14] Belgian Esperantist Germain Pirlot, a former teacher of French and history, is credited with naming the new currency by sending a letter to then President of the European Commission, Jacques Santer, suggesting the name "euro" on 4 August 1995.[49]

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. The definitive values of one euro in terms of the exchange rates at which the currency entered the euro are shown on the right.

The rates were determined by the Council of the European Union,[note 6] based on a recommendation from the European Commission based on the market rates on 31 December 1998. They were set so that one European Currency Unit (ECU) would equal one euro. The European Currency Unit was an accounting unit used by the EU, based on the currencies of the member states; it was not a currency in its own right. They could not be set earlier, because the ECU depended on the closing exchange rate of the non-euro currencies (principally sterling) that day.

The procedure used to fix the conversion rate 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, the conversion rate for the Greek drachma was fixed several months beforehand.[note 7]

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. Their exchange rates were locked at fixed rates against each other. 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 euro notes and coins were introduced on 1 January 2002.

The changeover period during which the former currencies' notes and coins were exchanged for those of the euro lasted about 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, where the mark officially ceased to be legal tender on 31 December 2001, though the exchange period lasted for two months more. Even after the old currencies ceased to be legal tender, they continued to be accepted by national central banks for periods ranging from several years to indefinitely (the latter for Austria, Germany, Ireland, Estonia and Latvia in banknotes and coins, and for Belgium, Luxembourg, Slovenia and Slovakia in banknotes only). 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.

Currency sign edit

 
The euro sign; logotype and handwritten
Main article: Euro sign

A special euro currency sign (€) was designed after a public survey had narrowed ten of the original thirty proposals down to two. The President of the European Commission at the time (Jacques Santer) and the European Commissioner with responsibility for the euro (Yves-Thibault de Silguy) then chose the winning design.[50]

Regarding the symbol, the European Commission stated on behalf of the European Union:

The symbol € is based on the Greek letter epsilon (Є), with the first letter in the word "Europe" and with 2 parallel lines signifying stability.

— Directorate-General for Communication[51]

The European Commission also specified a euro logo with exact proportions.[51] Placement of the currency sign relative to the numeric amount varies from state to state, but for texts in English published by EU institutions, the symbol (or the ISO-standard "EUR") should precede the amount.[52]

Eurozone crisis edit

 
European 10 year bonds, before the Great Recession in Europe bonds floated together in parity
  Greece 10 year bond
  Portugal 10 year bond
  Ireland 10 year bond
  Spain 10 year bond
  Italy 10 year bond
  France 10 year bond
  Germany 10 year bond
Main articles: European debt crisis and Greek government-debt crisis
See also: 2008–2011 Icelandic financial crisis
 
Budget deficit of the eurozone compared to the United States and the United Kingdom.

Following the U.S. financial crisis in 2008, fears of a sovereign debt crisis developed in 2009 among investors concerning some European states, with the situation becoming particularly tense in early 2010.[53][54] Greece was most acutely affected, but fellow Eurozone members Cyprus, Ireland, Italy, Portugal, and Spain were also significantly affected.[55][56] All these countries used EU funds except Italy, which is a major donor to the EFSF.[57] To be included in the eurozone, countries had to fulfil certain convergence criteria, but the meaningfulness of such criteria was diminished by the fact it was not enforced with the same level of strictness among countries.[58]

According to the Economist Intelligence Unit in 2011, "[I]f the [euro area] is treated as a single entity, its [economic and fiscal] position looks no worse and in some respects, rather better than that of the US or the UK" and the budget deficit for the euro area as a whole is much lower and the euro area's government debt/GDP ratio of 86% in 2010 was about the same level as that of the United States. "Moreover", they write, "private-sector indebtedness across the euro area as a whole is markedly lower than in the highly leveraged Anglo-Saxon economies". The authors conclude that the crisis "is as much political as economic" and the result of the fact that the euro area lacks the support of "institutional paraphernalia (and mutual bonds of solidarity) of a state".[59]

The crisis continued with S&P downgrading the credit rating of nine euro-area countries, including France, then downgrading the entire European Financial Stability Facility (EFSF) fund.[60]

A historical parallel – to 1931 when Germany was burdened with debt, unemployment and austerity while France and the United States were relatively strong creditors – gained attention in summer 2012[61] even as Germany received a debt-rating warning of its own.[62][63]

Direct and indirect usage edit

Further information: Eurozone, International status and usage of the euro, and Enlargement of the eurozone

Agreed direct usage with minting rights edit

The euro is the sole currency of 20 EU member states: Austria, Belgium, Croatia, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. These countries constitute the "eurozone", some 347 million people in total as of 2023.[64] According to bilateral agreements with the EU, the euro has also been designated as the sole and official currency in a further four European microstates awarded minting rights (Andorra, Monaco, San Marino and the Vatican City). With all but one (Denmark) EU members obliged to join when economic conditions permit, together with future members of the EU, the enlargement of the eurozone is set to continue.

Agreed direct usage without minting rights edit

The euro is also the sole currency in three overseas territories of France that are not themselves part of the EU, namely Saint Barthélemy, Saint Pierre and Miquelon, and the French Southern and Antarctic Lands, as well as in the British Overseas Territory of Akrotiri and Dhekelia.[65]

Unilateral direct usage edit

The euro has been adopted unilaterally as the sole currency of Montenegro and Kosovo. It has also been used as a foreign trading currency in Cuba since 1998,[66] Syria since 2006,[67] and Venezuela since 2018.[68] In 2009, Zimbabwe abandoned its local currency and introduced major global convertible currencies instead, including the euro and the United States dollar. The direct usage of the euro outside of the official framework of the EU affects nearly 3 million people.[69]

Currencies pegged to the euro edit

Main article: International status and usage of the euro
 
Worldwide use of the euro and the US dollar:
  Eurozone
  External adopters of the euro
  Currencies pegged to the euro
  Currencies pegged to the euro within narrow band
  United States
  External adopters of the US dollar
  Currencies pegged to the US dollar
  Currencies pegged to the US dollar within narrow band
Note: The Belarusian rouble is pegged to the euro, Russian rouble and US dollar in a currency basket.

Outside the eurozone, two EU member states have currencies that are pegged to the euro, which is a precondition to joining the eurozone. The Danish krone and Bulgarian lev are pegged due to their participation in the ERM II.

Additionally, a total of 21 countries and territories that do not belong to the EU have currencies that are directly pegged to the euro including 14 countries in mainland Africa (CFA franc), two African island countries (Comorian franc and Cape Verdean escudo), three French Pacific territories (CFP franc) and two Balkan countries, Bosnia and Herzegovina (Bosnia and Herzegovina convertible mark) and North Macedonia (Macedonian denar).[29] On 1 January 2010, the dobra of São Tomé and Príncipe was officially linked with the euro.[70] Additionally, the Moroccan dirham is tied to a basket of currencies, including the euro and the US dollar, with the euro given the highest weighting.

These countries generally had previously implemented a currency peg to one of the major European currencies (e.g. the French franc, Deutsche Mark or Portuguese escudo), and when these currencies were replaced by the euro their currencies became pegged to the euro. Pegging a country's currency to a major currency is regarded as a safety measure, especially for currencies of areas with weak economies, as the euro is seen as a stable currency, prevents runaway inflation, and encourages foreign investment due to its stability.

In total, as of 2013, 182 million people in Africa use a currency pegged to the euro, 27 million people outside the eurozone in Europe, and another 545,000 people on Pacific islands.[64]

Since 2005, stamps issued by the Sovereign Military Order of Malta have been denominated in euros, although the Order's official currency remains the Maltese scudo.[71] The Maltese scudo itself is pegged to the euro and is only recognised as legal tender within the Order.

Use as reserve currency edit

Since its introduction in 1999, the euro has been the second most widely held international reserve currency after the U.S. dollar. The share of the euro as a reserve currency increased from 18% in 1999 to 27% in 2008. Over this period, the share held in U.S. dollar fell from 71% to 64% and that held in RMB fell from 6.4% to 3.3%. The euro inherited and built on the status of the Deutsche Mark as the second most important reserve currency. The euro remains underweight as a reserve currency in advanced economies while overweight in emerging and developing economies: according to the International Monetary Fund[72] the total of euro held as a reserve in the world at the end of 2008 was equal to $1.1 trillion or €850 billion, with a share of 22% of all currency reserves in advanced economies, but a total of 31% of all currency reserves in emerging and developing economies.

The possibility of the euro becoming the first international reserve currency has been debated among economists.[73] Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it was "absolutely conceivable that the euro will replace the US dollar as reserve currency, or will be traded as an equally important reserve currency".[74] In contrast to Greenspan's 2007 assessment, the euro's increase in the share of the worldwide currency reserve basket has slowed considerably since 2007 and since the beginning of the worldwide credit crunch related recession and European sovereign-debt crisis.[72]

Economics edit

Optimal currency area edit

Further information: Optimum currency area

In economics, an optimum currency area, or region (OCA or OCR), is a geographical region in which it would maximise economic efficiency to have the entire region share a single currency. There are two models, both proposed by Robert Mundell: the stationary expectations model and the international risk sharing model. Mundell himself advocates the international risk sharing model and thus concludes in favour of the euro.[75] However, even before the creation of the single currency, there were concerns over diverging economies. Before the late-2000s recession it was considered unlikely that a state would leave the euro or the whole zone would collapse.[76] However the Greek government-debt crisis led to former British Foreign Secretary Jack Straw claiming the eurozone could not last in its current form.[77] Part of the problem seems to be the rules that were created when the euro was set up. John Lanchester, writing for The New Yorker, explains it:

The guiding principle of the currency, which opened for business in 1999, were supposed to be a set of rules to limit a country's annual deficit to three per cent of gross domestic product, and the total accumulated debt to sixty per cent of G.D.P. It was a nice idea, but by 2004 the two biggest economies in the euro zone, Germany and France, had broken the rules for three years in a row.[78]

Transaction costs and risks edit

Most traded currencies by value
Currency distribution of global foreign exchange market turnover[79]
Rank Currency ISO 4217
code 		Symbol or
abbreviation 		Proportion of daily volume
April 2019 April 2022
1 U.S. dollar USD US$ 88.3% 88.5%
2 Euro EUR € 32.3% 30.5%
3 Japanese yen JPY ¥ / 円 16.8% 16.7%
4 Sterling GBP £ 12.8% 12.9%
5 Renminbi CNY ¥ / 元 4.3% 7.0%
6 Australian dollar AUD A$ 6.8% 6.4%
7 Canadian dollar CAD C$ 5.0% 6.2%
8 Swiss franc CHF CHF 4.9% 5.2%
9 Hong Kong dollar HKD HK$ 3.5% 2.6%
10 Singapore dollar SGD S$ 1.8% 2.4%
11 Swedish krona SEK kr 2.0% 2.2%
12 South Korean won KRW ₩ / 원 2.0% 1.9%
13 Norwegian krone NOK kr 1.8% 1.7%
14 New Zealand dollar NZD NZ$ 2.1% 1.7%
15 Indian rupee INR ₹ 1.7% 1.6%
16 Mexican peso MXN $ 1.7% 1.5%
17 New Taiwan dollar TWD NT$ 0.9% 1.1%
18 South African rand ZAR R 1.1% 1.0%
19 Brazilian real BRL R$ 1.1% 0.9%
20 Danish krone DKK kr 0.6% 0.7%
21 Polish złoty PLN zł 0.6% 0.7%
22 Thai baht THB ฿ 0.5% 0.4%
23 Israeli new shekel ILS ₪ 0.3% 0.4%
24 Indonesian rupiah IDR Rp 0.4% 0.4%
25 Czech koruna CZK Kč 0.4% 0.4%
26 UAE dirham AED د.إ 0.2% 0.4%
27 Turkish lira TRY ₺ 1.1% 0.4%
28 Hungarian forint HUF Ft 0.4% 0.3%
29 Chilean peso CLP CLP$ 0.3% 0.3%
30 Saudi riyal SAR ﷼ 0.2% 0.2%
31 Philippine peso PHP ₱ 0.3% 0.2%
32 Malaysian ringgit MYR RM 0.2% 0.2%
33 Colombian peso COP COL$ 0.2% 0.2%
34 Russian ruble RUB ₽ 1.1% 0.2%
35 Romanian leu RON L 0.1% 0.1%
36 Peruvian sol PEN S/ 0.1% 0.1%
37 Bahraini dinar BHD .د.ب 0.0% 0.0%
38 Bulgarian lev BGN BGN 0.0% 0.0%
39 Argentine peso ARS ARG$ 0.1% 0.0%
… Other 1.8% 2.3%
Total[note 8] 200.0% 200.0%

The most obvious benefit of adopting a single currency is to remove the cost of exchanging currency, theoretically allowing businesses and individuals to consummate previously unprofitable trades. For consumers, banks in the eurozone must charge the same for intra-member cross-border transactions as purely domestic transactions for electronic payments (e.g., credit cards, debit cards and cash machine withdrawals).

Financial markets on the continent are expected to be far more liquid and flexible than they were in the past. The reduction in cross-border transaction costs will allow larger banking firms to provide a wider array of banking services that can compete across and beyond the eurozone. However, although transaction costs were reduced, some studies have shown that risk aversion has increased during the last 40 years in the Eurozone.[80]

Price parity edit

Another effect of the common European currency is that differences in prices—in particular in price levels—should decrease because of the law of one price. Differences in prices can trigger arbitrage, i.e., speculative trade in a commodity across borders purely to exploit the price differential. Therefore, prices on commonly traded goods are likely to converge, causing inflation in some regions and deflation in others during the transition. Some evidence of this has been observed in specific eurozone markets.[81]

Macroeconomic stability edit

Before the introduction of the euro, some countries had successfully contained inflation, which was then seen as a major economic problem, by establishing largely independent central banks. One such bank was the Bundesbank in Germany; the European Central Bank was modelled on the Bundesbank.[82]

The euro has come under criticism due to its regulation, lack of flexibility and rigidity towards sharing member states on issues such as nominal interest rates.[83] Many national and corporate bonds denominated in euro are significantly more liquid and have lower interest rates than was historically the case when denominated in national currencies. While increased liquidity may lower the nominal interest rate on the bond, denominating the bond in a currency with low levels of inflation arguably plays a much larger role. A credible commitment to low levels of inflation and a stable debt reduces the risk that the value of the debt will be eroded by higher levels of inflation or default in the future, allowing debt to be issued at a lower nominal interest rate.

There is also a cost in structurally keeping inflation lower than in the United States, United Kingdom, and China. The result is that seen from those countries, the euro has become expensive, making European products increasingly expensive for its largest importers; hence export from the eurozone becomes more difficult.

In general, those in Europe who own large amounts of euro are served by high stability and low inflation.

A monetary union means states in that union lose the main mechanism of recovery of their international competitiveness by weakening (depreciating) their currency. When wages become too high compared to productivity in the exports sector, then these exports become more expensive and they are crowded out from the market within a country and abroad. This drives the fall of employment and output in the exports sector and fall of trade and current account balances. Fall of output and employment in the tradable goods sector may be offset by the growth of non-exports sectors, especially in construction and services. Increased purchases abroad and negative current account balances can be financed without a problem as long as credit is cheap.[84] The need to finance trade deficit weakens currency, making exports automatically more attractive in a country and abroad. A state in a monetary union cannot use weakening of currency to recover its international competitiveness. To achieve this a state has to reduce prices, including wages (deflation). This could result in high unemployment and lower incomes as it was during the European sovereign-debt crisis.[85]

Trade edit

The euro increased price transparency and stimulated cross-border trade.[86] A 2009 consensus from the studies of the introduction of the euro concluded that it has increased trade within the eurozone by 5% to 10%,[87] although one study suggested an increase of only 3%[88] while another estimated 9 to 14%.[89] However, a meta-analysis of all available studies suggests that the prevalence of positive estimates is caused by publication bias and that the underlying effect may be negligible.[90] Although a more recent meta-analysis shows that publication bias decreases over time and that there are positive trade effects from the introduction of the euro, as long as results from before 2010 are taken into account. This may be because of the inclusion of the Financial crisis of 2007–2008 and ongoing integration within the EU.[91] Furthermore, older studies based on certain methods of analysis of main trends reflecting general cohesion policies in Europe that started before, and continue after implementing the common currency find no effect on trade.[92][93] These results suggest that other policies aimed at European integration might be the source of observed increase in trade. According to Barry Eichengreen, studies disagree on the magnitude of the effect of the euro on trade, but they agree that it did have an effect.[86]

Investment edit

Physical investment seems to have increased by 5% in the eurozone due to the introduction.[94] Regarding foreign direct investment, a study found that the intra-eurozone FDI stocks have increased by about 20% during the first four years of the EMU.[95] Concerning the effect on corporate investment, there is evidence that the introduction of the euro has resulted in an increase in investment rates and that it has made it easier for firms to access financing in Europe. The euro has most specifically stimulated investment in companies that come from countries that previously had weak currencies. A study found that the introduction of the euro accounts for 22% of the investment rate after 1998 in countries that previously had a weak currency.[96]

Inflation edit

 
Euro Zone inflation

The introduction of the euro has led to extensive discussion about its possible effect on inflation. In the short term, there was a widespread impression in the population of the eurozone that the introduction of the euro had led to an increase in prices, but this impression was not confirmed by general indices of inflation and other studies.[97][98] A study of this paradox found that this was due to an asymmetric effect of the introduction of the euro on prices: while it had no effect on most goods, it had an effect on cheap goods which have seen their price round up after the introduction of the euro. The study found that consumers based their beliefs on inflation of those cheap goods which are frequently purchased.[99] It has also been suggested that the jump in small prices may be because prior to the introduction, retailers made fewer upward adjustments and waited for the introduction of the euro to do so.[100]

Exchange rate risk edit

One of the advantages of the adoption of a common currency is the reduction of the risk associated with changes in currency exchange rates.[86] It has been found that the introduction of the euro created "significant reductions in market risk exposures for nonfinancial firms both in and outside Europe".[101] These reductions in market risk "were concentrated in firms domiciled in the eurozone and in non-euro firms with a high fraction of foreign sales or assets in Europe".

Financial integration edit

The introduction of the euro increased European financial integration, which helped stimulate growth of a European securities market (bond markets are characterized by economies of scale dynamics).[86] According to a study on this question, it has "significantly reshaped the European financial system, especially with respect to the securities markets [...] However, the real and policy barriers to integration in the retail and corporate banking sectors remain significant, even if the wholesale end of banking has been largely integrated."[102] Specifically, the euro has significantly decreased the cost of trade in bonds, equity, and banking assets within the eurozone.[103] On a global level, there is evidence that the introduction of the euro has led to an integration in terms of investment in bond portfolios, with eurozone countries lending and borrowing more between each other than with other countries.[104] Financial integration made it cheaper for European companies to borrow.[86] Banks, firms and households could also invest more easily outside of their own country, thus creating greater international risk-sharing.[86]

Effect on interest rates edit

 
Secondary market yields of government bonds with maturities of close to 10 years

As of January 2014, and since the introduction of the euro, interest rates of most member countries (particularly those with a weak currency) have decreased. Some of these countries had the most serious sovereign financing problems.

The effect of declining interest rates, combined with excess liquidity continually provided by the ECB, made it easier for banks within the countries in which interest rates fell the most, and their linked sovereigns, to borrow significant amounts (above the 3% of GDP budget deficit imposed on the eurozone initially) and significantly inflate their public and private debt levels.[105] Following the financial crisis of 2007–2008, governments in these countries found it necessary to bail out or nationalise their privately held banks to prevent systemic failure of the banking system when underlying hard or financial asset values were found to be grossly inflated and sometimes so nearly worthless there was no liquid market for them.[106] This further increased the already high levels of public debt to a level the markets began to consider unsustainable, via increasing government bond interest rates, producing the ongoing European sovereign-debt crisis.

Price convergence edit

The evidence on the convergence of prices in the eurozone with the introduction of the euro is mixed. Several studies failed to find any evidence of convergence following the introduction of the euro after a phase of convergence in the early 1990s.[107][108] Other studies have found evidence of price convergence,[109][110] in particular for cars.[111] A possible reason for the divergence between the different studies is that the processes of convergence may not have been linear, slowing down substantially between 2000 and 2003, and resurfacing after 2003 as suggested by a recent study (2009).[112]

Tourism edit

A study suggests that the introduction of the euro has had a positive effect on the amount of tourist travel within the EMU, with an increase of 6.5%.[113]

Exchange rates edit

Flexible exchange rates edit

The ECB targets interest rates rather than exchange rates and in general, does not intervene on the foreign exchange rate markets. This is because of the implications of the Mundell–Fleming model, which implies a central bank cannot (without capital controls) maintain interest rate and exchange rate targets simultaneously, because increasing the money supply results in a depreciation of the currency. In the years following the Single European Act, the EU has liberalised its capital markets and, as the ECB has inflation targeting as its monetary policy, the exchange-rate regime of the euro is floating.

Against other major currencies edit

The euro is the second-most widely held reserve currency after the U.S. dollar. After its introduction on 4 January 1999 its exchange rate against the other major currencies fell reaching its lowest exchange rates in 2000 (3 May vs sterling, 25 October vs the U.S. dollar, 26 October vs Japanese yen). Afterwards it regained and its exchange rate reached its historical highest point in 2008 (15 July vs US dollar, 23 July vs Japanese yen, 29 December vs sterling). With the advent of the global financial crisis the euro initially fell, to regain later. Despite pressure due to the European sovereign-debt crisis the euro remained stable.[114] In November 2011 the euro's exchange rate index – measured against currencies of the bloc's major trading partners – was trading almost two percent higher on the year, approximately at the same level as it was before the crisis kicked off in 2007.[115] In mid July, 2022, the euro equalled the US dollar for a short period of time.[16]

 
 
 
Euro exchange rate against US dollar (USD), sterling (GBP) and Japanese yen (JPY), starting from 1999.
  • Current and historical exchange rates against 32 other currencies (European Central Bank): link
Current EUR exchange rates
From Google Finance: AUD CAD CHF CNY GBP HKD JPY USD SEK TRY PLN
From Yahoo! Finance: AUD CAD CHF CNY GBP HKD JPY USD SEK TRY PLN
From XE.com: AUD CAD CHF CNY GBP HKD JPY USD SEK TRY PLN
From OANDA: AUD CAD CHF CNY GBP HKD JPY USD SEK TRY PLN

Political considerations edit

Besides the economic motivations to the introduction of the euro, its creation was also partly justified as a way to foster a closer sense of joint identity between European citizens. Statements about this goal were for instance made by Wim Duisenberg, European Central Bank Governor, in 1998,[116] Laurent Fabius, French Finance Minister, in 2000,[117] and Romano Prodi, President of the European Commission, in 2002.[118] However, 15 years after the introduction of the euro, a study found no evidence that it has had any effect on a shared sense of European identity.[119]

Euro in various official EU languages edit

Main article: Language and the euro

The formal titles of the currency are euro for the major unit and cent for the minor (one-hundredth) unit and for official use in most eurozone languages; according to the ECB, all languages should use the same spelling for the nominative singular.[120] This may contradict normal rules for word formation in some languages.

Bulgaria has negotiated an exception; euro in the Bulgarian Cyrillic alphabet is spelled eвро (evro) and not eуро (euro) in all official documents.[121] In the Greek script the term ευρώ (evró) is used; the Greek "cent" coins are denominated in λεπτό/ά (leptó/á). Official practice for English-language EU legislation is to use the words euro and cent as both singular and plural,[122] although the European Commission's Directorate-General for Translation states that the plural forms euros and cents should be used in English.[123] The word 'euro' is pronounced differently according to pronunciation rules in the individual languages applied; in German [ˈɔʏʁo], in English /ˈjʊəroʊ/, in French [øʁo], etc.

In summary:

Language(s) Name IPA
In most EU languages euro Croatian: [ěuro], Czech: [ˈɛuro], Danish: [ˈœwʁo], Dutch: [ˈøːroː], Estonian: [ˈeu̯ro], Finnish: [ˈeu̯ro], French: [øʁo], Italian: [ˈɛwro], Polish: [ˈɛwrɔ], Portuguese: [ˈewɾɔ] or [ˈewɾu], Slovak: [ˈewrɔ], Spanish: [ˈewɾo]
Bulgarian евро evro Bulgarian: [ˈɛvro]
German Euro [ˈɔʏʁo]
Greek ευρώ [eˈvro]
Hungarian euró [ˈɛuroː] or [ˈɛu̯roː]
Latvian euro or eiro [ɛìro]
Lithuanian euras [needs IPA]
Maltese ewro [ˈɛwrɔ]
Slovene evro [ˈéːʋrɔ]

For local phonetics, cent, use of plural and amount formatting (€6,00 or 6.00 €), see Language and the euro.

See also edit

Notes edit

  1. ^ Official documents and legislation refer to the euro as "the single currency".[1] This term is sometimes adopted by the media. (Google hits for the phrase)
  2. ^ Northern Cyprus uses Turkish lira.
  3. ^ Including outermost regions of French Guiana, Guadeloupe, Martinique, Mayotte, Réunion, Saint Barthélemy, Saint Martin, and Saint Pierre and Miquelon.
  4. ^ Only the European part of the country is part of the European Union and uses the euro. The Caribbean Netherlands introduced the United States dollar in 2011. Curaçao, Sint Maarten and Aruba have their own currencies, which are pegged to the dollar.
  5. ^ See Montenegro and the euro.
  6. ^ by means of Council Regulation 2866/98 (EC) of 31 December 1998.
  7. ^ by Council Regulation 1478/2000 (EC) of 19 June 2000.
  8. ^ The total sum is 200% because each currency trade is counted twice: once for the currency being bought and once for the one being sold. The percentages above represent the proportion of all trades involving a given currency, regardless of which side of the transaction it is on. For example, the US dollar is bought or sold in 88% of all currency trades, while the euro is bought or sold in 31% of all trades.

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  123. ^ For example, see (PDF). European Commission Directorate-General for Translation. 29 June 2010. para. 20.8. Archived from the original (PDF) on 5 December 2010. The euro. Like 'pound', 'dollar' or any other currency name in English, the word 'euro' is written in lower case with no initial capital and, where appropriate, takes the plural 's' (as does 'cent').

Further reading edit

  • Bartram, Söhnke M.; Taylor, Stephen J.; Wang, Yaw-Huei (May 2007). "The Euro and European Financial Market Dependence" (PDF). Journal of Banking and Finance. 51 (5): 1461–1481. doi:10.1016/j.jbankfin.2006.07.014. SSRN 924333.
  • Bartram, Söhnke M.; Karolyi, G. Andrew (October 2006). "The Impact of the Introduction of the Euro on Foreign Exchange Rate Risk Exposures". Journal of Empirical Finance. 13 (4–5): 519–549. doi:10.1016/j.jempfin.2006.01.002. SSRN 299641.
  • Baldwin, Richard; Wyplosz, Charles (2004). The Economics of European Integration. New York: McGraw Hill. ISBN 978-0-07-710394-1.
  • Buti, Marco; Deroose, Servaas; Gaspar, Vitor; Nogueira Martins, João (2010). The Euro. Cambridge: Cambridge University Press. ISBN 978-92-79-09842-0.
  • Jordan, Helmuth (2010). . Dorrance Publishing. Archived from the original on 16 September 2010. Retrieved 28 January 2011.
  • Simonazzi, A.; Vianello, F. (2001). "Financial Liberalization, the European Single Currency and the Problem of Unemployment". In Franzini, R.; Pizzuti, R.F. (eds.). Globalization, Institutions and Social Cohesion. Springer. ISBN 978-3-540-67741-3.

External links edit

  • European Union – Euro
  • European Commission – Euro Area
  • European Central Bank – Euro
  • European Central Bank – Euro Exchange Rates

December 02, 2023
euro, this, article, about, currency, other, uses, disambiguation, redirects, here, other, uses, disambiguation, euro, symbol, currency, code, official, currency, member, states, pean, union, this, group, states, officially, known, euro, area, commonly, eurozo. This article is about the currency For other uses see Euro disambiguation EUR redirects here For other uses see EUR disambiguation The euro symbol currency code EUR 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 commonly the eurozone and includes about 344 million citizens as of 2023 update The euro is divided into 100 euro cents 5 6 Eurosee also euro in various languagesEuro banknotes1 euro coinISO 4217CodeEUR numeric 978 Subunit0 01UnitUniteuroPluralVaries see language and the euroSymbol NicknameThe single currency note 1 DenominationsSubunit 1 100euro cent Name varies by language Plural euro cent Varies by language Symbol euro centcBanknotes Freq used 5 10 20 50 100 2 Rarely used 200 500 2 Coins Freq used1c 2c 5c 10c 20c 50c 1 2 Rarely used1c 2c Belgium Finland Ireland Italy Netherlands 3 DemographicsDate of introduction1 January 1999User s primary members of Eurozone 20 also other usersIssuanceCentral bankEuropean Central Bank Websitewww wbr ecb wbr europa wbr euPrintersee Banknote printingMintList of mintsValuationInflation4 3 September 2023 4 Sourceec europa eu MethodHICPPegged bysee Pegged currenciesEuro Monetary policy Euro Zone inflation year year M3 money supply increases Marginal Lending Facility Main Refinancing Operations Deposit Facility Rate EuriborThe currency is also used officially by the institutions of the European Union by four European microstates that are not EU members 6 the British Overseas Territory of Akrotiri and Dhekelia as well as unilaterally by Montenegro and Kosovo Outside Europe a number of special territories of EU members also use the euro as their currency Additionally over 200 million people worldwide use currencies pegged to the euro The euro is the second largest reserve currency as well as the second most traded currency in the world after the United States dollar 7 8 9 10 11 As of December 2019 update with more than 1 3 trillion in circulation the euro has one of the highest combined values of banknotes and coins in circulation in the world 12 13 The name euro was officially adopted on 16 December 1995 in Madrid 14 The euro was introduced to world financial markets as an accounting currency on 1 January 1999 replacing the former European Currency Unit ECU at a ratio of 1 1 US 1 1743 at the time Physical euro coins and banknotes entered into circulation on 1 January 2002 making it the day to day operating currency of its original members and by March 2002 it had completely replaced the former currencies 15 Between December 1999 and December 2002 the euro traded below the US dollar but has since traded near parity with or above the US dollar peaking at US 1 60 on 18 July 2008 and since then returning near to its original issue rate On 13 July 2022 the two currencies hit parity for the first time in nearly two decades due in part to the 2022 Russian invasion of Ukraine 16 Contents 1 Characteristics 1 1 Administration 1 2 Eurozone members 1 2 1 EU members not using the euro 1 2 2 Future eurozone members 1 3 Other users 1 4 Pegged currencies 2 Coins and banknotes 2 1 Coins 2 1 1 Coin minting 2 2 Banknotes 2 2 1 Issuing modalities for banknotes 2 2 2 Banknote printing 2 3 Payments clearing electronic funds transfer 3 History 3 1 Introduction 3 2 Currency sign 3 3 Eurozone crisis 4 Direct and indirect usage 4 1 Agreed direct usage with minting rights 4 2 Agreed direct usage without minting rights 4 3 Unilateral direct usage 4 4 Currencies pegged to the euro 4 5 Use as reserve currency 5 Economics 5 1 Optimal currency area 5 2 Transaction costs and risks 5 3 Price parity 5 4 Macroeconomic stability 5 4 1 Trade 5 4 2 Investment 5 4 3 Inflation 5 4 4 Exchange rate risk 5 4 5 Financial integration 5 4 6 Effect on interest rates 5 4 7 Price convergence 5 4 8 Tourism 6 Exchange rates 6 1 Flexible exchange rates 6 2 Against other major currencies 7 Political considerations 8 Euro in various official EU languages 9 See also 10 Notes 11 References 12 Further reading 13 External linksCharacteristics editAdministration edit nbsp The European Central Bank seat in Frankfurt am MainMain articles European Central Bank Maastricht Treaty and Eurogroup The euro is managed and administered by the European Central Bank ECB Frankfurt am Main and the Eurosystem composed of the central banks of the eurozone countries As an independent central bank the ECB has sole authority to set monetary policy The Eurosystem participates in the printing minting and distribution of notes and coins in all member states and the operation of the eurozone payment systems The 1992 Maastricht Treaty obliges most EU member states to adopt the euro upon meeting certain monetary and budgetary convergence criteria although not all participating states have done so Denmark has negotiated exemptions 17 while Sweden which joined the EU in 1995 after the Maastricht Treaty was signed turned down the euro in a non binding referendum in 2003 and has circumvented the obligation to adopt the euro by not meeting the monetary and budgetary requirements All nations that have joined the EU since 1993 have pledged to adopt the euro in due course The Maastricht Treaty was later amended by the Treaty of Nice 18 which closed the gaps and loopholes in the Maastricht and Rome Treaties Eurozone members edit Main article Eurozone The 20 participating members are Austria Belgium Croatia Cyprus note 2 Estonia Finland France note 3 Germany Greece Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands note 4 Portugal Slovakia Slovenia Spain EU members not using the euro edit The EU member states not in the Eurozone are Bulgaria Czech Republic Denmark Hungary Poland Romania and Sweden Future eurozone members edit Main article Enlargement of the eurozone The government of Bulgaria aims to replace the Bulgarian lev by the euro on 1 January 2025 19 20 21 The government of Romania aims for the Romanian leu to be replaced by the euro on 1 January 2026 22 EU members Czech Republic Hungary Poland and Sweden are legally obligated to adopt the euro eventually though they have no required date for adoption and their governments do not currently have any plans for switching Denmark negotiated for the right to retain its currency Other users edit Microstates with a monetary agreement Andorra 23 Monaco 24 San Marino 25 Vatican City 26 EU special territories Overseas territories French Southern and Antarctic Lands Saint Barthelemy Saint Pierre and Miquelon 27 British Overseas Territory Akrotiri and Dhekelia Unilateral adopters Kosovo 28 Montenegro note 5 Pegged currencies edit The currency of a number of states is pegged to the euro These states are Bosnia and Herzegovina Bosnia and Herzegovina convertible mark ISO 4217 code BAM Bulgaria Bulgarian lev BGN Cape Verde Cape Verdean escudo CVE Cameroon Central African CFA franc XAF Central African Republic Central African CFA franc Chad Central African CFA franc Equatorial Guinea Central African CFA franc Gabon Central African CFA franc Republic of the Congo Central African CFA franc French Polynesia CFP franc XFP New Caledonia CFP franc Wallis and Futuna CFP franc Comoros Comorian franc KMF Denmark Danish krone DKK North Macedonia Macedonian denar MKD 29 Sahrawi Arab Democratic Republic Sahrawi peseta Sovereign Military Order of Malta Maltese scudo 30 Sao Tome and Principe Sao Tome and Principe dobra STN Benin West African CFA franc XOF Burkina Faso West African CFA franc Cote d Ivoire West African CFA franc Guinea Bissau West African CFA franc Mali West African CFA franc Niger West African CFA franc Senegal West African CFA franc Togo West African CFA franc Coins and banknotes editCoins edit Main article Euro coins The euro is divided into 100 cents also referred to as euro cents especially when distinguishing them from other currencies and referred to as such on the common side of all cent coins In Community legislative acts the plural forms of euro and cent are spelled without the s notwithstanding normal English usage 31 32 Otherwise normal English plurals are used 33 with many local variations such as centime in France All circulating coins have a common side showing the denomination or value and a map in the background Due to the linguistic plurality in the European Union the Latin alphabet version of euro is used as opposed to the less common Greek or Cyrillic and Arabic numerals other text is used on national sides in national languages but other text on the common side is avoided For the denominations except the 1 2 and 5 cent coins the map only showed the 15 member states which were members when the euro was introduced Beginning in 2007 or 2008 depending on the country the old map was replaced by a map of Europe also showing countries outside the EU citation needed The 1 2 and 5 cent coins however keep their old design showing a geographical map of Europe with the 15 member states of 2002 raised somewhat above the rest of the map All common sides were designed by Luc Luycx The coins also have a national side showing an image specifically chosen by the country that issued the coin Euro coins from any member state may be freely used in any nation that has adopted the euro The coins are issued in denominations of 2 1 50c 20c 10c 5c 2c and 1c To avoid the use of the two smallest coins some cash transactions are rounded to the nearest five cents in the Netherlands and Ireland 34 35 by voluntary agreement and in Finland and Italy by law 36 This practice is discouraged by the commission as is the practice of certain shops of refusing to accept high value euro notes 37 Commemorative coins with 2 face value have been issued with changes to the design of the national side of the coin These include both commonly issued coins such as the 2 commemorative coin for the fiftieth anniversary of the signing of the Treaty of Rome and nationally issued coins such as the coin to commemorate the 2004 Summer Olympics issued by Greece These coins are legal tender throughout the eurozone Collector coins with various other denominations have been issued as well but these are not intended for general circulation and they are legal tender only in the member state that issued them 38 Coin minting edit A number of institutions are authorised to mint euro coins Bayerisches Hauptmunzamt Munich Mint mark D Currency Centre Fabrica Nacional de Moneda y Timbre Hamburgische Munze J Imprensa Nacional Casa da Moeda SA Istituto Poligrafico e Zecca dello Stato Koninklijke Nederlandse Munt Koninklijke Munt van Belgie Monnaie Royale de Belgique Mincovna Kremnica Monnaie de Paris Munze Osterreich Rahapaja Oy Myntverket i Finland Ab Staatliche Munze Berlin A Staatliche Munze Karlsruhe G Staatliche Munze Stuttgart F Lithuanian Mint Croatian Mint Banknotes edit Main article Euro banknotes nbsp Euro coins and banknotes of various denominationsThe design for the euro banknotes has common designs on both sides The design was created by the Austrian designer Robert Kalina 39 Notes are issued in 500 200 100 50 20 10 and 5 Each banknote has its own colour and is dedicated to an artistic period of European architecture The front of the note features windows or gateways while the back has bridges symbolising links between states in the union and with the future While the designs are supposed to be devoid of any identifiable characteristics the initial designs by Robert Kalina were of specific bridges including the Rialto and the Pont de Neuilly and were subsequently rendered more generic the final designs still bear very close similarities to their specific prototypes thus they are not truly generic The monuments looked similar enough to different national monuments to please everyone 40 The Europa series or second series consists of six denominations and no longer includes the 500 with issuance discontinued as of 27 April 2019 41 However both the first and the second series of euro banknotes including the 500 remain legal tender throughout the euro area 41 In December 2021 the ECB announced its plans to redesign euro banknotes by 2024 A theme advisory group made up of one member from each euro area country was selected to submit theme proposals to the ECB The proposals will be voted on by the public a design competition will also be held 42 Issuing modalities for banknotes edit Since 1 January 2002 the national central banks NCBs and the ECB have issued euro banknotes on a joint basis 43 Eurosystem NCBs are required to accept euro banknotes put into circulation by other Eurosystem members and these banknotes are not repatriated The ECB issues 8 of the total value of banknotes issued by the Eurosystem 43 In practice the ECB s banknotes are put into circulation by the NCBs thereby incurring matching liabilities vis a vis the ECB These liabilities carry interest at the main refinancing rate of the ECB The other 92 of euro banknotes are issued by the NCBs in proportion to their respective shares of the ECB capital key 43 calculated using national share of European Union EU population and national share of EU GDP equally weighted 44 Banknote printing edit Member states are authorised to print or to commission bank note printing As of November 2022 update these are the printers Istituto Poligrafico e Zecca dello Stato Banco de Portugal Bank of Greece Banque de France Bundesdruckerei Central Bank of Ireland De La Rue Fabrica Nacional de Moneda y Timbre Francois Charles Oberthur Giesecke amp Devrient Royal Joh Enschede National Bank of Belgium Oesterreichische Nationalbank Setec Oy Payments clearing electronic funds transfer edit Main article Single Euro Payments Area Capital within the EU may be transferred in any amount from one state to another All intra Union transfers in euro are treated as domestic transactions and bear the corresponding domestic transfer costs 45 This includes all member states of the EU even those outside the eurozone providing the transactions are carried out in euro 46 Credit debit card charging and ATM withdrawals within the eurozone are also treated as domestic transactions however paper based payment orders like cheques have not been standardised so these are still domestic based The ECB has also set up a clearing system TARGET for large euro transactions 47 History editMain article History of the euro Introduction edit Historical currencies of the European Union vte Currency Code Rate 48 Fixed on YieldedAustrian schilling ATS 13 7603 31 December 1998 1 January 1999Belgian franc BEF 40 3399 31 December 1998 1 January 1999Dutch guilder NLG 2 20371 31 December 1998 1 January 1999Finnish markka FIM 5 94573 31 December 1998 1 January 1999French franc FRF 6 55957 31 December 1998 1 January 1999German mark DEM 1 95583 31 December 1998 1 January 1999Irish pound IEP 0 787564 31 December 1998 1 January 1999Italian lira ITL 1 936 27 31 December 1998 1 January 1999Luxembourg franc LUF 40 3399 31 December 1998 1 January 1999Portuguese escudo PTE 200 482 31 December 1998 1 January 1999Spanish peseta ESP 166 386 31 December 1998 1 January 1999Greek drachma GRD 340 750 19 June 2000 1 January 2001Slovenian tolar SIT 239 640 11 July 2006 1 January 2007Cypriot pound CYP 0 585274 10 July 2007 1 January 2008Maltese lira MTL 0 429300 10 July 2007 1 January 2008Slovak koruna SKK 30 1260 8 July 2008 1 January 2009Estonian kroon EEK 15 6466 13 July 2010 1 January 2011Latvian lats LVL 0 702804 9 July 2013 1 January 2014Lithuanian litas LTL 3 45280 23 July 2014 1 January 2015Croatian kuna HRK 7 53450 12 July 2022 1 January 2023The euro was established by the provisions in the 1992 Maastricht Treaty To participate in the currency member states are meant 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 both of which were ultimately widely flouted after introduction low inflation and interest rates close to the EU average In the Maastricht Treaty the United Kingdom and Denmark were granted exemptions per their request from moving to the stage of monetary union which resulted in the introduction of the euro The name euro was officially adopted in Madrid on 16 December 1995 14 Belgian Esperantist Germain Pirlot a former teacher of French and history is credited with naming the new currency by sending a letter to then President of the European Commission Jacques Santer suggesting the name euro on 4 August 1995 49 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 The definitive values of one euro in terms of the exchange rates at which the currency entered the euro are shown on the right The rates were determined by the Council of the European Union note 6 based on a recommendation from the European Commission based on the market rates on 31 December 1998 They were set so that one European Currency Unit ECU would equal one euro The European Currency Unit was an accounting unit used by the EU based on the currencies of the member states it was not a currency in its own right They could not be set earlier because the ECU depended on the closing exchange rate of the non euro currencies principally sterling that day The procedure used to fix the conversion rate 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 the conversion rate for the Greek drachma was fixed several months beforehand note 7 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 Their exchange rates were locked at fixed rates against each other 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 euro notes and coins were introduced on 1 January 2002 The changeover period during which the former currencies notes and coins were exchanged for those of the euro lasted about 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 where the mark officially ceased to be legal tender on 31 December 2001 though the exchange period lasted for two months more Even after the old currencies ceased to be legal tender they continued to be accepted by national central banks for periods ranging from several years to indefinitely the latter for Austria Germany Ireland Estonia and Latvia in banknotes and coins and for Belgium Luxembourg Slovenia and Slovakia in banknotes only 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 Currency sign edit nbsp The euro sign logotype and handwrittenMain article Euro sign A special euro currency sign was designed after a public survey had narrowed ten of the original thirty proposals down to two The President of the European Commission at the time Jacques Santer and the European Commissioner with responsibility for the euro Yves Thibault de Silguy then chose the winning design 50 Regarding the symbol the European Commission stated on behalf of the European Union The symbol is based on the Greek letter epsilon Ye with the first letter in the word Europe and with 2 parallel lines signifying stability Directorate General for Communication 51 The European Commission also specified a euro logo with exact proportions 51 Placement of the currency sign relative to the numeric amount varies from state to state but for texts in English published by EU institutions the symbol or the ISO standard EUR should precede the amount 52 Eurozone crisis edit nbsp European 10 year bonds before the Great Recession in Europe bonds floated together in parity Greece 10 year bond Portugal 10 year bond Ireland 10 year bond Spain 10 year bond Italy 10 year bond France 10 year bond Germany 10 year bondMain articles European debt crisis and Greek government debt crisis See also 2008 2011 Icelandic financial crisis nbsp Budget deficit of the eurozone compared to the United States and the United Kingdom Following the U S financial crisis in 2008 fears of a sovereign debt crisis developed in 2009 among investors concerning some European states with the situation becoming particularly tense in early 2010 53 54 Greece was most acutely affected but fellow Eurozone members Cyprus Ireland Italy Portugal and Spain were also significantly affected 55 56 All these countries used EU funds except Italy which is a major donor to the EFSF 57 To be included in the eurozone countries had to fulfil certain convergence criteria but the meaningfulness of such criteria was diminished by the fact it was not enforced with the same level of strictness among countries 58 According to the Economist Intelligence Unit in 2011 I f the euro area is treated as a single entity its economic and fiscal position looks no worse and in some respects rather better than that of the US or the UK and the budget deficit for the euro area as a whole is much lower and the euro area s government debt GDP ratio of 86 in 2010 was about the same level as that of the United States Moreover they write private sector indebtedness across the euro area as a whole is markedly lower than in the highly leveraged Anglo Saxon economies The authors conclude that the crisis is as much political as economic and the result of the fact that the euro area lacks the support of institutional paraphernalia and mutual bonds of solidarity of a state 59 The crisis continued with S amp P downgrading the credit rating of nine euro area countries including France then downgrading the entire European Financial Stability Facility EFSF fund 60 A historical parallel to 1931 when Germany was burdened with debt unemployment and austerity while France and the United States were relatively strong creditors gained attention in summer 2012 61 even as Germany received a debt rating warning of its own 62 63 Direct and indirect usage editFurther information Eurozone International status and usage of the euro and Enlargement of the eurozone nbsp Austria Belgium Croatia Cyprus Finland Estonia France Greece Germany Ireland Italy Latvia Lithuania Lux Malta Netherlands Portugal Slovakia Slovenia Spain Andorra Monaco San Marino Vatican Kos Mont Eurozone members 20 Monetary agreement 4 Unilaterally adopted 2 nbsp Agreed direct usage with minting rights edit The euro is the sole currency of 20 EU member states Austria Belgium Croatia Cyprus Estonia Finland France Germany Greece Ireland Italy Latvia Lithuania Luxembourg Malta the Netherlands Portugal Slovakia Slovenia and Spain These countries constitute the eurozone some 347 million people in total as of 2023 update 64 According to bilateral agreements with the EU the euro has also been designated as the sole and official currency in a further four European microstates awarded minting rights Andorra Monaco San Marino and the Vatican City With all but one Denmark EU members obliged to join when economic conditions permit together with future members of the EU the enlargement of the eurozone is set to continue Agreed direct usage without minting rights edit The euro is also the sole currency in three overseas territories of France that are not themselves part of the EU namely Saint Barthelemy Saint Pierre and Miquelon and the French Southern and Antarctic Lands as well as in the British Overseas Territory of Akrotiri and Dhekelia 65 Unilateral direct usage edit The euro has been adopted unilaterally as the sole currency of Montenegro and Kosovo It has also been used as a foreign trading currency in Cuba since 1998 66 Syria since 2006 67 and Venezuela since 2018 68 In 2009 Zimbabwe abandoned its local currency and introduced major global convertible currencies instead including the euro and the United States dollar The direct usage of the euro outside of the official framework of the EU affects nearly 3 million people 69 Currencies pegged to the euro edit Main article International status and usage of the euro nbsp Worldwide use of the euro and the US dollar Eurozone External adopters of the euro Currencies pegged to the euro Currencies pegged to the euro within narrow band United States External adopters of the US dollar Currencies pegged to the US dollar Currencies pegged to the US dollar within narrow band Note The Belarusian rouble is pegged to the euro Russian rouble and US dollar in a currency basket Outside the eurozone two EU member states have currencies that are pegged to the euro which is a precondition to joining the eurozone The Danish krone and Bulgarian lev are pegged due to their participation in the ERM II Additionally a total of 21 countries and territories that do not belong to the EU have currencies that are directly pegged to the euro including 14 countries in mainland Africa CFA franc two African island countries Comorian franc and Cape Verdean escudo three French Pacific territories CFP franc and two Balkan countries Bosnia and Herzegovina Bosnia and Herzegovina convertible mark and North Macedonia Macedonian denar 29 On 1 January 2010 the dobra of Sao Tome and Principe was officially linked with the euro 70 Additionally the Moroccan dirham is tied to a basket of currencies including the euro and the US dollar with the euro given the highest weighting These countries generally had previously implemented a currency peg to one of the major European currencies e g the French franc Deutsche Mark or Portuguese escudo and when these currencies were replaced by the euro their currencies became pegged to the euro Pegging a country s currency to a major currency is regarded as a safety measure especially for currencies of areas with weak economies as the euro is seen as a stable currency prevents runaway inflation and encourages foreign investment due to its stability In total as of 2013 update 182 million people in Africa use a currency pegged to the euro 27 million people outside the eurozone in Europe and another 545 000 people on Pacific islands 64 Since 2005 stamps issued by the Sovereign Military Order of Malta have been denominated in euros although the Order s official currency remains the Maltese scudo 71 The Maltese scudo itself is pegged to the euro and is only recognised as legal tender within the Order Use as reserve currency edit Since its introduction in 1999 the euro has been the second most widely held international reserve currency after the U S dollar The share of the euro as a reserve currency increased from 18 in 1999 to 27 in 2008 Over this period the share held in U S dollar fell from 71 to 64 and that held in RMB fell from 6 4 to 3 3 The euro inherited and built on the status of the Deutsche Mark as the second most important reserve currency The euro remains underweight as a reserve currency in advanced economies while overweight in emerging and developing economies according to the International Monetary Fund 72 the total of euro held as a reserve in the world at the end of 2008 was equal to 1 1 trillion or 850 billion with a share of 22 of all currency reserves in advanced economies but a total of 31 of all currency reserves in emerging and developing economies The possibility of the euro becoming the first international reserve currency has been debated among economists 73 Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it was absolutely conceivable that the euro will replace the US dollar as reserve currency or will be traded as an equally important reserve currency 74 In contrast to Greenspan s 2007 assessment the euro s increase in the share of the worldwide currency reserve basket has slowed considerably since 2007 and since the beginning of the worldwide credit crunch related recession and European sovereign debt crisis 72 Economics editOptimal currency area edit Further information Optimum currency areaIn economics an optimum currency area or region OCA or OCR is a geographical region in which it would maximise economic efficiency to have the entire region share a single currency There are two models both proposed by Robert Mundell the stationary expectations model and the international risk sharing model Mundell himself advocates the international risk sharing model and thus concludes in favour of the euro 75 However even before the creation of the single currency there were concerns over diverging economies Before the late 2000s recession it was considered unlikely that a state would leave the euro or the whole zone would collapse 76 However the Greek government debt crisis led to former British Foreign Secretary Jack Straw claiming the eurozone could not last in its current form 77 Part of the problem seems to be the rules that were created when the euro was set up John Lanchester writing for The New Yorker explains it The guiding principle of the currency which opened for business in 1999 were supposed to be a set of rules to limit a country s annual deficit to three per cent of gross domestic product and the total accumulated debt to sixty per cent of G D P It was a nice idea but by 2004 the two biggest economies in the euro zone Germany and France had broken the rules for three years in a row 78 Transaction costs and risks edit Most traded currencies by valueCurrency distribution of global foreign exchange market turnover 79 vte Rank Currency ISO 4217code Symbol orabbreviation Proportion of daily volumeApril 2019 April 20221 U S dollar USD US 88 3 88 5 2 Euro EUR 32 3 30 5 3 Japanese yen JPY 円 16 8 16 7 4 Sterling GBP 12 8 12 9 5 Renminbi CNY 元 4 3 7 0 6 Australian dollar AUD A 6 8 6 4 7 Canadian dollar CAD C 5 0 6 2 8 Swiss franc CHF CHF 4 9 5 2 9 Hong Kong dollar HKD HK 3 5 2 6 10 Singapore dollar SGD S 1 8 2 4 11 Swedish krona SEK kr 2 0 2 2 12 South Korean won KRW 원 2 0 1 9 13 Norwegian krone NOK kr 1 8 1 7 14 New Zealand dollar NZD NZ 2 1 1 7 15 Indian rupee INR 1 7 1 6 16 Mexican peso MXN 1 7 1 5 17 New Taiwan dollar TWD NT 0 9 1 1 18 South African rand ZAR R 1 1 1 0 19 Brazilian real BRL R 1 1 0 9 20 Danish krone DKK kr 0 6 0 7 21 Polish zloty PLN zl 0 6 0 7 22 Thai baht THB 0 5 0 4 23 Israeli new shekel ILS 0 3 0 4 24 Indonesian rupiah IDR Rp 0 4 0 4 25 Czech koruna CZK Kc 0 4 0 4 26 UAE dirham AED د إ 0 2 0 4 27 Turkish lira TRY 1 1 0 4 28 Hungarian forint HUF Ft 0 4 0 3 29 Chilean peso CLP CLP 0 3 0 3 30 Saudi riyal SAR 0 2 0 2 31 Philippine peso PHP 0 3 0 2 32 Malaysian ringgit MYR RM 0 2 0 2 33 Colombian peso COP COL 0 2 0 2 34 Russian ruble RUB 1 1 0 2 35 Romanian leu RON L 0 1 0 1 36 Peruvian sol PEN S 0 1 0 1 37 Bahraini dinar BHD د ب 0 0 0 0 38 Bulgarian lev BGN BGN 0 0 0 0 39 Argentine peso ARS ARG 0 1 0 0 Other 1 8 2 3 Total note 8 200 0 200 0 The most obvious benefit of adopting a single currency is to remove the cost of exchanging currency theoretically allowing businesses and individuals to consummate previously unprofitable trades For consumers banks in the eurozone must charge the same for intra member cross border transactions as purely domestic transactions for electronic payments e g credit cards debit cards and cash machine withdrawals Financial markets on the continent are expected to be far more liquid and flexible than they were in the past The reduction in cross border transaction costs will allow larger banking firms to provide a wider array of banking services that can compete across and beyond the eurozone However although transaction costs were reduced some studies have shown that risk aversion has increased during the last 40 years in the Eurozone 80 Price parity edit Another effect of the common European currency is that differences in prices in particular in price levels should decrease because of the law of one price Differences in prices can trigger arbitrage i e speculative trade in a commodity across borders purely to exploit the price differential Therefore prices on commonly traded goods are likely to converge causing inflation in some regions and deflation in others during the transition Some evidence of this has been observed in specific eurozone markets 81 Macroeconomic stability edit Before the introduction of the euro some countries had successfully contained inflation which was then seen as a major economic problem by establishing largely independent central banks One such bank was the Bundesbank in Germany the European Central Bank was modelled on the Bundesbank 82 The euro has come under criticism due to its regulation lack of flexibility and rigidity towards sharing member states on issues such as nominal interest rates 83 Many national and corporate bonds denominated in euro are significantly more liquid and have lower interest rates than was historically the case when denominated in national currencies While increased liquidity may lower the nominal interest rate on the bond denominating the bond in a currency with low levels of inflation arguably plays a much larger role A credible commitment to low levels of inflation and a stable debt reduces the risk that the value of the debt will be eroded by higher levels of inflation or default in the future allowing debt to be issued at a lower nominal interest rate There is also a cost in structurally keeping inflation lower than in the United States United Kingdom and China The result is that seen from those countries the euro has become expensive making European products increasingly expensive for its largest importers hence export from the eurozone becomes more difficult In general those in Europe who own large amounts of euro are served by high stability and low inflation A monetary union means states in that union lose the main mechanism of recovery of their international competitiveness by weakening depreciating their currency When wages become too high compared to productivity in the exports sector then these exports become more expensive and they are crowded out from the market within a country and abroad This drives the fall of employment and output in the exports sector and fall of trade and current account balances Fall of output and employment in the tradable goods sector may be offset by the growth of non exports sectors especially in construction and services Increased purchases abroad and negative current account balances can be financed without a problem as long as credit is cheap 84 The need to finance trade deficit weakens currency making exports automatically more attractive in a country and abroad A state in a monetary union cannot use weakening of currency to recover its international competitiveness To achieve this a state has to reduce prices including wages deflation This could result in high unemployment and lower incomes as it was during the European sovereign debt crisis 85 Trade edit The euro increased price transparency and stimulated cross border trade 86 A 2009 consensus from the studies of the introduction of the euro concluded that it has increased trade within the eurozone by 5 to 10 87 although one study suggested an increase of only 3 88 while another estimated 9 to 14 89 However a meta analysis of all available studies suggests that the prevalence of positive estimates is caused by publication bias and that the underlying effect may be negligible 90 Although a more recent meta analysis shows that publication bias decreases over time and that there are positive trade effects from the introduction of the euro as long as results from before 2010 are taken into account This may be because of the inclusion of the Financial crisis of 2007 2008 and ongoing integration within the EU 91 Furthermore older studies based on certain methods of analysis of main trends reflecting general cohesion policies in Europe that started before and continue after implementing the common currency find no effect on trade 92 93 These results suggest that other policies aimed at European integration might be the source of observed increase in trade According to Barry Eichengreen studies disagree on the magnitude of the effect of the euro on trade but they agree that it did have an effect 86 Investment edit Physical investment seems to have increased by 5 in the eurozone due to the introduction 94 Regarding foreign direct investment a study found that the intra eurozone FDI stocks have increased by about 20 during the first four years of the EMU 95 Concerning the effect on corporate investment there is evidence that the introduction of the euro has resulted in an increase in investment rates and that it has made it easier for firms to access financing in Europe The euro has most specifically stimulated investment in companies that come from countries that previously had weak currencies A study found that the introduction of the euro accounts for 22 of the investment rate after 1998 in countries that previously had a weak currency 96 Inflation edit nbsp Euro Zone inflationThe introduction of the euro has led to extensive discussion about its possible effect on inflation In the short term there was a widespread impression in the population of the eurozone that the introduction of the euro had led to an increase in prices but this impression was not confirmed by general indices of inflation and other studies 97 98 A study of this paradox found that this was due to an asymmetric effect of the introduction of the euro on prices while it had no effect on most goods it had an effect on cheap goods which have seen their price round up after the introduction of the euro The study found that consumers based their beliefs on inflation of those cheap goods which are frequently purchased 99 It has also been suggested that the jump in small prices may be because prior to the introduction retailers made fewer upward adjustments and waited for the introduction of the euro to do so 100 Exchange rate risk edit One of the advantages of the adoption of a common currency is the reduction of the risk associated with changes in currency exchange rates 86 It has been found that the introduction of the euro created significant reductions in market risk exposures for nonfinancial firms both in and outside Europe 101 These reductions in market risk were concentrated in firms domiciled in the eurozone and in non euro firms with a high fraction of foreign sales or assets in Europe Financial integration edit The introduction of the euro increased European financial integration which helped stimulate growth of a European securities market bond markets are characterized by economies of scale dynamics 86 According to a study on this question it has significantly reshaped the European financial system especially with respect to the securities markets However the real and policy barriers to integration in the retail and corporate banking sectors remain significant even if the wholesale end of banking has been largely integrated 102 Specifically the euro has significantly decreased the cost of trade in bonds equity and banking assets within the eurozone 103 On a global level there is evidence that the introduction of the euro has led to an integration in terms of investment in bond portfolios with eurozone countries lending and borrowing more between each other than with other countries 104 Financial integration made it cheaper for European companies to borrow 86 Banks firms and households could also invest more easily outside of their own country thus creating greater international risk sharing 86 Effect on interest rates edit nbsp Secondary market yields of government bonds with maturities of close to 10 yearsAs of January 2014 and since the introduction of the euro interest rates of most member countries particularly those with a weak currency have decreased Some of these countries had the most serious sovereign financing problems The effect of declining interest rates combined with excess liquidity continually provided by the ECB made it easier for banks within the countries in which interest rates fell the most and their linked sovereigns to borrow significant amounts above the 3 of GDP budget deficit imposed on the eurozone initially and significantly inflate their public and private debt levels 105 Following the financial crisis of 2007 2008 governments in these countries found it necessary to bail out or nationalise their privately held banks to prevent systemic failure of the banking system when underlying hard or financial asset values were found to be grossly inflated and sometimes so nearly worthless there was no liquid market for them 106 This further increased the already high levels of public debt to a level the markets began to consider unsustainable via increasing government bond interest rates producing the ongoing European sovereign debt crisis Price convergence edit The evidence on the convergence of prices in the eurozone with the introduction of the euro is mixed Several studies failed to find any evidence of convergence following the introduction of the euro after a phase of convergence in the early 1990s 107 108 Other studies have found evidence of price convergence 109 110 in particular for cars 111 A possible reason for the divergence between the different studies is that the processes of convergence may not have been linear slowing down substantially between 2000 and 2003 and resurfacing after 2003 as suggested by a recent study 2009 112 Tourism edit A study suggests that the introduction of the euro has had a positive effect on the amount of tourist travel within the EMU with an increase of 6 5 113 Exchange rates editFlexible exchange rates edit The ECB targets interest rates rather than exchange rates and in general does not intervene on the foreign exchange rate markets This is because of the implications of the Mundell Fleming model which implies a central bank cannot without capital controls maintain interest rate and exchange rate targets simultaneously because increasing the money supply results in a depreciation of the currency In the years following the Single European Act the EU has liberalised its capital markets and as the ECB has inflation targeting as its monetary policy the exchange rate regime of the euro is floating Against other major currencies edit The euro is the second most widely held reserve currency after the U S dollar After its introduction on 4 January 1999 its exchange rate against the other major currencies fell reaching its lowest exchange rates in 2000 3 May vs sterling 25 October vs the U S dollar 26 October vs Japanese yen Afterwards it regained and its exchange rate reached its historical highest point in 2008 15 July vs US dollar 23 July vs Japanese yen 29 December vs sterling With the advent of the global financial crisis the euro initially fell to regain later Despite pressure due to the European sovereign debt crisis the euro remained stable 114 In November 2011 the euro s exchange rate index measured against currencies of the bloc s major trading partners was trading almost two percent higher on the year approximately at the same level as it was before the crisis kicked off in 2007 115 In mid July 2022 the euro equalled the US dollar for a short period of time 16 nbsp nbsp nbsp Euro exchange rate against US dollar USD sterling GBP and Japanese yen JPY starting from 1999 Current and historical exchange rates against 32 other currencies European Central Bank linkCurrent EUR exchange ratesFrom Google Finance AUD CAD CHF CNY GBP HKD JPY USD SEK TRY PLNFrom Yahoo Finance AUD CAD CHF CNY GBP HKD JPY USD SEK TRY PLNFrom XE com AUD CAD CHF CNY GBP HKD JPY USD SEK TRY PLNFrom OANDA AUD CAD CHF CNY GBP HKD JPY USD SEK TRY PLNPolitical considerations editBesides the economic motivations to the introduction of the euro its creation was also partly justified as a way to foster a closer sense of joint identity between European citizens Statements about this goal were for instance made by Wim Duisenberg European Central Bank Governor in 1998 116 Laurent Fabius French Finance Minister in 2000 117 and Romano Prodi President of the European Commission in 2002 118 However 15 years after the introduction of the euro a study found no evidence that it has had any effect on a shared sense of European identity 119 Euro in various official EU languages editMain article Language and the euro The formal titles of the currency are euro for the major unit and cent for the minor one hundredth unit and for official use in most eurozone languages according to the ECB all languages should use the same spelling for the nominative singular 120 This may contradict normal rules for word formation in some languages Bulgaria has negotiated an exception euro in the Bulgarian Cyrillic alphabet is spelled evro evro and not euro euro in all official documents 121 In the Greek script the term eyrw evro is used the Greek cent coins are denominated in lepto a lepto a Official practice for English language EU legislation is to use the words euro and cent as both singular and plural 122 although the European Commission s Directorate General for Translation states that the plural forms euros and cents should be used in English 123 The word euro is pronounced differently according to pronunciation rules in the individual languages applied in German ˈɔʏʁo in English ˈ j ʊer oʊ in French oʁo etc In summary Language s Name IPAIn most EU languages euro Croatian euro Czech ˈɛuro Danish ˈœwʁo Dutch ˈoːroː Estonian ˈeu ro Finnish ˈeu ro French oʁo Italian ˈɛwro Polish ˈɛwrɔ Portuguese ˈewɾɔ or ˈewɾu Slovak ˈewrɔ Spanish ˈewɾo Bulgarian evro evro Bulgarian ˈɛvro German Euro ˈɔʏʁo Greek eyrw eˈvro Hungarian euro ˈɛuroː or ˈɛu roː Latvian euro or eiro ɛiro Lithuanian euras needs IPA Maltese ewro ˈɛwrɔ Slovene evro ˈeːʋrɔ For local phonetics cent use of plural and amount formatting 6 00 or 6 00 see Language and the euro See also editCaptain Euro The Raspberry Ice Cream War Causes of the European debt crisis Controversies surrounding the eurozone crisis Currency union Digital euro Economic and Monetary Union of the European Union European debt crisis European integration History of the European Union List of acronyms associated with the eurozone crisis List of currencies in Europe Proposed long term solutions for the eurozone crisis Withdrawal from the eurozoneNotes edit Official documents and legislation refer to the euro as the single currency 1 This term is sometimes adopted by the media Google hits for the phrase Northern Cyprus uses Turkish lira Including outermost regions of French Guiana Guadeloupe Martinique Mayotte Reunion Saint Barthelemy Saint Martin and Saint Pierre and Miquelon Only the European part of the country is part of the European Union and uses the euro The Caribbean Netherlands introduced the United States dollar in 2011 Curacao Sint Maarten and Aruba have their own currencies which are pegged to the dollar See Montenegro and the euro by means of Council Regulation 2866 98 EC of 31 December 1998 by Council Regulation 1478 2000 EC of 19 June 2000 The total sum is 200 because each currency trade is counted twice once for the currency being bought and once for the one being sold The percentages above represent the proportion of all trades involving a given currency regardless of which side of the transaction it is on For example the US dollar is bought or sold in 88 of all currency trades while the euro is bought or sold in 31 of all trades References edit Council Regulation EC No 1103 97 of 17 June 1997 on certain provisions relating to the introduction of the euro Official Journal L 162 19 June 1997 P 0001 0003 European Communities 19 June 1997 Retrieved 1 April 2009 a b ECB Statistical Data Warehouse Reports gt ECB Eurosystem policy gt Banknotes and coins statistics gt 1 Euro banknotes gt 1 1 Quantities European Central Bank Walsh Alistair 29 May 2017 Italy to stop producing 1 and 2 cent coins Deutsche Welle Retrieved 4 November 2019 Inflation in the euro area The euro European Commission website Retrieved 2 January 2019 a b What is the euro area European Commission website Retrieved 2 January 2019 IMF Data Currency Composition of Official Foreign Exchange Reserve At a Glance International Monetary Fund 23 December 2022 Retrieved 11 January 2023 Foreign exchange turnover in April 2013 preliminary global results PDF Bank for International Settlements Retrieved 7 February 2015 Triennial Central Bank Survey 2007 PDF BIS 19 December 2007 Retrieved 25 July 2009 Aristovnik Aleksander Cec Tanja 30 March 2010 Compositional Analysis of Foreign Currency Reserves in the 1999 2007 Period The Euro vs The Dollar As Leading Reserve Currency PDF Munich Personal RePEc Archive Paper No 14350 Retrieved 27 December 2010 Boesler Matthew 11 November 2013 There Are Only Two Real Threats to the US Dollar s Status As The International Reserve Currency Business Insider Retrieved 8 December 2013 1 2 Euro banknotes values European Central Bank Statistical Data Warehouse 14 January 2020 Retrieved 23 January 2020 2 2 Euro coins values European Central Bank Statistical Data Warehouse 14 January 2020 Retrieved 23 January 2020 a b Madrid European Council 12 95 Conclusions European Parliament Retrieved 14 February 2009 Initial changeover 2002 European Central Bank Retrieved 5 March 2011 a b Euro Falls Near Parity With Dollar a Threshold Watched Closely by Investors The New York Times 12 July 2022 ISSN 0362 4331 Retrieved 13 July 2022 The Euro European Commission Retrieved 29 January 2009 Nice Treaty of Treaty of Nice About Parliament Not Available Retrieved 7 May 2021 Bulgaria gives up its goal to join eurozone in 2024 EURACTIV Bulgaria 17 February 2023 Retrieved 18 February 2023 Why Bulgaria Abandoned Its Goal to Join Euro in 2024 The Washington Post 17 February 2023 Retrieved 18 February 2023 Bulgaria Will Not Make It Into Eurozone In January 2024 As Planned Radio Free Europe Radio Liberty 18 February 2023 Retrieved 18 February 2023 Romania wants to push euro adoption by 2026 20 March 2023 Monetary Agreement between the European Union and the Principality of Andorra Official Journal of the European Union 17 December 2011 Archived from the original on 10 May 2013 Retrieved 8 September 2012 By monetary agreement between France acting for the EC and Monaco Retrieved 30 May 2010 By monetary agreement between Italy acting for the EC and San Marino Retrieved 30 May 2010 By monetary agreement between Italy acting for the EC and Vatican City Retrieved 30 May 2010 By agreement of the EU Council Retrieved 30 May 2010 By UNMIK administration direction 1999 2 Unmikonline 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pp 212 213 doi 10 2307 j ctvd58rxg ISBN 978 0 691 19390 8 JSTOR j ctvd58rxg S2CID 240840930 The euro s trade effects PDF Retrieved 2 October 2009 The Euro Effect on Trade is not as Large as Commonly Thought PDF Archived from the original PDF on 24 July 2011 Retrieved 2 October 2009 Chintrakarn Pandej 2007 Estimating the Euro Effects on Trade with Propensity Score Matching Review of International Economics 16 186 198 doi 10 1111 j 1467 9396 2007 00725 x S2CID 154077583 SSRN 1079383 Havranek Tomas 2010 Rose effect and the euro is the magic gone PDF Review of World Economics 146 2 241 261 doi 10 1007 s10290 010 0050 1 S2CID 53585674 Polak Petr 2019 The Euro s Trade Effect A Meta Analysis PDF Journal of Economic Surveys 33 1 101 124 doi 10 1111 joes 12264 hdl 10419 174189 ISSN 1467 6419 S2CID 157693449 Gomes Tamara Graham Chris Helliwel John Takashi Kano Murray John Schembri Lawrence August 2006 The Euro and Trade Is there a Positive Effect PDF Bank of Canada Archived from the original PDF 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11 001 S2CID 55948853 Lane Philip R June 2006 Global Bond Portfolios and EMU International Journal of Central Banking 2 2 1 23 CiteSeerX 10 1 1 365 4579 Redwood The origins of the euro crisis Investmentweek co uk 3 June 2011 Retrieved 16 September 2011 Farewell Fair Weather Euro IP Global Edition Ip global org Archived from the original on 17 March 2011 Retrieved 16 September 2011 Price setting and inflation dynamics did EMU matter PDF Archived from the original PDF on 25 July 2011 Retrieved 13 March 2011 Price convergence in the EMU Evidence from micro data PDF Retrieved 2 October 2009 One TV One Price PDF Retrieved 17 July 2011 One Market One Money One Price PDF Retrieved 17 July 2011 Gil Pareja Salvador and Simon Sosvilla Rivero Price Convergence in the European Car Market FEDEA November 2005 Fritsche Ulrich Lein Sarah Weber Sebastian April 2009 Do Prices in the EMU Converge Non linearly PDF University of Hamburg Department Economics and Politics Discussion Papers Macroeconomics and 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identity across different nations The case of the euro European Economic Review 100 318 336 doi 10 1016 j euroecorev 2017 08 011 S2CID 102510742 European Central Bank Convergence Report PDF May 2007 Retrieved 29 December 2008 The euro is the single currency of the member states that have adopted it To make this singleness apparent Community law requires a single spelling of the word euro in the nominative singular case in all community and national legislative provisions taking into account the existence of different alphabets Elena Koinova 19 October 2007 Evro Dispute Over Portuguese Foreign Minister Bulgaria The Sofia Echo Archived from the original on 3 June 2011 Retrieved 17 July 2011 European Commission Spelling of the words euro and cent in official community languages as used in community legislative acts PDF Retrieved 12 January 2009 For example see English Style Guide PDF European Commission Directorate General for Translation 29 June 2010 para 20 8 Archived from the original PDF on 5 December 2010 The euro Like pound dollar or any other currency name in English the word euro is written in lower case with no initial capital and where appropriate takes the plural s as does cent Further reading editBartram Sohnke M Taylor Stephen J Wang Yaw Huei May 2007 The Euro and European Financial Market Dependence PDF Journal of Banking and Finance 51 5 1461 1481 doi 10 1016 j jbankfin 2006 07 014 SSRN 924333 Bartram Sohnke M Karolyi G Andrew October 2006 The Impact of the Introduction of the Euro on Foreign Exchange Rate Risk Exposures Journal of Empirical Finance 13 4 5 519 549 doi 10 1016 j jempfin 2006 01 002 SSRN 299641 Baldwin Richard Wyplosz Charles 2004 The Economics of European Integration New York McGraw Hill ISBN 978 0 07 710394 1 Buti Marco Deroose Servaas Gaspar Vitor Nogueira Martins Joao 2010 The Euro Cambridge Cambridge University Press ISBN 978 92 79 09842 0 Jordan Helmuth 2010 Fehlschlag Euro Dorrance Publishing Archived from the original on 16 September 2010 Retrieved 28 January 2011 Simonazzi A Vianello F 2001 Financial Liberalization the European Single Currency and the Problem of Unemployment In Franzini R Pizzuti R F eds Globalization Institutions and Social Cohesion Springer ISBN 978 3 540 67741 3 External links editEuro at Wikipedia s sister projects nbsp Definitions from Wiktionary nbsp Media from Commons nbsp News from Wikinews nbsp Quotations from Wikiquote nbsp Texts from Wikisource nbsp Textbooks from Wikibooks nbsp Resources from Wikiversity European Union Euro European Commission Euro Area European Central Bank Euro European Central Bank Euro Exchange Rates Portals nbsp European Union nbsp Money nbsp Numismatics Retrieved from https en wikipedia org w index php title Euro amp oldid 1186846927, wikipedia, wiki, book, books, library,

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