Euro
The euro is administered by the European System of Central Banks (ESCB), composed of the European Central Bank (ECB) and the Eurozone central banks operating in member states. The ECB (headquartered in Frankfurt am Main, Germany) has sole authority to set monetary policy; the other members of the ESCB participate in the printing, minting and distribution of notes and coins, and the operation of the Eurozone payment system.
The euro is divided into 100 cents. All euro coins have a common side showing the worth and a national side showing an image particular to the country it was issued in. The Monarchies tend to have a picture of their reigning King or Queen.
Euro banknotes have a common design for each denomination on both sides. All the different coins can be used in all the participating member states: a euro coin bearing an image of the Spanish king is legal tender not only in Spain, but also in Finland (and other nations where the euro is in use). (This practice is similar to that used on sterling pound coins: there are Scottish, Welsh, Northern Irish, English and 'Royal' designs for one side, while the other side features a uniform design, and each is legal tender throughout the United Kingdom.)
Official practice followed in English language EU legislation is to use the words euro and cent as both singular and plural.[1] However normal usage outside of such legislation is to use the plurals euros and cents; this somewhat inconsistent position is actually endorsed by the European Commission Translation Service.
In reality neither the European Commission nor its Translation Service has any right to dictate language: especially in languages like Irish the dictated forms euro and cent for both singular and plural are non-sensical and indeed impossible in the language as they violate basic rules. A variation of these basic terms therefore exists in the various languages of the member states: for example the Finnish term for the cent is sentti/senttiÃÂä and the Greek term is λεπτό (lepto). The plurals euros and cents are also officially used in Spanish and French. In Portugal, the plural euros is used and the words cÃÂêntimo/cÃÂêntimos are widely used instead of cent/cents. Although cent is the official term in France and Belgium, most French and French-speaking Belgian people still use the older term centime to avoid confusion with the word cent meaning hundred, and in the habit of the subdivision of a French Franc divided into 100 centimes. Likewise, in Spain cÃÂéntimo is still frequently heard. In Dutch, the plural of euro is euro’s and that of cent is centen. In Irish one speaks of eura and ceint as the plurals. In English-speaking Ireland, both euros and euro may be heard for the plural, or occasionally quid. Speaking of several cent would be unusual.
The euro was established by the provisions in the 1992 Maastricht Treaty on European Union relating to establishing an economic and monetary union. In order to participate in the new currency, member states had to meet strict criteria such as a budget deficit of less than 3% of GDP, a debt ratio of less than 60% of GDP, combined with low inflation and interest rates close to the EU average.
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 in euro of these subdivisions (which represent the exchange rate at which the currency entered the euro) are as follows:
Greece failed to meet the criteria for joining initially, so it did not join the common currency on January 1, 1999. It was admitted two years later, on January 1, 2001, at an exchange rate of:
The currency was introduced in non-physical form (traveller's cheques, electronic transfers, banking, etc.) at midnight on January 1, 1999, when the national currencies of participating countries (the Eurozone) ceased to exist independently in that their exchange rates were locked at fixed rates against each other, effectively making them mere subdivisions of the euro; the Euro thus became the successor to the older European Currency Unit (ECU). The notes and coins for the old currencies, however, continued to be used as legal tender until new notes and coins were introduced on January 1, 2002 and the changeover period ended on February 28, 2002.
The changeover period during which the former currencies' notes and coins were exchanged for those of the euro generally lasted two months. 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 Deutschmark officially ceased to be legal tender on December 31, 2001, though the exchange period lasted two months. The final date was February 28, 2002, by which all national currencies ceased to be legal tender in their respective member states. (Note that some of these dates were earlier than was originally planned.) However, even after that they will continue to be accepted by national central banks for several years, and in some states for decades hence. The earliest coins to become non-convertible were the Portuguese escudos, which ceased to have monetary value after 31 December 2002, although banknotes remain exchangeable until 2022.
Although some countries are not printing the bigger banknotes such as 500 euro and 200 euro, all banknotes are legal tender throughout the Eurozone. Finland decided not to mint or circulate 1 cent and 2 cent coins, except in small numbers for collectors. All cash transactions in Finland ending in 1 or 2 cents are rounded down and 3 or 4 cents are rounded up.
At present the member states participating in the euro are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Spain. These countries are frequently referred to as the "Eurozone" or as "Euroland".
Denmark and the United Kingdom got special derogations in the original Maastricht Treaty of the European Union. Both countries are not legally required to join the euro unless their governments decide otherwise, either by parliamentary vote or referendum.
Note: should Denmark join the euro, Greenland, which is not part of the EU, but of Denmark, would have to hold a separate referendum to decide whether it wants to switch to the euro. The outcome of this possibility is uncertain, as current trends seem to favour independence from Denmark.
The British government under prime minister Tony Blair has committed itself to a triple-approval procedure before joining the euro, involving approval by the Cabinet, Parliament, and the British electorate in a referendum.
Unlike other European countries, where the euro is seen as an essential building block in a more politically integrated Europe, in the United Kingdom the possible benefits of eurozone membership are seen as principally economic, and an assessment of British membership based on five economic tests was published on June 9, 2003 by Chancellor of the Exchequer Gordon Brown.
Though maintaining the Government's positive view on the euro, the report came out against membership for the moment, because of the fact that four out of the five tests were not passed.
Chancellor Brown stated [1] in June 2003 that the best exchange rate for the UK to join the single currency would be around 73 pence per Euro (a value which the Euro had never reached). This rate has not been formalised as an official condition of entry.
Opinion polls in the UK show an increasing majority of the British public to be against joining the euro. They perceive loss of political and economic sovereignty, and a referendum in the near future has been ruled out until at least after next general election.
Sweden does not have any derogation by any protocol or threaty.
Nevertheless, Sweden decided in 1997 not to join the euro from the beginning, and has not made any effort to fulfill the required criteria for a stable exchange rate.
A recent referendum on the euro on September 14, 2003, showed that most Swedes opposed the euro, with the following figures: Yes 41.8%, No 56.1%. Consequently, the decision has been postponed for at least 9 years, as prime minister GÃÂöran Persson wants the results of the referendum to be respected until at least 2012.
For all new member states, the single currency is "part of the package" of the European Union. Showing the ability to move towards full economic and moneraty union is one requisite of good membership.
Once they become members of the union, they should participate in the European Exchange Rate Mechanism, linking their currencies to the euro for at least two years, sustaining a stable exchange rate.
(Although it is possible to avoid "the euro issue" by not joining the second European Exchange Rate Mechanism (ERM II) first (like Sweden), it is unlikely that the new EU members will try this route. These countries have stated several times that they want to join the single currency as soon as possible.)
Having a single currency is expected to increase the economic interdependency of and the ease of trade between the EU members that have adopted the euro. This is likely to be beneficial for all citizens of the euro area, as increases in trade are historically one of the main driving forces of economic growth. Moreover, this would fit with the long-term purpose of a unified market within the European Union.
A major benefit is the removal of bank currency transaction charges that previously was a significant cost to both individuals and businesses when changing from one currency to another. Conversely, banks will suffer a significant reduction in profits with the loss of this income.
A second effect of the common European currency is that differences in prices - in particular in price levels - will decrease. Differences in prices can trigger arbitrage, e.g. trade between countries, which will equalise prices across the euro area. Often this will also result in increased competition between companies, which should help to contain inflation and which therefore will be beneficial to consumers.
Some economists are concerned about the possible dangers of adopting a single currency for a large and diverse area. Because the Eurozone has a single monetary policy, set by the ECB, it cannot be fine-tuned for the economic situation in each individual country. Public investment and fiscal policy in each country is thus the only way in which economic changes can be introduced specific to each region or nation.
Others point out that the Eurozone is similar in size and population to the United States, which has a single currency and a single monetary policy set by the Federal Reserve. However, the individual states that make up the USA have less regional autonomy and a more homogeneous economy than the nations of the EU. Of particular concern is the notion that the economies of the EU may not all be 'in sync' -- each may be at a different stage in the boom and bust cycle, or just be experiencing different inflationary pressures.
It has been said that the euro would add great liquidity to the financial markets in Europe. Governments and companies can now borrow money in euro instead of their local currency, and this allegedly would allow access to many more sources of funds. Other economists consider that the potential strength of Euroland would be in the coherent efforts of a virtual greater super-economy, in which it is now potentially easier to create stronger financial associations, rather than in the mere sum of single liquidities.
A final and possibly decisive effect is on the pricing of oil. Euroland consumes more imported oil than the United States. This would mean that more Euros than US dollars would flow into the OPEC nations, except that oil is priced by those nations in US dollars only - Iraq under Saddam Hussein was the exception, until the 2003 invasion of Iraq. There have been frequent discussions at OPEC about pricing oil in Euros, which would have various effects, among them, requiring nations to hold stores of Euros to buy oil, rather than the US dollars that they hold now. This would be a transfer of a 'float' that presently subsidizes the United States to subsidize the European Union instead. Venezuela under Hugo Chavez has been a vocal proponent of this scheme, despite selling most of its own oil to the United States.
After the introduction of the euro, its exchange rate against other currencies, especially the U.S. dollar, declined heavily. At its introduction in 1999, the euro was worth USD1.18; by late 2000 it had fallen to below USD0.85. It then began what at the time was thought to be a recovery; by the beginning of 2001 it had risen to USD0.95. It declined again, finally reaching a low of below USD0.84 in July 2001. The currency then began to recover against the U.S. dollar. In the wake of U.S. corporate scandals, the two currencies reached parity on July 15, 2002, and by the end of 2002 the euro had reached USD1.04 as it climbed further. There is speculation that this strength relative to the dollar might encourage the use of the euro as an alternative reserve currency. On May 23, 2003, the euro surpassed its initial trading value for the first time as it again hit USD1.18, and in February 2004 the euro even climbed above USD1.29, the highest exchange rate since its introduction. Part of the euro's strength is thought to be due to more attractive interest rates in Europe than in the United States. The expensive Euro has been seen to be hurting European export.
The international three-letter code (according to ISO standard ISO 4217) for the euro is EUR. A special euro currency symbol (€) was also designed. After a public survey had narrowed the original ten proposals down to just two, it was then up to the European Commission to choose the final design. The eventual winner had been designed by Arthur Eisenmenger and was inspired by the Greek letter epsilon (ε), as well as being a stylised version of the letter "E".
The euro is represented in the Unicode character set (code point U+20AC or decimal 8364) as well as in updated versions of the traditional Latin character sets. Western nations should switch from ISO 8859-1 (Latin 1) to ISO 8859-15 (Latin 9) or Unicode in order to represent this character. ISO 8859-16 represents this character also.
The European Commission originally specified the euro character to have exact proportions, not varying from font to font. By this specification, the euro would effectively be a logo, unlike designable characters such as the letters or other currency symbols like the dollar and pound signs.
Keeping it to exact measurements would have made it rather broad in comparison to other symbols and digits in most fontss and would sometimes have resulted in layout problems. For these reasons, most type designers have ignored the commission and designed their own variants for each font instead, often based upon the capital letter C in the respective font. The illustration at the top of this article is of the official, invariant symbol.
Characteristics
Pluralisation
Transition
The above rates were determined by the ECB based on market rates on December 31, 1998, so that 1 ECU (European Currency Unit) would equal 1 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.) These rates were set by Council Regulation 2866/98 (EC), of December 31, 1998.
The procedure used to fix the irrevocable conversion rate between the 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, in Council Regulation 1478/2000 (EC), of June 19, 2000.Eurozone membership
Monaco, San Marino and Vatican City
Monaco, San Marino, and Vatican City also use the euro, although they are not officially euro members, nor members of the EU. (They had previously used currencies that have been replaced by the euro.) They now mint their own coins, with their own national symbols on the reverse. These countries use the euro by virtue of agreements concluded with EU member states (Italy in the case of San Marino and Vatican City, France in the case of Monaco), approved by the Council of the European Union.Andorra
Andorra does not have specific euro coins, since it previously used the French Franc and Spanish Peseta as legal tender currency. There is no formal arrangement with the EU, but with Spain and France.Countries that previously used the German Mark
Likewise, Montenegro and Kosovo, which used to have the German mark as their currency, also adopted the euro without having entered into any legal arrangements with the EU explicitly permitting them to do so.Pegs to pre-euro currencies
Non eurozone EU members
Denmark
In Denmark a referendum on joining the euro was held on September 28, 2000, resulting in a 53.2% vote against joining. It is uncertain if a new referendum will be held in the near future. United Kingdom
Sweden
Other EU members
Effects of a single currency
Euro exchange rate
Euro symbol
See also
External Links
Banks (eurosystem)
Links to the national central banks:
Banks (European System of Central Banks (ESCB) - non eurozone)
Articles