When Was the Euro Introduced as Legal Currency on the World Market

When Was the Euro Introduced as Legal Currency on the World Market

The symbol of the euro is the “€”, which comes from the Greek letter epsilon, which is the first letter of the word “Europe”. The two parallel lines refer to the stability of the euro. The euro is the second most held reserve currency after the US dollar. Following its introduction on 4 January 1999, the exchange rate declined against other major currencies and reached its lowest exchange rate in 2000 (3 May against the pound sterling, 25 October against the United States dollar, 26 October against the Japanese yen). It then recovered and its exchange rate reached an all-time high in 2008 (15 July against the US dollar, 23 July against the Japanese yen, 29 December against the pound sterling). With the advent of the global financial crisis, the euro first fell, and then gained again. Despite the pressure of the European sovereign debt crisis, the euro has remained stable. [106] In November 2011, the euro exchange rate index – measured by the currencies of the bloc`s main trading partners – was almost two percent higher year-on-year, roughly above pre-crisis levels in 2007. [107] On 7 February 1992, the Maastricht Treaty was signed, paving the way for the creation of a single European currency. The treaty was the culmination of decades of consultations on the development of economic cooperation in Europe. The Maastricht Treaty established the European Central Bank (ECT) and the European System of Central Banks. With the exception of Bosnia, Bulgaria, North Macedonia (which had pegged its currencies to the German mark) and Cape Verde (formerly pegged to the Portuguese escudo), all of these non-EU countries had a currency pegged to the French franc before pegging their currencies to the euro.

Pegging a country`s currency to a major currency is considered a security measure, especially for currencies in weaker economies, as the euro is considered a stable currency, prevents runaway inflation and its stability encourages foreign investment. However, a multitude of political and economic obstacles have blocked the way: weak political commitment, disagreements over economic priorities, and turbulence in international markets. They have all contributed to thwarting progress towards Economic and Monetary Union. A special euro currency sign (€) was devised after a public inquiry reduced the initial ten proposals to two. The European Commission then opted for the design of the Belgian Alain Billiet. As regards the symbol, the Commission stated[28]. Economic and Monetary Union (EMU) has been a recurring objective of the European Union since the late 1960s. EMU involves the coordination of economic and fiscal policies, a common monetary policy and a common currency, the euro. A single currency offers many advantages: it facilitates cross-border trade for businesses, the economy becomes more stable and consumers have more choices and options. Within the EU, several currencies are pegged to the euro, usually as a precondition for joining the euro area. The Danish krone, Croatian kuna and Bulgarian lev are linked by virtue of their participation in ERM II. With the date of each country`s entry into EMU, the irrevocable conversion rates of the national currency against the euro have been fixed.

In practice, the deployment proceeded smoothly and with few problems. Up to 2. In January, all ATMs in 7 countries and at least 90% in 4 other countries issued euros instead of traditional currencies, with Italy, the worst offender, issuing only 85% of ATMs in euros. [27] The unexpected tendency of consumers to spend their old currency instead of exchanging it in banks has led to temporary shortages of euro currency, with some consumers receiving change in the old currency. [28] The circulation of euro banknotes and coins in Greece has been smooth and successful. The Greek public quickly became familiar with the euro, and in the first week of January most transactions were settled in euros. The share of euro banknotes and coins in total banknotes and coins in circulation was significant and consistently above the euro area average. All new EU members who joined the bloc after the signing of the Maastricht Treaty in 1992 are obliged to adopt the euro in accordance with their accession treaties.

However, the last of the five economic convergence criteria that must first be fulfilled in order to benefit from the introduction of the euro is the exchange rate stability criterion, which requires a member of the ERM for at least two years without “severe pressures” on the exchange rate. The impact of lower interest rates, combined with the constant excess of liquidity provided by the ECB, has allowed banks in countries with the lowest interest rates and their affiliates to borrow substantially (above the budget deficit of 3% of GDP initially imposed on the euro area) and significantly increase their public and private debt. [97] After the 2007-2008 financial crisis, the governments of these countries deemed it necessary to bail out or nationalize their private banks to prevent systemic failure of the banking system when the underlying physical or financial assets were found to be severely inflated and sometimes so worthless that there was no liquid market for them. [98] This further increased the already high level of public debt to levels that markets began to consider unsustainable as interest rates on government bonds rose, triggering the ongoing European sovereign debt crisis. The glyph is (according to the European Commission) “a combination of the Greek epsilon, as a sign of the weight of European civilization; an E for Europe; and the parallel lines that cross represent the stability of the euro.” The guiding principle of the currency, which opened in 1999, was supposed to be a set of rules aimed at limiting a country`s annual deficit to three percent of gross domestic product and total accumulated debt to sixty percent of GDP. It was a good idea, but by 2004, the eurozone`s two largest economies, Germany and France, had broken the rules for three consecutive years. [71] In Germany, Deutsche Telekom modified 50,000 public telephones in 2005, at least temporarily, in order to obtain Deutsche Mark coins. [31] The appellants were allowed to use DM coins, at least initially, with the mark pegged to one euro, almost double the usual rate. [32] In 2009 the Lisbon Treaty formalised the Eurogroup, the meeting of euro finance ministers, with an official president. Jean-Claude Juncker was President before and after the formalisation and worked on the strengthening of the group, economic cooperation and joint representation.

The appetite for greater economic cooperation has increased due to the recession and the possible bankruptcy of some weaker eurozone members. [41] However, Germany had resisted previous efforts to strengthen the Eurogroup, such as President Nicolas Sarkozy`s attempts at French Eurogroup summits, for fear of undermining the ECB`s independence. Jean-Claude Trichet, who succeeded Duisenberg as ECB president in 2003, rebuffed many of Sarkozy`s attacks at the start of the recession. Prior to this formalisation of the Eurogroup, euro area leaders held a special summit in Paris on 11 October 2008 in response to the financial crisis. Instead of meeting the Eurogroup as finance ministers, they met as heads of state and government (like the European Council) to define a joint action plan for the euro area and the European Central Bank to stabilise the European economy. At these meetings, many reforms of the governance of the euro would have been agreed. The euro emerged from the Maastricht Treaty of 1991, in which the original 12 Member States of the European Community (now the European Union) created an economic and monetary union and a corresponding common unit of exchange. The new currency, the euro, was officially issued on 1 January 1999. Although its use was initially limited to financial markets and certain businesses, participating Member States started using euro banknotes and coins in 2002. The euro was introduced by the provisions of the Maastricht Treaty of 1992.