Euro
The euro (currency sign: €; banking code: EUR) is the official currency of the European Union member states of Austria, Belgium, Cyprus,[1] Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain, also known as the eurozone. It is the single currency for more than 300 million people in Europe.
© Image courtesy of Bank of Latvia.
The euro was introduced to world financial markets as an accounting currency in 1999 and launched as physical coins and banknotes in most of the above countries in 2002. Slovenia joined the eurozone on 1 January 2007, Malta and Cyprus a year later, and Slovakia on 1 January 2009. All EU member states are eligible to join if they comply with certain monetary requirements, and eventual use of the euro is mandatory for all new EU member states.
The euro is managed and administered by the Frankfurt-based European Central Bank (ECB) and the European System of Central Banks (ESCB) (composed of the central banks of its member states). As an independent central bank, the ECB has sole authority to set monetary policy. The ESCB participates in the printing, minting and distribution of notes and coins in all member states, and the operation of the eurozone payment systems.
Characteristics of the euro
Coins and banknotes
The euro is divided into 100 cents (sometimes referred to as eurocents). All euro coins (including the €2 commemorative coins) have a common side showing the denomination (value) with the EU-countries in the background and a national side showing an image specifically chosen by the country that issued the coin. All coins can be used in all member states.
The euro coins are €2, €1, 50c, 20c, 10c, 5c, 2c and 1c (known as tinies for their small size), though the latter two are not minted in Finland or the Netherlands (but are still legal tender). Many shop owners in the eurozone prefer having all their prices end in 0 or 5 Cents, so that 1c and 2c coins are not needed.
All euro banknotes have a common design for each denomination on both sides. Notes are issued in €500, €200, €100, €50, €20, €10, €5. Some of the higher denominations, such as €500 and €200, are not issued in a few countries, though are legal tender.
The ECB has set up a clearing system for large euro transactions (TARGET). All intra-eurozone transfers shall cost the same as a domestic one. This is true for retail payments, although several ECB payment methods can be used. Credit card charging and ATM withdrawals within the eurozone are also charged as if they were domestic. The ECB hasn't standardized paper based payment orders, such as cheques; these are still domestic-based.
The currency sign €
A special euro currency sign (€) was designed after a public survey had narrowed the original ten proposals down to two. The European Commission then chose the final design. The eventual winner was a design allegedly created by a team of four experts who have not been officially named. The official story of the design history of the euro sign is disputed by Arthur Eisenmenger, a former chief graphic designer for the EEC, who claims to have created it as a generic symbol of Europe.
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 crossing through standing for the stability of the euro".
The European Commission also specified a euro logo with exact proportions and foreground/background colour tones.[2] Although some font designers simply copied the exact shape of this logo as the euro sign in their fonts, most designed their own variants, often based upon the capital letter C in the respective font so that currency signs have the same width as Arabic numerals.[3]
Placement of the currency sign varies from nation to nation. While the official recommendation is to place it before the number (contravening the general ISO recommendation to place unit symbol after the number), people in many countries have kept the placement of their former currencies.
Economic and monetary union
History (1990-2006)
The euro was established by the provisions in the 1992 Maastricht Treaty on European Union that was used to establish 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 three per cent of their GDP, a debt ratio of less than sixty per cent of GDP, low inflation, and interest rates close to the EU average.
Economists that helped create or contributed to the euro include Robert Mundell, Wim Duisenberg, Robert Tollison, Neil Dowling and Tommaso Padoa-Schioppa. (For macro-economic theory, see below.)
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 rates at which the currency entered the euro) are shown at right.
| Currency | Abbr. | Rate | Fixed on |
|---|---|---|---|
| Austrian schilling | ATS | 13.7603 | 31/12/1998 |
| Belgian franc | BEF | 40.3399 | 31/12/1998 |
| Dutch gulden | NLG | 2.20371 | 31/12/1998 |
| Finnish mark | FIM | 5.94573 | 31/12/1998 |
| French franc | FRF | 6.55957 | 31/12/1998 |
| German mark | DEM | 1.95583 | 31/12/1998 |
| Irish pound | IEP | 0.787564 | 31/12/1998 |
| Italian lira | ITL | 1936.27 | 31/12/1998 |
| Luxembourg franc | LUF | 40.3399 | 31/12/1998 |
| Portuguese escudo | PTE | 200.482 | 31/12/1998 |
| Spanish peseta | ESP | 166.386 | 31/12/1998 |
| Greek drachma | GRD | 340.750[4] | 19/06/2000 |
The rates were determined by the Council of the European Union, based on a recommendation from the European Commission based on the market rates on 31 December 1998, so that one ECU (European Currency Unit) 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.) These rates were set by Council Regulation 2866/98 (EC), of 31 December 1998. They could not be set earlier, because the ECU depended on the closing exchange rate of the non-euro currencies (principally the pound sterling) that day.
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 19 June 2000.
The currency was introduced in non-physical form (travellers' cheques, electronic transfers, banking, etc.) at midnight on 1 January 1999, when the national currencies of participating countries (the eurozone) ceased to exist independently in that their exchange rates were locked at fixed rates against each other, effectively making them mere non-decimal subdivisions of the euro. The euro thus became the successor to the European Currency Unit (ECU). The notes and coins for the old currencies, however, continued to be used as legal tender until new notes and coins were introduced on 1 January 2002.
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; the mark officially ceased to be legal tender on 31 December 2001, though the exchange period lasted two months. The final date was 28 February 2002, by which all national currencies ceased to be legal tender in their respective member states. However, even after the official date, they continued to be accepted by national central banks for several years up to forever in Austria, Germany, Ireland, and Spain. 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.
Current eurozone
- The euro is the sole currency in Austria, Cyprus, Belgium, France, Finland, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain. These 16 countries together are frequently referred to as the eurozone or the euro area, or more informally 'Euroland' or the 'Eurogroup'. The euro is also legal currency in the eurozone overseas territories of French Guiana, Réunion, Saint-Pierre et Miquelon, Guadeloupe, Martinique and Mayotte.
- By virtue of some bilateral agreements the European microstates of Monaco, San Marino, and Vatican City mint their own euro coins on behalf of the European Central Bank.
- Andorra, Montenegro and Kosovo adopted the euro as their legal currency for movement of capital and payments without participation in the ESCB or the right to mint coins. Andorra is in the process of entering a monetary agreement similar to Monaco, San Marino, and the Vatican City.
| Currency | Abbr. | Rate | Fixed in |
|---|---|---|---|
| Slovenian tolar | SIT | 239.640 | 2006-07-11 |
| Currency | Abbr. | Rate | Conv goal |
| Cypriot pound | CYP | 0.585274 | 2008-01-01 |
| Estonian kroon | EEK | 15.6466 | 2008-01-01 |
| Latvian lats | LVL | 0.702804 | 2008-01-01 |
| Maltese lira | MTL | — | 2008-01-01 |
| Bulgarian lev | BGN | — | 2009-01-01 |
| Slovak koruna | SKK | — | 2009-01-01 |
| Lithuanian litas | LTL | 3.4528 | 2009-01-01 |
| Czech koruna | CZK | — | 2010- |
| Hungarian forint | HUF | — | 2010- |
| Polish zloty | PLN | — | 2011- |
| Romanian leu | RON | — | 2011- |
- 1 January 2007 for Slovenia. Date confirmed and finalised by the European Commission, conversion rate 239.640. The final exchange rate was fixed on 2006-07-11.
- 1 January 2008 for Cyprus, Estonia, Latvia and Malta
- 1 January 2009 for Bulgaria, Slovakia and Lithuania
- 1 January 2010 for the Czech Republic.
- 2011 or later for Hungary, Poland and Romania
Too high an inflation rate postponed the entry of Lithuania as planned on 1 January 2007.
Estonia, Latvia, Lithuania, Malta, Slovakia and Slovenia have already finalised the design for the country's coins' obverse side.
Bulgaria and Romania entered the EU on January 1, 2007.
Name and linguistic issues
Several linguistic issues have arisen in relation to the spelling of the words euro and cent in the many languages of the member states of the European Union, as well as in relation to grammar and the formation of plurals. The official spelling of the euro according to the ECB, as it appears (in capitals) on the banknotes, is "euro" in the Latin script and "ευρω" in the Greek script. The proposed official spelling by the ECB in the Cyrillic script is "еуро". However, the new EU member Bulgaria proposes "евро", the spelling that is currently used in Bulgaria. "Eвро", as well as "evro", although official spellings in some countries using the euro, are currently not supported by the ECB. Also not supported is the spelling used in Malta, where "ewro" derives from "Ewropa".
In each country except Greece, which uses λεπτό (lepto, singular) and λεπτά (lepta, plural) on its coins, the form "cent" is officially required to be used in legislation in both the singular and in the plural. Immutable word formations have been encouraged by the European Commission in usage with official EU legislation (originally in order to ensure uniform presentation on the banknotes), but the unofficial practice concerning the mutability (or not) of the words differs between the member states and their languages. The subject has led to much debate and controversy.
Trivia
- On 1 January 2002, the first purchase involving euros occurred on Réunion when officials bought a bag of lychees at a market.
- Although there have been other currencies predating the euro that were specifically designed in similar ways (different sizes, colours, and ridges) to aid the visually impaired, the introduction of the euro constitutes the first time that authorities have consulted associations representing the blind before, rather than after, the release of the currency.
Footnotes
- ↑ Only the southern part of the island is part of the European Union and uses the euro.
- ↑ http://europa.eu.int/comm/economy_finance/euro/notes_and_coins/symbol_en.htm
- ↑ http://www.fontshop.com/features/fontmag/002/02_euro/
- ↑ Greece failed to meet the criteria for joining initially, so it did not join the common currency on 1 January 1999. It was admitted two years later, on 1 January 2001, with a Greek drachma (GRD) exchange rate of 340.750.