the euro, our currency

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1Towards Economic and Monetary U

nionThe euro, our currency

e euro - general information

History was made on 1 January 1999 when eleven European Union countries (later to become sixteen) irrevocably established the conversion rates between their respective national currencies and the euro and created a monetary union with a single currency, giving birth to the euro.

EMU@10 – Ten years ago, the Council in the composition of Heads of State and Governments decided on the Member States participating in the euro.

A transitional period followed where the euro only existed as book money, and on 1 January 2002, euro banknotes and coins were put into circulation.

Twelve countries (Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland) started using euro banknotes and coins when they first entered circulation on 1 January 2002.

In 2007, Slovenia was the first of the 10 countries that joined the EU in 2004 to join the euro area. In 2008, Cyprus and Malta joined the euro area, followed by Slovakia on 1 January 2009.

Euro area

© European Communities, 2008

Euro area 2009

EU Member States that have not yet adopted the euro

“EU citizens and residents have selected a design for the commemorative €2 coin to celebrate 10 years of Economic and Monetary Union. e winning design was created by George Stamatopoulos. Commemorative coins bearing this design will be issued by all euro-area Member States, starting in January 2009.” www.eurodesigncontest.eu

EU Member States with an opt-out

Ireland DenmarkUnitedKingdom

eNetherlands

SwedenFinland

Estonia

Latvia

Lithuania

Poland

Czech Rep.Belgium

LuxembourgGermany

Austria Slovakia

Hungary

Romania

BulgariaItaly Slovenia

France

Portugal

Spain

Malta

GreeceCyprus

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e key players e European Commission proposes Community (or EU) policies and legislation and monitors their implementation. Proposals relating to Economic and Monetary Union (EMU) are prepared by the European Commission’s Directorate General for Economic and Financial Affairs, under the responsibility of the Commissioner for Economic and Monetary Affairs, Joaquín Almunia.

e Council of the European Union (“the Council”), which is made up of representatives of EU Member States‘ governments, decides on and adopts Commission proposals. When matters relating to EMU (with the exception of monetary policy) are under discussion, the national ministers of finance and economic affairs gather as the ECOFIN Council, which constitutes the forum for the coordination of national policies. Summit meetings of Heads of State or Government, known as the European Council, set the overall political direction for European decision-making.

e Eurogroup is an informal body composed of the finance ministers of euro area Member States and the European Commission. e ECB also participates in Eurogroup meetings by invitation. e Eurogroup discusses topics of common interest for all euro area Member States, like the economic situation or exchange rate developments. Since January 2005 Luxembourg‘s Prime Minister Jean-Claude Juncker is the first permanent President of the Eurogroup.

e European Parliament, whose members are directly elected, is consulted on legislative proposals, and in many areas also shares the power to adopt legislation with the Council of the European Union. ECON is the European Parliament‘s standing committee on economic and monetary affairs.

e European Central Bank (ECB) is the keystone in the European System of Central Banks (ESCB), comprising the national central banks of all EU Member States. e national central banks of the euro area plus the ECB make up the Eurosystem. e ECB is independent of political influence and conducts the monetary policy of the euro area with a mission to maintain price stability.


Towards Economic and Monetary U


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e key policies Monetary policy concerns the management of the supply of money in an economy, for example by printing money or setting interest rates. e ECB is in charge of drawing up and implementing the monetary policy of the euro area.

Fiscal policy concerns the management of government revenues (e.g. taxation) and expenditure (e.g. spending on healthcare). Sound public finances are particularly important for the smooth working

of EMU. Fiscal policies remain the responsibility of the Member States but are coordinated at EU level, notably

through the Stability and Growth Pact.

e responsibility for euro area economic policy remains largely with the Member States, although the EC Treaty requires them to coordinate their economic policymaking with a view to achieving the objectives of the Community. is coordination is ensured through the Commission and the ECOFIN Council.

Exchange rate policye European Central Bank is in charge of conducting foreign exchange operations and managing the euro area’s exchange reserves. e Council has the right to conclude formal exchange rate agreements or to give general orientations for exchange rate policies.

e Lisbon Strategy – also called the Growth and Jobs Initiative – adopted by the EU in 2000 and revamped in 2005, aims for an innovation-friendly, modern Europe which creates growth and jobs for its citizens through the formulation of various policy initiatives to be taken by all EU Member States and by the EU itself. e broader objectives set out by the Lisbon Strategy are intended to be attained by 2010. e main fields are economic, social, and environmental renewal and sustainability. e Lisbon Strategy is heavily based on the economic concepts of:

• Innovation as the motor for economic change

• e “learning economy”• Social and environmental renewal

e rationale of the strategy is to create a stronger economy that will drive job creation in the EU, alongside social and environmental policies that ensure sustainable development and social inclusion, which will themselves drive economic growth even further.




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© Getty Images

First steps towards a European economic and monetary union

Culture and society1950s e young have little pocket money. ey tend to dress like their parents and listen to the same music – on the radio or record player. Boys have short hair, girls have medium to long hair – styled like their mothers.

1960s Blue denim jeans appear as fashion wear. Later, the first miniskirts are seen and hair is worn longer as young people begin to dress very differently from adults. e word denim comes from ‘de Nîmes’, or ‘from Nîmes’ – the French town where the material was produced in the 17th century.

1961 e first man in space is Yuri Gagarin.

Economic and monetary union

1970 e Prime Minister of Luxembourg, Pierre Werner, proposes a three-stage process towards EMU and a single currency at a summit meeting in e Hague. e Member States adopt the Werner Plan in 1971, which foresaw the creation of a monetary union by 1980.

History and politics1957 e six founding members of the European Union each have their own currency: Belgium (Belgian franc), Germany (mark), France (French franc), Italy (lira), Luxembourg (Luxembourg franc), and the Netherlands (guilder).




1957 e founding treaty of the EU, the Treaty of Rome, identifies the convergence of economic policies as an important contribution to promoting stability, a rising standard of living and closer relations between the Member States.

1960s e common Agricultural Policy is adopted to ensure secure and stable food supplies by supporting producers in the agricultural sector.

Sicco Mansholt, Vice-President of the Commission of the European Economic Community in charge of Agriculture, considered as father of the Common Agricultural Policy

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© ESA

Instability and economic disruption

Culture and society

1975 e European Space Agency (ESA) is formed to conduct independent space missions. Ariane 1, the first ESA rocket, is launched on Christmas Eve 1979 with a payload of communications satellites.

1980s Pop stars with flared trousers, platformshoes and long hair are a big influence on fashion. Girls wear “hot pants”, and punks – with their spiky dyed hair and craze for body piercing – make their first appearance.


1972 Adopting an exchange rate mechanism(ERM) called “the snake in the tunnel”, the Member States fix their currencies against the US dollar to reduce exchange rate volatility and thereby to improve economic stability and give a new impetus to EMU. However, the snake is soon abandoned following the economic disruption caused by the oil crisis.

1979 e European Monetary System wascreated to limit fluctuations between Europeancurrencies. e ECU (European Currency Unit)was created as a unit of account.

History and politics1973 Denmark, Ireland and the United Kingdomjoin the European Community, adding the Danishkrone, the punt and the pound sterling to thecurrency basket. Political turmoil in the Middle East sparks the first oil crisis, causing worldwide economic and social disruption.

1987 On the initiative of Jacques Delors, theSingle European Act enters into force, preparingthe ground for the free movement of goods,services, capital and people. e deadline forcompletion of the single market is set at 1992.




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Re-establishing economic stability

Culture and society


1989 In Madrid, European leaders agree toPresident Delors’ three-stage timetable for theintroduction of economic and monetary union,with a European Central Bank to manage the single currency.

1991 e European Council adopts the“Maastricht criteria” – the rules for adoption ofthe euro, so-called because it was the Maastricht Treaty (Treaty on European Union), signed in 1992, which set out the blueprint for EMU. ey place economic constraints on governments in order to ensure sufficient economic convergence is achieved before establishing (and subsequently enlarging) the single European currency area.

History and politics1981 Greece and the drachma join the EU (at that time still known as the European Community or EC). e ancient drachma lives on today in its “Athenian owl” symbol which features on one-euro coins.

1986 Spain and Portugal join the EU – bringingits membership to 12 and adding the peseta andthe escudo to the growing currency basket.

Signature of the Act of accession of Spain to theEuropean Community by Felipe González (on the right), and Fernando Morán López (on the left).




1989 Tim Berners-Lee, a scientist working at the European Organisation for Nuclear Research (CERN), invents the World Wide Web (www), a system for finding and sharing information across theInternet.

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Culture and society


History and politics

Emergence of the largest integrated trading bloc in the world

1997 Low-cost airlines bring frequent air travelwithin the reach of many more people boostingtourism and travel throughout Europe.

1995 e European Council meeting in Madrid announces the name of the future European single currency – the euro – to be launched on 1 January 1999.

1998 e independent European Central Bank is founded in Frankfurt.

1989 Soviet President Mikhail Gorbachev helps remove the barriers that divide Europe. e Iron Curtain is drawn back as Hungary opens its borders to Austria and the Berlin Wall comes down reuniting Europe.

1995 Austria, Finland and Sweden join the EU– bringing its membership to 15 and adding theschilling, the markka and the krona to the growing currency basket.

1999 e Schengen area, abolishing border controls among its members and first agreed in the Luxembourg town of Schengen in 1985, is extended to 13 countries in the Treaty of Amsterdam. Much of the EU now has a single external border and people, including non-EUnationals, can move freely around the Schengen area.




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© Getty Images

© ESA

Culture and society


History and politics

e largest monetary changeover in history

2000 e EU and ESA launch a European Space Strategy for the exploration and the exploitation of space.

2000s Home computers run at gigahertz (GHz) speeds and fast broadband internet connections are spreading throughout Europe. Mobile phones have more functions such as digital cameras, and are becoming fashion accessories. Digital MP3 music players with miniature hard disks can download music from the Internet and store many thousands of tracks in a single handheld device – a lifetime’s high-sound-quality music in your pocket.

1999 e euro is launched in 11 EU Member States forming the euro area. It takes over the role of the ECU (European Currency Unit). e ECU was a composition of the different national currencies. Euro banknotes and coins are not available yet – euro cash is only introduced three years later. Denmark and the United Kingdom have special derogations in the original Maastricht Treaty on European Union. Neither country is legally required to join the euro area. Greece joins the euro area in 2001.

2002 A new year and a new currency. e largest cash changeover in history takes place as euro coins and banknotes replace the national currencies of the euro area. e new euro is the crowning achievement of decades of work towards EMU.

2004 e new Member States are to adopt the euro as soon as they meet the Maastricht convergence criteria. For these countries, the single currency is “part of the package” of the European Union.

2007 Slovenia is the first of the new EU Member States to adopt the euro.

2004 e European Union now numbers 25, welcoming the Czech Republic (Czech koruna), Estonia (kroon), Cyprus (Cyprus pound), Latvia (lats), Lithuania (litas), Hungary (forint), Malta (Maltese lira), Poland (zloty), Slovenia (tolar) and Slovakia (Slovak koruna).

2007 Bulgaria (lev) and Romania (leu) join the European Union.On 21 December 2007, the Schengen area is enlarged to Hungary, Poland, Slovakia, e Czech Republic, Lithuania, Latvia, Estonia, Malta and Slovenia making its eastern border 4278 km long.




2008 Cyprus and Malta join the euro area.

2009 EMU celebrates its first 10 years. Slovakia joins the euro area as the 16th member country.

the euro, our currency

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