THE EURO, THE OFFICIAL CURRENCY OF THE EUROZONE

Today, The Grandma has been reading about the euro, its history and its importance for the future of the European Union.

The euro (symbol: €; code: EUR) is the official currency of 19 of the 27 member states of the European Union. This group of states is known as the eurozone or euro area and includes about 343 million citizens as of 2019.

The euro, which is divided into 100 cents, is the second-largest and second-most traded currency in the foreign exchange market after the United States dollar.

The currency is also used officially by the institutions of the European Union, by four European microstates that are not EU members, 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.

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.

The name euro was officially adopted on 16 December 1995.

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).

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.

More information: European Central Bank

While the euro dropped subsequently to US$0.83 within two years (26 October 2000), it has traded above the U.S. dollar since the end of 2002, peaking at US$1.60 on 18 July 2008 and since then returning near to its original issue rate.

In late 2009, the euro became immersed in the European sovereign-debt crisis, which led to the creation of the European Financial Stability Facility as well as other reforms aimed at stabilising and strengthening the currency.

The euro is managed and administered by the Frankfurt-based European Central Bank (ECB) 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 states have done so. Denmark has negotiated exemptions, 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, which closed the gaps and loopholes in the Maastricht and Rome Treaties.

More information: National Bank of Belgium

The euro is the sole currency of 19 EU member states: Austria, Belgium, 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 343 million people in total as of 2018.

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. Outside the EU, the euro is also the sole currency of Montenegro and Kosovo and several European microstates (Andorra, Monaco, San Marino and the Vatican City) as well as 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. Together this direct usage of the euro outside the EU affects nearly 3 million people.

The euro has been used as a trading currency in Cuba since 1998, Syria since 2006, and Venezuela since 2018.

In 2009, Zimbabwe abandoned its local currency and used major currencies instead, including the euro and the United States dollar.

More information: The Balance

 The euro is our common fate,
and Europe is our common future.

Angela Merkel

MAASTRICHT TREATY, BIRTH OF THE EUROPEAN UNION

Today, The Grandma has been reading about the history of the EU. On a day like today in 1992 the Maastricht Treaty was signed leading to the creation of the European Union. 

The Maastricht Treaty, concluded in 1992 between the 12 member states of the European Communities, is the foundation treaty of the European Union (EU).

Formally the Treaty on the European Union, it announced a new stage in the process of European integration chiefly in provisions for a shared European citizenship, for the eventual introduction of a single currency, and with less precision for common foreign and security policies. 

Although these were widely seen to presage a federal Europe, the focus of constitutional debate shifted to the later 2007 Treaty of Lisbon. In the wake of the Eurozone debt crisis unfolding from 2009, the most enduring reference to the Maastricht Treaty has been to the rules of compliance -the Maastricht criteria- for the currency union.

Against the background of the end of the Cold War and the re-unification of Germany, and in anticipation of accelerated globalization, the treaty negotiated tensions between member states seeking deeper integration and those wishing to retain greater national control. The resulting compromise faced what was to be the first in a series of EU treaty ratification crises.

From the establishment of the European Economic Community in 1957, integrationists argued the free movement of workers was the logical corollary of the free movement of capital, goods and services and integral to the establishment of a common and later single European market.

In time, the tension between the transferred worker as a mobile unit of production contributing to the success of the single market, and the reality of the Community migrants as individuals, seeking to exercise a personal right to live and work in another state for their own, and their families', welfare, asserted itself. The Treaty built on the growing suggestion that there was a Community-wide basis for citizenship rights.

More information: Europa

The Treaty rules that every person holding the nationality of a Member State shall be a citizen of the Union. This common and parallel citizenship accords the Member State migrants not only the civil right to take up residence and employment, but also, and for the first time, political rights.

In a new EU country of residence Member-State nationals have the right to vote, and to stand, in both local and European elections. Unresolved in the Treaty is the question of their access to social rights. Political debate continued as to who should have access to public services and welfare systems funded by taxation.

The four convergence criteria, as detailed in attached protocols, impose control over inflation, public debt and the public deficit, exchange rate stability and domestic interest rates. With limited leeway granted in exceptional circumstances, the obligations are to maintain:

-Inflation at a rate no more than 1.5 percentage points higher than the average of the three best performing (the lowest inflation) Member States.

-A budgetary position that avoids excessive government deficits defined in ratios to gross domestic product (GDP) of greater than 3% for annual deficits and 60% for gross government debt.

-The exchange rate of the national currency within the normal fluctuation margins by the exchange-rate mechanism of the European Monetary System without severe tensions for at least the last two years.

-Nominal long-term interest rates no more than 2 percentage points higher than in the three Member States with the lowest inflation.

More information: Europa

 Maastricht confirmed that Europe is a peace project
and the European Union is, indeed,
in the history of the world the most successful
peace project in human lives.

Federica Mogherini