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) isthe official currency of 19 of the 27memberstates of the EuropeanUnion. 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 EuropeanUnion, by four European microstates that are not EU members, the BritishOverseas 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 January2002, making it the day-to-day operating currency of its original members, and by March 2002 it had completely replaced the former currencies.
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 theeuro 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.
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.
Today, The Grandma has flown to The Netherlands to commemorate the 28th anniversary of the signature of the Maastricht Treaty, also and officially known as the Treaty on European Union. This treaty signed by the members of the European Communities was the beginning of a further European integration.
European Union could be a great union of nations if its members are able to respect each other, attend its obligations and accomplish its rules. Nowadays, the European Union is under a great age of transformation after the Brexit and the rising of the ancient nations that claim their rights and reclaim respect and comprehension.
The Maastricht Treaty, officially the Treatyon European Union, was a treaty signed on 7 February 1992 by the members of the European Communities in Maastricht, Netherlands, to further European integration.
On 9–10 December 1991, the same city hosted the European Council which drafted the treaty. The treaty founded the European Union and established its pillar structure which stayed in place until the Lisbon Treaty came into force in 2009. The treaty also greatly expanded the competences of the EEC/EU and led to the creation of the single European currency, the euro.
The Maastricht Treaty reformed and amended the treaties establishing the European Communities, the EU's first pillar. It renamed European Economic Community to European Community to reflect its expanded competences beyond economic matters.
The Maastricht Treaty also created two new pillars of the EU on Common Foreign and Security Policy and Cooperation in the Fields of Justice and Home Affairs (respectively the second and third pillars), which replaced the former informal intergovernmental cooperation bodies named TREVI and European Political Cooperation on EU Foreign policy coordination.
The Maastricht Treaty (TEU) and all pre-existing treaties has subsequently been further amended by the treaties of Amsterdam (1997), Nice (2001) and Lisbon (2007). Today it is one of two treaties forming the constitutional basis of the European Union (EU), the other being the Treaty on the Functioning of the European Union.
European Union Flags
While the current version of the TEU entered into force in 2009, following the Treaty of Lisbon (2007), the older form of the same document was implemented by the Treaty of Maastricht (1992).
The signing of the Treaty of Maastricht took place on 7 February 1992.
The Dutch government, by virtue of holding Presidency of the Council of the European Union during the negotiations in the second half of 1991, arranged a ceremony inside the government buildings of the Limburg province on the river Maas (Meuse).
Representatives from the twelve member states of the European Communities were present, and signed the treaty as plenipotentiaries, marking the conclusion of the period of negotiations.
Only three countries held referendums (France, Denmark and Ireland -all required by their respective constitutions). The process of ratifying the treaty was fraught with difficulties in three states.
In Denmark, the first Danish Maastricht Treaty referendum was held on 2 June 1992 and ratification of the treaty was rejected by a margin of 50.7% to 49.3%. Subsequently, alterations were made to the treaty through the addition of the Edinburgh Agreement which lists four Danish exceptions, and this treaty was ratified the following year on 18 May 1993 after a second referendum was held in Denmark, with legal effect after the formally granted royal assent on 9 June 1993.
In September 1992, a referendum in France only narrowly supported the ratification of the treaty, with 50.8% in favour. This narrow vote for ratification in France, known at the time as the 'petite oui', led Jacques Delors to comment that Europe began as an elitist project in which it was believed that all that was required was to convince the decision-makers. That phase of benign despotism is over.
Maastricht, The Netherlands
In the United Kingdom, an opt-out from the treaty's social provisions was opposed in Parliament by the opposition Labour and Liberal Democrat MPs and the treaty itself by the Maastricht Rebels within the governing Conservative Party.
The number of rebels exceeded the Conservative majority in the House of Commons, and thus the government of John Major came close to losing the confidence of the House. In accordance with British constitutional convention, specifically that of parliamentary sovereignty, ratification in the UK was not subject to approval by referendum. Despite this, the British constitutional historian Vernon Bogdanor suggests that there was a clear constitutional rationale for requiring a referendum based on the allocation of legislative power.
At the end of January 2020 (GMT), the UK left the EU and so withdrew from this Treaty.
The TEU entered into force on 1 November 1993. The treaty led to the creation of the euro. One of the obligations of the treaty for the members was to keep sound fiscal policies, with debt limited to 60% of GDP and annual deficits no greater than 3% of GDP. This obligation has not been met, with debt to GDP levels increasing steadily in most countries in eurozone since the treaty was signed with the average for the zone standing at 85%, and much higher for some countries, e.g. France, where debt to GDP ratios reached 98% in 2019, or Greece at 181%.
The treaty also created what was commonly referred to as the pillar structure of the European Union.
The treaty established the three pillars of the European Union -one supranational pillar created from three European Communities (which included the European Economic Community (EEC), the European Coal and Steel Community and the European Atomic Energy Community), the Common Foreign and Security Policy (CFSP) pillar, and the Justice and Home Affairs (JHA) pillar.
The first pillar was where the EU's supra-national institutions -the Commission, the European Parliament and the European Court of Justice- had the most power and influence. The other two pillars were essentially more intergovernmental in nature with decisions being made by committees composed of member states' politicians and officials.
Maastricht, The Netherlands
All three pillars were the extensions of existing policy structures. The European Community pillar was the continuation of the European Economic Community with the Economic being dropped from the name to represent the wider policy base given by the Maastricht Treaty.
Coordination in foreign policy had taken place since the beginning of the 1970s under the name of European Political Cooperation (EPC), which had been first written into the treaties by the Single European Act but not as a part of the EEC.
While the Justice and Home Affairs pillar extended cooperation in law enforcement, criminal justice, asylum, and immigration and judicial cooperation in civil matters, some of these areas had already been subject to intergovernmental cooperation under the Schengen ImplementationConvention of 1990.
The creation of the pillar system was the result of the desire by many member states to extend the European Economic Community to the areas of foreign policy, military, criminal justice, and judicial cooperation. This desire was set off against the misgivings of other member states, notably the United Kingdom, over adding areas which they considered to be too sensitive to be managed by the supra-national mechanisms of the European Economic Community.
The agreed compromise was that instead of renaming the European Economic Community as the European Union, the treaty would establish a legally separate European Union comprising the renamed European Economic Community, and the inter-governmental policy areas of foreign policy, military, criminal justice, judicial cooperation.
The structure greatly limited the powers of the European Commission, the European Parliament and the European Court of Justice to influence the new intergovernmental policy areas, which were to be contained with the second and third pillars: foreign policy and military matters (the CFSP pillar) and criminal justice and cooperation in civil matters (the JHA pillar).
Treaty on European Union
In addition, the treaty established the EuropeanCommittee of the Regions (CoR). CoR is the European Union's (EU) assembly of local and regional representatives that provides sub-national authorities with a direct voice within the EU's institutional framework.
The Maastricht criteria (also known as the convergence criteria) are the criteria for European Union member states to enter the third stage of European Economic and Monetary Union (EMU) and adopt the euro as their currency.
The four criteria are defined in article 121 of the treaty establishing the European Community. They impose control over inflation, public debt and the public deficit, exchange rate stability and the convergence of interest rates.
1. Inflation rates. No more than 1.5 percentage points higher than the average of the three best performing (lowest inflation) member states of the EU.
2. Government finance.
Annual government deficit.
The ratio of the annual government deficit to gross domestic product (GDP) must not exceed 3% at the end of the preceding fiscal year. If not, it is at least required to reach a level close to 3%. Only exceptional and temporary excesses would be granted for exceptional cases.
Government debt.
The ratio of gross government debt to GDP must not exceed 60% at the end of the preceding fiscal year. Even if the target cannot be achieved due to the specific conditions, the ratio must have sufficiently diminished and must be approaching the reference value at a satisfactory pace.
As of the end of 2014, of the countries in the Eurozone, only Estonia, Latvia, Lithuania, Slovakia, Luxembourg, and Finland still met this target.
3. Exchange rate. Applicant countries should have joined the exchange-rate mechanism (ERM II) under the European Monetary System (EMS) for two consecutive years and should not have devalued its currency during the period.
4. Long-term interest rates. The nominal long-term interest rate must not be more than 2 percentage points higher than in the three lowest inflation member states.
The purpose of setting the criteria is to maintain price stability within the Eurozone even with the inclusion of new member states.
