the euro general information - ec.europa.eu

The euro -general information

History was made on 1 January 1999 wheneleven European Union countries (later tobecome thirteen) irrevocably establishedthe conversion rates between theirrespective national currencies and the euroand created a monetary union with a singlecurrency, giving birth to the euro.

Euro area

EU Member States that have not yetadopted the euro

EU Member States with an opt-out

A transitional period followed where the euro only existed asbook money, and on 1 January 2002, euro banknotes and coinswere put into circulation.Twelve countries (Belgium, Germany, Greece, Spain, France,Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugaland Finland) started using euro banknotes and coins when theyfirst entered circulation on 1 January 2002.

In 2007, Slovenia was the first of the tencountries that joined the EU in 2004 to jointhe euro area.

Within the euro area, there is one institution,the European Central Bank, which is incharge of conducting monetary policy witha view to ensuring price stability. MemberStates continue to be in charge of theireconomic policies but must coordinatethem to ensure that Economic andMonetary Union functions smoothly.

The three steps of

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The key players The 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-Generalfor Economic and Financial Affairs, under the responsibility ofthe Commissioner for Economic and Monetary Affairs, JoaquínAlmunia.

The Council of the European Union (“the Council”), whichis made up of representatives of EU Member States'governments, decides on and adopts Commission proposals.When matters relating to EMU (with the exception of monetarypolicy) are under discussion, the national ministers of financeand economic affairs gather as the ECOFIN Council, whichconstitutes the forum for the coordination of national policies.Summit meetings of Heads of State or Government, known asthe European Council, set the overall political direction forEuropean decision-making.

The Eurogroup is an informal bodycomposed of the finance ministers ofeuro area Member States and theEuropean Commission. The ECB alsoparticipates in Eurogroup meetings byinvitation. The Eurogroup discussestopics of common interest for all euroarea Member States, like the economicsituation or exchange rate developments.

The European Parliament, whosemembers are directly elected, isconsulted on legislative proposals, andin many areas also shares the power toadopt legislation with the Council ofthe European Union. ECON is theEuropean Parliament's standingcommittee on economic and monetaryaffairs.

The European Central Bank (ECB) isthe keystone in the European System ofCentral Banks (ESCB), comprising thenational central banks of all EU MemberStates. The national central banks of theeuro area plus the ECB make up theEurosystem. The ECB is independent ofpolitical influence and conducts themonetary policy of the euro area with amission to maintain price stability.


© Segno Associati

© Segno Associati

The key policies Monetary policy concerns the management of the supplyof money in an economy, for example by printing money orsetting interest rates. The ECB is in charge of drawing up andimplementing the monetary policy of the euro area.

Fiscal policy concerns the management of governmentrevenues (e.g. taxation) and expenditure (e.g. spending onhealthcare). Sound public finances are particularly importantfor the smooth working of EMU. Fiscal policies remain theresponsibility of the Member States but are coordinated atEU level, notably through the Stability and Growth Pact.

The responsibility for euro area economic policy remainslargely with the Member States, although the EC Treaty requiresthem to coordinate their economic policymaking with a viewto achieving the objectives of the Community. Thiscoordination is ensured through the Commission and theECOFIN Council. There are a number of structures andinstruments that underpin coordination such as theEurogroup, the Stability and Growth Pact and the IntegratedGuidelines.

Exchange rate policyThe European Central Bank is in chargeof conducting foreign exchangeoperations and managing the euro area’sexchange reserves. The Council has theright to conclude formal exchange rateagreements or to give generalorientations for exchange rate policies.

The Lisbon Strategy – also called the Growth and Jobs Initiative – adopted by theEU in 2000 and revamped in 2005 – aims for an innovation-friendly, modern Europewhich creates growth and jobs for its citizens through the formulation of variouspolicy initiatives to be taken by all EU Member States and by the EU itself. Thebroader objectives set out by the Lisbon Strategy are intended to be attained by2010. The main fields are economic, social, and environmental renewal andsustainability. The Lisbon Strategy is heavily based on the economic concepts of:

• Innovation as the motor for economic change• The “learning economy”• Social and environmental renewal

The rationale of the strategy is to create a stronger economy that will drivejob creation in the EU, alongside social and environmental policies that ensuresustainable development and social inclusion, which will themselves driveeconomic growth even further.

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First steps towards aEuropean economic and monetary union

1960s Blue denim jeans appear as fashionwear. Later, the first miniskirts are seen and hairis worn longer as young people begin to dressvery differently from adults. The word denimcomes from “de Nîmes”, or “from Nîmes” – theFrench town where the material was producedin the 17th century.

Culture and society

Economic and monetary union

History and politics

1970 The Prime Minister of Luxembourg, PierreWerner, proposes a three-stage process towardsEMU and a single currency at a summit meetingin The Hague. The Member States adopt theWerner Plan in 1971, which foresaw the creationof a monetary union by 1980.

1960s The Common Agricultural Policy isadopted to ensure secure and stable food suppliesby supporting producers in the agricultural sector.

1950s The young have little pocket money. Theytend to dress like their parents and listen to thesame music – on the radio or record player. Boyshave short hair, girls have medium to long hair –styled like their mothers.

1961 The first man in space is Yuri Gagarin.

1957 The founding treaty of the EU, the Treatyof Rome, identifies the convergence of economicpolicies as an important contribution to promotingstability, a rising standard of living and closerrelations between the Member States.

1957 The six founding members of the EuropeanUnion each have their own currency: Belgium(Belgian franc), Germany (mark), France (Frenchfranc), Italy (lira), Luxembourg (Luxembourgfranc), and the Netherlands (guilder).

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Sicco Mansholt, Vice-President ofthe Commission of the EuropeanEconomic Community in charge ofAgriculture, considered as father ofthe Common Agricultural Policy


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Instability andeconomic disruption

Culture and society



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. The deadline forcompletion of the single market is set at 1992.

1975 The European Space Agency (ESA) is formedto conduct independent space missions. Ariane 1,the first ESA rocket, is launched on Christmas Eve1979 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 spikydyed hair and craze for body piercing – make theirfirst appearance.

1972 Adopting an exchange rate mechanism(ERM) called “the snake in the tunnel”, the MemberStates fix their currencies against the US dollar toreduce exchange rate volatility and thereby toimprove economic stability and give a new impetusto EMU. However, the snake is soon abandonedfollowing the economic disruption caused by theoil crisis.

1973 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 Eastsparks the first oil crisis, causing worldwideeconomic and social disruption.

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


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Re-establishingeconomic stability

Culture and society



1991 The European Council adopts the“Maastricht criteria” – the rules for adoption ofthe euro, so-called because it was the MaastrichtTreaty (Treaty on European Union), signed in 1992,which set out the blueprint for EMU. They placeeconomic constraints on governments in orderto ensure sufficient economic convergence isachieved before establishing (and subsequentlyenlarging) the single European currency area.The Broad Economic Policy Guidelines (BEPGs)are adopted as a reference document guiding theconduct of the whole range of economic policiesin the Member States and the European Union.

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

1980s Jeans, trainers and T-shirts are in allteenagers’ wardrobes. Girls start to show a littlemidriff, body piercing is common and small tattoosare popular. The young are more style-consciousthan ever.

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

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 singlecurrency.

1981 Greece and the drachma join the EU (at thattime still known as the European Community orEC). The ancient Greek drachma lives on today inits “Athenian owl” symbol which features onGreek one-euro coins.

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Signature of the Act ofaccession of Spain to theEuropean Community byFelipe González (on the right),and Fernando Morán López(on the left)


Talk Talk and Duran Duranpop music groups

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Emergence of the largestintegrated trading bloc in the world

Culture and society



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

1990s Home computers run at several hundredMHz and dial-up internet connections arespreading. E-mail becomes common and videogames take off. There are 24 million web serversworldwide by the end of the decade.

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

1995 The European Council meetingin Madrid announces the name of thefuture European single currency – theeuro – to be launched on 1 January1999.

1989 Soviet President Mikhail Gorbachev helpsto remove the barriers that divide Europe. The IronCurtain is drawn back as Hungary opens its bordersto Austria and the Berlin Wall comes downreuniting Europe.

1997 The Stability and Growth Pactis agreed at the Amsterdam EuropeanCouncil.

1998 The independent EuropeanCentral Bank is founded in Frankfurt.

1999 The Schengen area, abolishing bordercontrols among its members and first agreed inthe Luxembourg town of Schengen in 1985, isextended to 13 countries in the Treaty ofAmsterdam. Much of the EU now has a singleexternal border and people, including non-EUnationals, can move freely around the Schengenarea.

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The largest monetarychangeover in history

Culture and society



2002 A new year and a new currency.The largest cash changeover in historytakes place as euro coins andbanknotes replace the nationalcurrencies of the euro area. The neweuro is the crowning achievement ofdecades of work towards EMU.

2000 The EU and ESA launch a European SpaceStrategy for the exploration and the exploitationof space.

2000s Home computers run at gigahertz (GHz)speeds and fast broadband internet connectionsare spreading throughout Europe. Mobile phoneshave more functions such as digital cameras, andare becoming fashion accessories.

1999 The euro is launched in 11 EUMember States forming the euro area.It takes over the role of the ECU(European Currency Unit). The ECUwas a composition of the differentnational currencies, weightedaccording to their part in EU externaltrade and their GDP (gross domesticproduct). Euro banknotes and coinsare not available yet – euro cash is onlyintroduced three years later.Denmark and the United Kingdomhave special derogations in the originalMaastricht Treaty on European Union.Neither country is legally required tojoin the euro area. Greece joins theeuro area in 2001.

2004 The new Member States areto adopt the euro as soon as theymeet the Maastricht convergencecriteria. For these countries, the singlecurrency is “part of the package” ofEuropean Union membership – unlikethe UK and Denmark, they have nopossibility of “opting out".

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

2001 A terrorist attack destroys theNew York World Trade Center,bringing a change in stance towardsinternational terrorism in the worldand new challenges for Europeanpolitics.

2000 The Heads of State andGovernment of the EU launch theLisbon Strategy – a series of ambitiousreforms to make the European Unionthe most dynamic and competitiveknowledge-based economy in theworld by 2010.

2004 The 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.

Digital MP3 music players with miniature harddisks can download music from the internet andstore many thousands of tracks in a singlehandheld device – a lifetime’s high-sound-qualitymusic in your pocket.

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