One of the most significant stages toward European unity took occurred on January 1, 1999, when 12 nations adopted the euro as their official currency. This was one of the most significant moves toward European unification (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain).
Greater economic integration and the unification of Europe as a single market were among the goals that were intended to be accomplished by the adoption of a common currency. Because there would be fewer conversions from currency to currency, it would also make it simpler for individuals from various nations to do business with one another. Due to the increased economic integration of the participating nations, the creation of the euro was also considered as a strategy to maintain peace in the region.
At initially, the euro was only used in dealings between banks, and its value was recorded concurrently with that of the national currencies. After a few years, the people began to have access to banknotes and coins for use in their day-to-day transactions.
On January 1, 2002, citizens of the first nations in the European Union to accept the euro started to use the new currency’s banknotes and coins. Before the middle of that year, people had to use all of their old paper money and coins in the nations’ old currency since beyond that point, it would no longer be acceptable in monetary transactions and the euro would be used solely instead.
The Euro, Symbol: €
The abbreviation for the euro is “€,” which consists of a rounded “E” with either one or two cross lines. Euros may be broken down into its component parts, the euro cent and the euro, with each euro cent representing one hundredth of a euro.
More than 175 million people in 19 of the 28 countries that are members of the EU, as well as several countries that are not nominally members of the EU, use the euro as their primary currency. This makes the euro one of the most influential currencies in the world.
The following countries presently use the euro:
- Andorra (not an EU member)
- Kosovo (not all countries recognize Kosovo as an independent nation)
- Monaco (not in the EU)
- Montenegro (not in the EU)
- The Dutch territory
- San Marino (not in the EU)
- The City of Vatican (not in the EU)
Territories that use the euro:
- Akrotiri and Dhekelia (British territory)
- French Southern and Antarctic Lands
- Saint Bathelemy (overseas collectivity of France)
- Saint Martin (overseas collectivity of France)
- Saint Pierre and Miquelon (overseas collectivity of France)
Countries that do not use the euro but participate in the Single Euro Payments Area, which simplifies bank transfers:
- Czech Republic
- United Kingdom
Recent and Future Euro Countries
The first day of use for the euro in Slovakia was January 1, 2009, while the first day of use for Estonia was January 1, 2011. On January 1, 2014, Latvia became the newest member of the eurozone, and on January 1, 2015, Lithuania started utilising the euro.
As of the year 2019, the countries of the United Kingdom, Denmark, the Czech Republic, Hungary, Poland, Bulgaria, Romania, and Croatia are not part of the Eurozone and do not use the euro. Newly admitted nations to the EU are making progress toward membership in the eurozone. Both Romania and Croatia have intentions of adopting the currency in the next two years: 2022 for Romania and 2024 for Croatia.
Using metrics like as interest rates, inflation, exchange rates, gross domestic product, and government debt, economies of nations are analysed once every two years to determine whether or not they have the financial wherewithal to adopt the euro as their currency. The European Union uses these indicators of economic health to determine whether or not a potential new member state would be less likely to need financial assistance in the form of a fiscal stimulus or bailout after entering the eurozone. The European Union (EU) was placed under some pressure as a result of the financial crisis that occurred in 2008 and its aftereffects, such as the debate over whether or not Greece should be bailed out or should quit the eurozone.
Reasons Why Certain Nations Do Not Employ It
The United Kingdom and Denmark are the only two nations in the European Union that have chosen not to adopt the currency despite being members of the EU. As of 2019, the question of the currency seemed to be moot due to the fact that the United Kingdom decided in 2016 to withdraw from the European Union in a referendum known as Brexit. Because the pound sterling is such a significant currency throughout the globe, international leaders did not consider it necessary to switch to another currency at the time that the euro was developed.
Countries that do not use the euro are able to maintain the independence of their economies; this includes the ability to set their own interest rates and other monetary policies. However, the flip side of this independence is that these countries are responsible for managing their own financial crises and cannot seek assistance from the European Central Bank.
On the other hand, it can make sense for a country’s economy to not be dependant on the economies of other nations. Countries that choose not to participate in the Eurozone could be able to respond more quickly and effectively to a worldwide crisis that has varying effects on various nations, as what happened in Greece in 2007–2008. It took years for decisions to be made on bailouts for Greece, for example, and throughout that time Greece was unable to choose its own policies or take its own actions. At the time, one of the most contentious debates centred on the question of whether or not insolvent Greece would withdraw from the eurozone or reintroduce its own currency.
Denmark is not a member of the eurozone, but its national currency, the krone, is pegged to the euro in order to keep the country’s economy stable and predictable, as well as to steer clear of significant price swings and market speculation on the krone. The exchange rate is fixed at 7.46038 kroner to one euro, which may fluctuate by up to 2.25 percent. 1 A fixed exchange rate between the krone and the German mark existed prior to the introduction of the euro.
Euro versus. Dollar
The United States dollar has traditionally served as a common currency for usage around the globe, much in the same way that the English language has served as a common language for individuals from a variety of nations. Because of the consistent backing of the United States government by the dollar, investors and nations outside the United States see U.S. Treasury bonds as secure locations to deposit their money. Some nations even keep their financial reserves denominated in dollars. In addition, the currency has the scale and liquidity that are necessary to be a significant participant on the global stage.
The initial exchange rate for the euro was calculated based on the European Currency Unit, which had been developed based on a collection of European currencies prior to the introduction of the euro. The dollar is often traded at a little premium to this currency. Its all-time low was 0.8225 in October of 2000, and its all-time high was 1.6037 in July of 2008, amid the height of the subprime mortgage crisis and the collapse of the Lehman Brothers financial services firm. 2
Because of the protracted recession that occurred all over the world after the collapse of Lehman Brothers, Professor Steve Hanke proposed in an article published in Forbes in 2018 that establishing a “zone of stability” for the exchange rate formally between the euro and the dollar would keep the entire global market stable. Hanke’s theory was based on the hypothesis that this would keep the entire global market stable.