Euro

euro
ευρώ (Greek)

евро (Bulgarian)
Banknotes Coins
Banknotes Coins
ISO 4217 Code EUR (num. 978)
Official user(s)
Unofficial user(s)
Inflation 1.5%, March 2010
Method HICP
Pegged by
Symbol €
Nickname The single currency[1]
Plural See Euro linguistic issues
Coins
Freq. used 10c, 50c, €1, €2
Rarely used 1c, 2c, 5c,20c
Banknotes
Freq. used €5, €10, €20, €50, €100
Rarely used €200, €500
Central bank European Central Bank
Website www.ecb.europa.eu
Printer
Website
Mint
Website

The euro (sign: €; code: EUR) is the official currency of the eurozone: 16 of the 27 Member States of the European Union (EU). It is also the currency used by the EU institutions. The eurozone consists of Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain.[2] Estonia is due to join the eurozone on 1 January 2011.[3] The currency is also used in a further five European countries, with and without formal agreements, and is consequently used daily by some 327 million Europeans.[4] Over 175 million people worldwide use currencies which are pegged to the euro, including more than 150 million people in Africa.

The euro is the second largest reserve currency (a status it inherited from the German mark) as well as the second most traded currency in the world after the U.S. dollar.[5][6] As of June 2010, with more than €800 billion in circulation, the euro is the currency with the highest combined value of banknotes and coins in circulation in the world, having surpassed the U.S. dollar.[note 15] Based on IMF estimates of 2008 GDP and purchasing power parity among the various currencies, the eurozone is the second largest economy in the world.[7]

The name euro was officially adopted on 16 December 1995.[8] 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. Euro coins and banknotes entered circulation on 1 January 2002.

Contents

Administration

Main articles: European Central Bank, Maastricht Treaty, and Euro Group
The ECB in Frankfurt, Germany, is in charge of the eurozone's monetary policy

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 requirements, although not all states have done so. The United Kingdom and Denmark negotiated exemptions,[9] while Sweden turned down the euro in a 2003 referendum, 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.

Characteristics

Coins and banknotes

All euro coins have a common side, and a national side chosen by the issuing bank.
Main articles: euro coins and euro banknotes

The euro is divided into 100 cents (sometimes referred to as euro-cents, especially when distinguishing them from other currencies). In Community legislative acts the plural forms of euro and cent are spelled without the s, notwithstanding normal English usage.[10][11] Otherwise, normal English plurals are recommended and used;[12] with many local variations such as 'centime' in France.

All circulating coins have a common side showing the denomination or value, and a map in the background. For the denominations except the 1-, 2- and 5-cent coins that map only showed the 15 Member States which were members when the euro was introduced. Beginning in 2007 or 2008 (depending on the country) the old map is being replaced by a map of Europe also showing countries outside the Union like Norway. The 1-, 2- and 5-cent coins, however, keep their old design, showing a geographical map of Europe with the 15 Member States of 2002 raised somewhat above the rest of the map. All common sides were designed by Luc Luycx. The coins also have a national side showing an image specifically chosen by the country that issued the coin. Euro coins from any Member State may be freely used in any nation which has adopted the euro.

The common (top) and national sides of the €2 coin

The coins are issued in €2, €1, 50c, 20c, 10c, 5c, 2c, and 1c denominations. In order to avoid the use of the two smallest coins, some cash transactions are rounded to the nearest five cents in the Netherlands (by voluntary agreement) and in Finland (by law).[13] This practice is discouraged by the Commission, as is the habit of certain shops to refuse to accept high value euro notes.[14]

Commemorative coins with €2 face value have been issued with changes to the design of the national side of the coin. These include both commonly issued coins, such as the €2 commemorative coin for the fiftieth anniversary of the signing of the Treaty of Rome, and nationally issued coins, such as the coin to commemorate the 2004 Summer Olympics issued by Greece. These coins are legal tender throughout the eurozone. Collector's coins with various other denominations have been issued as well, but these are not intended for general circulation, and they are legal tender only in the Member State that issued them.[15]

The design for the euro banknotes have common designs on both sides. The design was created by the Austrian designer Robert Kalina.[16] Notes are issued in €500, €200, €100, €50, €20, €10, €5. Each banknote has its own colour and is dedicated to an artistic period of European architecture. The front of the note features windows or gateways while the back has bridges. While the designs are supposed to be devoid of any identifiable characteristics, the initial designs by Robert Kalina were of specific bridges, including the Rialto and the Pont de Neuilly, and were subsequently rendered more generic; the final designs still bear very close similarities to their specific prototypes; thus they are not truly generic.[17] Some of the highest denominations such as the €500 are not issued in all countries, though they remain legal tender throughout the eurozone.

Payments clearing, electronic funds transfer

Capital within the EU may be transferred in any amount from one country to another. All intra-EU transfers in euro are considered as domestic payments and bear the corresponding domestic transfer costs.[18] This includes all Member States of the EU, even those outside the eurozone providing the transactions are carried out in euro.[19] Credit/debit card charging and ATM withdrawals within the eurozone are also charged as domestic, however paper-based payment orders, like cheques, have not been standardised so these are still domestic-based. The ECB has also set up a clearing system, TARGET, for large euro transactions.[20]

Currency sign

The euro sign; logotype and handwritten.
Main article: Euro sign

A special euro currency sign (€) was designed after a public survey had narrowed the original ten proposals down to two. The European Commission then chose the design created by the Belgian Alain Billiet. The official story of the design history of the euro sign is disputed by Arthur Eisenmenger, a former chief graphic designer for the EEC, who claims to have created it as a generic symbol of Europe.[21]

Inspiration for the € symbol itself came from the Greek epsilon (Є)[note 16] – a reference to the cradle of European civilisation – and the first letter of the word Europe, crossed by two parallel lines to ‘certify’ the stability of the euro.
—European Commission[10]

The European Commission also specified a euro logo with exact proportions and foreground/background colour tones.[22] While the Commission intended the logo to be a prescribed glyph shape, font designers made it clear that they intended to design their own variants instead.[23] Typewriters lacking the euro sign can create it by typing a capital 'C', backspacing and overstriking it with the equal ('=') sign. Placement of the currency sign relative to the numeric amount varies from nation to nation, but for texts in English the symbol (and the ISO-standard "EUR") should precede the amount.[24]

Introduction of the euro

Preceding national currencies of the Eurozone
Currency Code Rate Fixed on Yielded
Austria Austrian schilling ATS &000000000000001376030013.7603 01998-12-31 31 December 1998 2002
Belgium Belgian franc BEF &000000000000004033990040.3399 01998-12-31 31 December 1998 2002
Netherlands Dutch guilder NLG &00000000000000022037102.20371 01998-12-31 31 December 1998 2002
Finland Finnish markka FIM &00000000000000059457305.94573 01998-12-31 31 December 1998 2002
France French franc FRF &00000000000000065595696.55957 01998-12-31 31 December 1998 2002
Germany German mark DEM &00000000000000019558301.95583 01998-12-31 31 December 1998 2002
Republic of Ireland Irish pound IEP &00000000000000007875640.787564 01998-12-31 31 December 1998 2002
Italy Italian lira ITL &Expression error: Unrecognised punctuation character ","1,936.27 01998-12-31 31 December 1998 2002
Luxembourg Luxembourgian franc LUF &000000000000004033990040.3399 01998-12-31 31 December 1998 2002
Monaco Monegasque franc MCF &00000000000000065595696.55957 01998-12-31 31 December 1998 2002
Portugal Portuguese escudo PTE &0000000000000200481999200.482 01998-12-31 31 December 1998 2002
San Marino Sammarinese lira SML &Expression error: Unrecognised punctuation character ","1,936.27 01998-12-31 31 December 1998 2002
Spain Spanish peseta ESP &0000000000000166385999166.386 01998-12-31 31 December 1998 2002
Vatican City Vatican lira VAL &Expression error: Unrecognised punctuation character ","1,936.27 01998-12-31 31 December 1998 2002
Greece Greek drachma GRD &0000000000000340750000340.75 02000-06-19 19 June 2000 2002
Slovenia Slovenian tolar SIT &0000000000000239639999239.64 02006-07-11 11 July 2006 2007
Cyprus Cypriot pound CYP &00000000000000005852740.585274 02007-07-10 10 July 2007 2008
Malta Maltese lira MTL &00000000000000004293000.4293 02007-07-10 10 July 2007 2008
Slovakia Slovak koruna SKK &000000000000003012600030.126 02008-07-08 8 July 2008 2009
Estonia Estonian kroon EEK &000000000000001564659915.6466 02010-07-13 13 July 2010 2011

The euro was established by the provisions in the 1992 Maastricht Treaty. To participate in the currency, Member States are meant to meet strict criteria, such as a budget deficit of less than three per cent of their GDP, a debt ratio of less than sixty per cent of GDP, low inflation, and interest rates close to the EU average. In the Maastricht Treaty, the United Kingdom and Denmark were granted exemptions per their request from moving to the stage of monetary union which would result in the introduction of the euro.

Economists who helped create or contributed to the euro include Fred Arditti, Neil Dowling, Wim Duisenberg, Robert Mundell, Tommaso Padoa-Schioppa and Robert Tollison. (For macro-economic theory, see below.) The name euro was devised on 4 August 1995 by Germain Pirlot, a Belgian Esperantist and ex-teacher of French and history,[25] and officially adopted in Madrid on 16 December 1995.[8][26]

Due to differences in national conventions for rounding and significant digits, all conversion between the national currencies had to be carried out using the process of triangulation via the euro. The definitive values in euro of these subdivisions (which represent the exchange rates at which the currency entered the euro) are shown at right.

The rates were determined by the Council of the European Union,[27] based on a recommendation from the European Commission based on the market rates on 31 December 1998. They were set so that one European Currency Unit (ECU) would equal one euro. The European Currency Unit was an accounting unit used by the EU, based on the currencies of the Member States; it was not a currency in its own right. They could not be set earlier, because the ECU depended on the closing exchange rate of the non-euro currencies (principally the pound sterling) that day.

The procedure used to fix the irrevocable conversion rate between the drachma and the euro was different, since the euro by then was already two years old. While the conversion rates for the initial eleven currencies were determined only hours before the euro was introduced, the conversion rate for the Greek drachma was fixed several months beforehand.[28]

The currency was introduced in non-physical form (traveller's cheques, electronic transfers, banking, etc.) at midnight on 1 January 1999, when the national currencies of participating countries (the eurozone) ceased to exist independently. Their exchange rates were locked at fixed rates against each other, effectively making them mere non-decimal subdivisions of the euro. The euro thus became the successor to the European Currency Unit (ECU). The notes and coins for the old currencies, however, continued to be used as legal tender until new euro notes and coins were introduced on 1 January 2002.

The changeover period during which the former currencies' notes and coins were exchanged for those of the euro lasted about two months, until 28 February 2002. The official date on which the national currencies ceased to be legal tender varied from Member State to Member State. The earliest date was in Germany, where the mark officially ceased to be legal tender on 31 December 2001, though the exchange period lasted for two months more. Even after the old currencies ceased to be legal tender, they continued to be accepted by national central banks for periods ranging from several years to forever (the latter in Austria, Germany, Ireland and Spain). The earliest coins to become non-convertible were the Portuguese escudos, which ceased to have monetary value after 31 December 2002, although banknotes remain exchangeable until 2022.

Direct and indirect usage

Further information: Eurozone, International status and usage of the euro, and Enlargement of the eurozone
Andorra
Bulgaria
Czech
Rep.
Denmark
Hungary
Kosovo
Latvia
Lithuania
Monaco
Monten.
Poland
Romania
San Marino
Sweden
United
Kingdom
Vatican
     Eurozone
     ERM II members
     unilaterally adopted
     other EU members
     special adoption agreement
     via treaty

Direct usage

The euro is the sole currency of 16 EU Member States: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain. These countries comprise the "eurozone", some 326 million people in total. Estonia will join in 2011.[29]

With all but two of the remaining EU members obliged to join, together with future members of the EU, the enlargement of the eurozone is set to continue further. Outside the EU, the euro is also the sole currency of Montenegro and Kosovo and several European micro states (Andorra, Monaco, San Marino and Vatican City) as well as in three overseas territories of EU states that are not themselves part of the EU (Mayotte, Saint Pierre and Miquelon and Akrotiri and Dhekelia). Together this direct usage of the euro outside the EU affects over 3 million people.

It is also gaining increasing international usage as a trading currency, in Cuba,[30] North Korea and Syria.[31] There are also various currencies pegged to the euro (see below). In 2009 Zimbabwe abandoned its local currency and used major currencies instead, including the euro and the United States dollar.[32]

Use as reserve currency

Since its introduction, the euro has been the second most widely held international reserve currency after the U.S. dollar. The share of the euro as a reserve currency has increased from 17.9% in 1999 to 26.5% in 2008, at the expense of the U.S. dollar (its share fell from 70.9% to 64.0% in the same timeframe) and the Yen (it fell from 6.4% to 3.3%). The euro inherited and built on the status of the second most important reserve currency from the German mark. The euro remains underweight as a reserve currency in advanced economies while overweight in emerging and developing economies: according to the IMF[33] the total of euros held as a reserve in the world at the end of 2008 was equal to USD 1.1 trillion, with a share of 22% of all currency reserves in advanced economies, but a total of 31% of all currency reserves in emerging and developing economies.

The possibility of the euro becoming the first international reserve currency is now widely debated among economists.[34] Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is "absolutely conceivable that the euro will replace the dollar as reserve currency, or will be traded as an equally important reserve currency."[35] In contrast to Greenspan's 2007 assessment the euro's increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession and sovereign debt crisis.[33]

Currencies pegged to the euro

Worldwide use of the euro and the U.S. dollar:      Eurozone      External adopters of the euro      Currencies pegged to the euro      Currencies pegged to the euro within narrow band      United States      External adopters of the US dollar      Currencies pegged to the US dollar      Currencies pegged to the US dollar within narrow band Note that the Belarusian ruble is pegged to the Euro, Russian Ruble and U.S. Dollar in a currency basket.

Outside the eurozone, a total of 23 countries and territories that do not belong to the EU have currencies that are directly pegged to the euro including 14 countries in mainland Africa (CFA franc and Moroccan dirham), two African island countries (Comorian franc and Cape Verdean escudo), three French Pacific territories (CFP franc) and another Balkan country, Bosnia and Herzegovina (Bosnia and Herzegovina convertible mark). On 28 July 2009, São Tomé and Príncipe signed an agreement with Portugal which will eventually tie its currency to the euro.[36]

With the exception of Bosnia (which pegged its currency against the German mark) and Cape Verde (formerly pegged to the Portuguese escudo) all of these non-EU countries had a currency peg to the French Franc before pegging their currencies to the euro. Pegging a country's currency to a major currency is regarded as a safety measure, especially for currencies of areas with weak economies, as the euro is seen as a stable currency, prevents runaway inflation and encourages foreign investment due to its stability.

Within the EU several currencies have a peg to the euro, in most instances as a precondition to joining the eurozone. The Bulgarian Lev and the Estonian kroon were formerly pegged to the German mark, other EU memberstates have a direct peg due to ERM II: the Danish krone, the Lithuanian litas and the Latvian lats.

In total, over 150 million people in Africa use a currency pegged to the euro, 25 million people outside the eurozone in Europe and another 500,000 people on Pacific islands.

Economics

Optimal currency area

In economics, an optimum currency area (or region) (OCA, or OCR) is a geographical region in which it would maximize economic efficiency to have the entire region share a single currency. There are two models, both proposed by Robert A. Mundell: the stationary expectations model and the international risk sharing model. Mundell himself advocates the international risk sharing model and thus concludes in favour of the euro.[37] However, even before the creation of the single currency, there were concerns over diverging economies. Yet the chances of a state leaving the euro, or the chances that the whole zone would collapse, are extremely slim.[38]

Transaction costs and risks

The most obvious benefit of adopting a single currency is to remove the cost of exchanging currency, theoretically allowing businesses and individuals to consummate previously unprofitable trades. For consumers, banks in the eurozone must charge the same for intra-member cross-border transactions as purely domestic transactions for electronic payments (e.g., credit cards, debit cards and cash machine withdrawals).

The absence of distinct currencies also removes exchange rate risks. The risk of unanticipated exchange rate movement has always added an additional risk or uncertainty for companies or individuals that invest or trade outside their own currency zones. Companies that hedge against this risk will no longer need to shoulder this additional cost. This is particularly important for countries whose currencies had traditionally fluctuated a great deal, particularly the Mediterranean nations.

Financial markets on the continent are expected to be far more liquid and flexible than they were in the past. The reduction in cross-border transaction costs will allow larger banking firms to provide a wider array of banking services that can compete across and beyond the eurozone.

Price parity

Another effect of the common European currency is that differences in prices – in particular in price levels – should decrease because of the 'law of one price'. Differences in prices can trigger arbitrage, i.e. speculative trade in a commodity across borders purely to exploit the price differential. Therefore, prices on commonly traded goods are likely to converge, causing inflation in some regions and deflation in others during the transition. Some evidence of this has been observed in specific markets.[39]

Macroeconomic stability

Low levels of inflation are the hallmark of stable and modern economies. Because a high level of inflation acts as a tax (seigniorage) and theoretically discourages investment, it is generally viewed as undesirable. In spite of the downside, many countries have been unable or unwilling to deal with serious inflationary pressures. Some countries have successfully contained them by establishing largely independent central banks. One such bank was the Bundesbank in Germany; as the European Central Bank is modelled on the Bundesbank,[40] it is independent of the pressures of national governments and has a mandate to keep inflationary pressures low. Member countries that join the bank commit to lower inflation, hoping to enjoy the macroeconomic stability associated with low levels of expected inflation. The ECB (unlike the Federal Reserve in the United States of America) does not have a second objective to sustain growth and employment.

Many national and corporate bonds denominated in euro are significantly more liquid and have lower interest rates than was historically the case when denominated in legacy currencies. While increased liquidity may lower the nominal interest rate on the bond, denominating the bond in a currency with low levels of inflation arguably plays a much larger role. A credible commitment to low levels of inflation and a stable debt reduces the risk that the value of the debt will be eroded by higher levels of inflation or default in the future, allowing debt to be issued at a lower nominal interest rate.

Evidence on the effect of the introduction of the euro

In conformity with the economic predictions, empirical studies have found that the introduction of the euro has had a positive impact on the movement of goods, financial assets, and people within the eurozone. In addition, countries which previously had weak currencies have benefited from lower interest rates and their firms now have easier access to capital.

Trade

The consensus from the studies of the effect of the introduction of the euro is that it has increased trade within the eurozone by 5% to 10%.[41] On the lower bound, one study suggested an increase of 3%.[42] A recent study estimates this effect to be between 9 and 14%.[43] Nevertheless, a recent meta-analysis of all available studies suggests that the prevalence of positive estimates is caused by publication bias and that the underlying effect may be negligible.[44]

Investment

Studies have found a positive effect of the introduction of the euro on investment. Physical investment seems to have increased by 5% in the eurozone due to the introduction.[45] Regarding foreign direct investment, a study found that the intra-eurozone FDI stocks have increased by about 20% during the first four years of the EMU.[46] Concerning the effect on corporate investment, there is evidence that the introduction of the euro has resulted in an increase in investment rates and that it has made it easier for firms to access financing in Europe. The euro has most specifically stimulated investment in companies that come from countries that previously had weak currencies. A study found that the introduction of the euro accounts for 22% of the investment rate after 1998 in countries that previously had a weak currency.[47] The effect is however less clear for firms coming from the strong currency countries; the introduction has not been beneficial for most of them.

Inflation

The introduction of the euro has led to extensive discussion about its possible effect on inflation. In the short term, there was a widespread impression in the population of the eurozone that the introduction of the euro had led to an increase in prices. Paradoxically, this impression has not been supported by general indices of inflation, showing no major effect of the introduction of the euro. A study of this paradox has found that it is due to an asymmetric effect of the introduction of the euro on prices: while it had no effect on most goods, it had an effect on cheap goods which have seen their price round up after the introduction of the euro. The study found that consumers based their beliefs on inflation of those cheap goods which are frequently purchased.[48] It has also been suggested that the jump in small prices may be because prior to the introduction, retailers made fewer upward adjustments and waited for the introduction of the euro to do so.[49]

Exchange rate risk

One of the advantages of the adoption of a common currency is the reduction of the risk associated with changes in currency exchange rates. It has been found that the introduction of the euro created "significant reductions in market risk exposures for nonfinancial firms both in and outside of Europe".[50] These reductions in market risk "were concentrated in firms domiciled in the eurozone and in non-Euro firms with a high fraction of foreign sales or assets in Europe". These changes were however "statistically and economically small".

Financial integration

The introduction of the euro seems to have had a strong effect on European financial integration. According to a study on this question, it has "significantly reshaped the European financial system, especially with respect to the securities markets [...] However, the real and policy barriers to integration in the retail and corporate banking sectors remain significant, even if the wholesale end of banking has been largely integrated."[51] Specifically, the euro has significantly decreased the cost of trade in bonds, equity, and banking assets within the eurozone. [52] On a global level, there is evidence that the introduction of the euro has led to an integration in terms of investment in bond portfolios, with eurozone countries lending and borrowing more between each other than with other countries.[53]

Effect on interest rates

The introduction of the euro has decreased the interest rates of most members countries, in particular those with a weak currency. As a consequence the market value of firms from countries which previously had a weak currency has very significantly increased.[54] The countries whose interest rates fell most as a result of the euro are Greece, Ireland, Portugal, Spain, and Italy.[55]

Price convergence

The evidence on the convergence of prices in the eurozone with the introduction of the euro is mixed. Several studies failed to find any evidence of convergence following the introduction of the euro after a phase of convergence in the early 1990s.[56][57] Other studies have found evidence of price convergence,[58][59] in particular for cars.[60] A possible reason for the divergence between the different studies is that the processes of convergence may not have been linear, slowing down substantially between 2000 and 2003, and resurfacing after 2003 as suggested by a recent study (2009).[61]

Tourism

A study has found that the introduction of the euro has had a positive effect on tourism flows within the EMU, with an increase of 6.5%.[62]

Exchange rates

U.S. dollars per 1 euro
1999–2010
Year Lowest ↓ Highest ↑
Date Rate Date Rate
1999 03 Dec $1.0015 05 Jan $1.1790
2000 26 Oct $0.8252 06 Jan $1.0388
2001 06 Jul $0.8384 05 Jan $0.9545
2002 28 Jan $0.8578 31 Dec $1.0487
2003 08 Jan $1.0377 31 Dec $1.2630
2004 14 May $1.1802 28 Dec $1.3633
2005 15 Nov $1.1667 03 Jan $1.3507
2006 02 Jan $1.1826 05 Dec $1.3331
2007 12 Jan $1.2893 27 Nov $1.4874
2008 27 Oct $1.2460 15 Jul $1.5990
2009 04 Mar $1.2555 03 Dec $1.5120
2010 08 Jun $1.1942 13 Jan $1.4563
Source: Euro exchange rates in USD, ECB

Flexible exchange rates

The ECB targets interest rates rather than exchange rates and in general does not intervene on the foreign exchange rate markets, because of the implications of the Mundell-Fleming Model which suggest that a central bank cannot maintain interest rate and exchange rate targets simultaneously because increasing the money supply results in a depreciation of the currency. In the years following the Single European Act, the EU has liberalised its capital markets, and as the ECB has chosen monetary autonomy, the exchange rate regime of the euro is flexible, or floating.

Against other major currencies

After the introduction of the euro, its exchange rate against other currencies fell heavily, especially against the U.S. dollar. From an introduction at US$1.18/€, the euro fell to a low of $0.8252/€ by 26 October 2000. After the appearance of the coins and notes on 1 January 2002 and the replacement of all national currencies, the euro began steadily appreciating, and regained parity with the U.S. dollar, on 15 July 2002. The euro has not fallen below parity with the U.S. dollar since December 2002 but has risen in value.

Exchange rate evolution of the euro compared to USD, JPY and GBP. Exchange rate at start is put to 1.
Green: in Jan-1999: €1 = $1.18 ; in Jul-2008: €1 = $1.57
Red: in Jan-1999: €1 = ¥133 ; in Jul-2008: €1 = ¥168
Blue: in Jan-1999: €1 = £0.71 ; in Jul-2008: €1 = £0.80

On 23 May 2003, the euro surpassed its initial ($1.18) trading value for the first time. At the end of 2004, it reached $1.3668 (€0.7316/$) as the U.S. dollar fell against all major currencies. Against the U.S. dollar, the euro temporarily weakened in 2005, falling to $1.18 (€0.85/$) in July 2005, and was stable throughout the third quarter of 2005. In November 2005 the euro again began to rise steadily against the U.S. dollar, hitting one record high after another. On 15 July 2008, the euro rose to an all-time high of $1.5990 (€0.6254/$). In a reversal, in August 2008 the euro began to drop against the U.S. dollar. In just two weeks the euro fell from its peak to $1.48 and by late October it reached a two and a half year low below $1.25 before moving back above $1.50 by November 2009.[63] On 29 December 2008, the pound sterling fell to an all-time low of £0.97855 (€1.0219/£) against the euro, although its value recovered somewhat in 2009.[64] In early 2010, concerns over the solvency of Greece caused a drop in the exchange rate against the dollar followed by a bounce to $1.33.[65]

Current EUR exchange rates
From Google Finance: AUD CAD CHF GBP HKD JPY USD RUB CNY TWD
From Yahoo! Finance: AUD CAD CHF GBP HKD JPY USD RUB CNY TWD
From XE.com: AUD CAD CHF GBP HKD JPY USD RUB CNY TWD
From OANDA.com: AUD CAD CHF GBP HKD JPY USD RUB CNY TWD

Linguistic issues

The formal titles of the currency are euro for the major unit and cent for the minor (one hundredth) unit and for official use in most eurozone languages; according to the ECB, all languages should use the same spelling for the nominative singular.[66] This may contradict normal rules for word formation in some languages; e.g., those where there is no eu diphthong. Bulgaria has negotiated an exception; euro in the Cyrillic alphabet is spelled as eвро (evro) and not eуро (euro) in all official documents.[67] The European Commission's Directorate-General for Translation states clearly that the plural forms euros and cents should be used in English.[68]

Notes

  1. ↑ Andorra started negotiating a treaty with the ECB for becoming a State with issuing rights in 2003 but no treaty was signed since.
  2. ↑ "By UNMIK administration direction 1999/2". Unmikonline.org. http://www.unmikonline.org/regulations/admdirect/1999/089%20Final%20%20ADE%201999-02.htm. Retrieved 2010-05-30. 
  3. ↑ By an internal act (references missing)
  4. ↑ Alongside Zimbabwean dollar (suspended indefinitely from 12 April 2009), U.S. dollar, Pound Sterling, South African rand and Botswana pula
  5. ↑ Except northern Cyprus that uses Turkish lira
  6. ↑ Including overseas departments
  7. ↑ Except Campione that uses Swiss franc.
  8. ↑ Metropolitan only. Overseas territories uses the Netherlands Antillean guilder.
  9. ↑ "By monetary agreement between France (acting for the EC) and Monaco". http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2002:142:0059:0073:EN:PDF. Retrieved 2010-05-30. 
  10. ↑ "By monetary agreement between Italy (acting for the EC) and San Marino". http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2001:209:0001:0004:EN:PDF. Retrieved 2010-05-30. 
  11. ↑ "By monetary agreement between Italy (acting for the EC) and Vatican city". http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2001:299:0001:0004:EN:PDF. Retrieved 2010-05-30. 
  12. ↑ By the third protocol to the Cyprus adhesion Treaty to EU and British local ordinance.
  13. ↑ By agreement of the EU Council. Mayotte will become an integral part of France, and hence the EU and the eurozone, in 2011 then becoming a French department with a 20 year transitional period.
  14. ↑ "By agreement of the EU Council". http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:1999:030:0029:0030:EN:PDF. Retrieved 2010-05-30. 
  15. ↑ As of 30 October 2009 (2009 -10-30):
    Total EUR currency (coins and banknotes) in circulation 771.5 (banknotes) + 21.032 (coins) =792.53 billion EUR * 1.48 (exchange rate) = 1,080 billion USD
    Total USD currency (coins and banknotes) in circulation 859 billion USD
  16. ↑ In the quotation, the epsilon is actually represented with the Cyrillic capital letter Ukranian ye (Є, U+0404) instead of the technically more appropriate Greek lunate epsilon symbol (ϵ, U+03F5).

References

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    This term is sometimes adopted by the media (Google hits for the phrase)
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  26. ↑ This was seen by some as the second diplomatic defeat of the French, who wanted the name Ecu. Also, their candidate for the initial president lost out to the German candidate, Duisenberg.
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  63. ↑ ECB official rates against the U.S. dollar from ecb.eu
  64. ↑ ECB official rates against the British pound from ecb.eu
  65. ↑ Lewis, Dan (2010-02-17). "One possible outcome of Greece crisis: Only splitting the Euro will save it". The Wall Street Journal. http://online.wsj.com/article/SB10001424052748704804204575069570005834614.html. 
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  67. ↑ SofiaEcho.com, "EVRO" Dispute over Portuguese Foreign Minister.
  68. ↑ For example, see European Commission, Directorate General for Translation: English Style Guide section 20.8 "The euro. Like 'pound', 'dollar' or any other currency name in English, the word 'euro' is written in lower case with no initial capital and, where appropriate, takes the plural 's' (as does 'cent')." European Commission Directorate-General for Translation – English Style Guide.

Further reading

  • Buti, Marco; Deroose, Servaas; Gaspar, Vitor; Nogueira Martins, João (2010). The Euro. Cambridge: Cambridge University Press. ISBN 9789279098420 .
  • Baldwin, Richard; Wyplosz, Charles (2004). The Economics of European Integration. New York: McGraw Hill. ISBN 0077103947 .

External links

Official websites

Other