European Union |
Andorra |
Andorran–European relations are based on a customs union between the Andorra and the European Union (EU).
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The "Agreement between the European Economic Community and the Principality of Andorra" (signed 28 June 1990, entered into force 1 July 1991) establishes a customs union with most favoured nation status between the Principality and the EU. Andorra is treated as an EU state where trade in manufactured goods is concerned, but not for agricultural produce.[1]
There are full customs checks on the EU side of the border, as Andorra has low VAT and other indirect taxes, such as those for alcohol, tobacco and petrol, from which visitors might benefit.
Andorra uses the euro as its sole currency, but does not yet have the right to issue its own coins like other European microstates using the euro.
Andorra does not have an official currency and unlike its two larger neighbours, France and Spain, which surround it, it is not a member of the European Union (EU). However it de facto uses the EU's euro (the currency of the Eurozone states) as it historically used the French franc and Spanish peseta. Those two currencies were replaced by the euro in 2002, hence the euro replaced the franc and peseta as the sole circulating currency in Andorra.
Three other European microstates outside of the EU, Monaco, San Marino and the Vatican City, also faced this situation but they, unlike Andorra, concluded agreements with the EU for the right to mint their own euro coins. Euro coins have a common design on one side, and a national-specific side on the other. Hence those three microstates could design their own national side, mint and distribute their own coins. As with coins minted in other eurozone states, the microstate coins are valid across the eurozone; however they do not gain representation on the euro's governing bodies, the European Central Bank (ECB) and the Eurogroup.
In 2003, Andorra requested the right to mint its own coins. In 2004 the Council of the European Union adopted its negotiating position with Andorra. Following Andorra's agreement to abide by Council Directive 2003/48/EC on taxation of savings income in the form of interest payments, the Commission recommended opening negotiations.[2] Negotiations have progressed since although were expected to be concluded by 2008, then 2012[3][4] but have been stalled repeatedly. This has in part been due to poor relations stemming from Andorra's tax haven status. A monetary agreement was eventually agreed on by Andorra and the EU in February 2011,[5] and the agreement was signed on 30 June 2011. After ratification, the agreement will make the euro Andorra's official currency and allow Andorra to mint up to 2.4 million coins from 2013 onwards, if it complies with the agreement's terms.[6][7]
Two other agreements were signed in 2003/4. The first is a cooperation agreement covering the environment, communications, information, culture, transport, regional and cross-border co-operation and social issues.[1] However this has seen few operational results so far.[8] There is also a taxation of savings agreement[1] which was signed following pressure from the EU on offshore financial centres to conform to EU standards.[8]
Andorra has stayed outside the Schengen Agreement and maintains border controls with the EU. However as travellers to Andorra have to pass through the Schengen Area, and Andorra accepts Schengen visas, Andorra is in practice a virtual part of the area.[8]
Deepening Andorra's relationship with the EU generally requires compliance with the EU's four freedoms (only goods is achieved) together with fiscal and financial sector reforms to EU standards (removing its tax haven reputation).[8] The government has said that "for the time being" there is no need to join the EU;[9] however, the governing Social Democratic Party is in favour.
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