The euro (currency sign: €; banking code: EUR) is the official currency of the European Union's Eurozone, which currently consists of 13 states (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia, and Spain) and will extend to include Cyprus and Malta from 1 January 2008. It is the single currency for more than 320 million Europeans. Including areas using currencies pegged to the euro, the euro directly affects more than 480 million people worldwide. With more than €610 billion in circulation as of December 2006 (equivalent to US$802 billion at the exchange rates at the time), the euro is the currency with the highest combined value of cash in circulation in the world, having surpassed the U.S. dollar.
The euro was introduced to world financial markets as an accounting currency in 1999 and launched as physical coins and banknotes in 2002. It replaced the former European Currency Unit (ECU) at a ratio of 1:1.
The euro is managed and administered by the Frankfurt-based European Central Bank (ECB) and the European System of Central Banks (ESCB) (composed of the central banks of its member states). As an independent central bank, the ECB has sole authority to set monetary policy. The ESCB participates in the printing, minting and distribution of notes and coins in all member states, and the operation of the Eurozone payment systems.
While all European Union (EU) member states are eligible to join if they comply with certain monetary requirements, not all EU members have chosen to adopt the currency. All nations that have joined the EU since the 1993 implementation of the Maastricht Treaty have pledged to adopt the euro in due course. Maastricht obliged current members to join the euro; however, the United Kingdom and Denmark negotiated exemptions from that requirement for themselves. Sweden turned down the euro in a 2003 referendum, and has circumvented the requirement to join the euro area by not meeting the membership criteria.
On the other hand, several small European states (Vatican City, Monaco, and San Marino), although not EU members, have adopted the euro due to currency unions with member states. Andorra, Montenegro, and Kosovo have adopted the euro unilaterally, while not being EU members either. The one exception of the smaller nations is Liechtenstein, which continues to use the Swiss franc.
Characteristics of the euro
The euro is divided into 100 cent (sometimes referred to as eurocents). All circulating euro coins (including the €2 commemorative coins) have a common side showing the denomination (value) with the EU-countries in the background and a national side showing an image specifically chosen by the country that issued the coin. Euro coins from any country may be freely used in any nation which has adopted the euro.
The euro coins are €2, €1, 50¢, 20¢, 10¢, 5¢, 2¢, and 1¢. In the Netherlands and Finland, where cash transactions are rounded to the nearest five cents, the two smallest denominations are no longer struck (except for collectors), though they remain legal tender there. (See also Linguistic issues concerning the euro.)
Coins have a common side, and a national side designed by the respective national authorities.
Commemorative coins with €2 face value have been issued with changes to the design of the national side of the coin — as Greece did for the 2004 Summer Olympics. These two-euro coins are legal tender throughout the Eurozone. Coins with various other denominations have been issued as well, but these are not intended for general circulation. These later coins are only legal tender in the nation which issued them.
All euro banknotes have a common design for each denomination on both sides. Notes are issued in €500, €200, €100, €50, €20, €10, €5. The design for each of them has a common theme of European architecture in various artistic periods. The front (or recto) of the note features windows or gateways while the back (or verso) has bridges. Care has been taken so that the architectural examples do not represent any actual existing monument, so as not to induce jealousy and controversy in the choice of which monument should be depicted. Some of the highest denominations such as the €500 are not issued in a few countries, though they remain legal tender throughout the Eurozone.
Payments clearing, electronic funds transfer
All intra-Eurozone transfers shall cost the same as a domestic one. This is true for retail payments, although several ECB payment methods can be used. Credit/debit card charging and ATM withdrawals within the Eurozone are also charged as if they were domestic. The ECB has not standardised paper-based payment orders, such as cheques; these are still domestic-based.
The ECB has set up a clearing system, TARGET, for large euro transactions.
The currency 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 final design. The eventual winner was a 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.
The glyph is according to the European Commission "a combination of the Greek epsilon, as a sign of the weight of European civilization; an E for Europe; and the parallel lines crossing through standing for the stability of the euro".
The European Commission also specified a euro logo with exact proportions and foreground/background colour tones. 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. Often the sign is based upon the capital letter C in the respective font so that currency signs have the same width as Arabic numerals.
Placement of the currency sign varies from nation to nation. There are no official standards on where to place the euro symbol.
Another advantage to the final chosen symbol is that it is easily created on a typewriter lacking the euro sign, by typing a capital 'C', backspacing and overstriking it with the equal ('=') sign.
The official construction of the euro sign, which was specified to be printed in Pantone Yellow on a Reflex Blue background.
Economic and Monetary Union
History (1990–2007)
The euro was established by the provisions in the 1992 Maastricht Treaty on European Union that was used to establish an economic and monetary union. In order to participate in the new currency, member states had 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 from moving to the stage of monetary union which would result in the introduction of the euro.
Economists that helped create or contributed to the euro include Robert Mundell, Wim Duisenberg, Robert Tollison, Neil Dowling, Fred Arditti and Tommaso Padoa-Schioppa. (For macro-economic theory, see below.)
Yielded currencies of the EurozoneCurrency Abbr. Rate Fixed on EMU III
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, based on a recommendation from the European Commission based on the market rates on 31 December 1998, so that one ECU (European Currency Unit) 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.) Council Regulation 2866/98 (EC), of 31 December 1998, set these rates. 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, in Council Regulation 1478/2000 (EC), of 19 June 2000.
The currency was introduced in non-physical form (travellers' cheques, electronic transfers, banking, etc.) at midnight on 1 January 1999, when the national currencies of participating countries (the Eurozone) ceased to exist independently in that 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 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; the Mark officially ceased to be legal tender on 31 December 2001, though the exchange period lasted two months. The final date was 28 February 2002, by which all national currencies ceased to be legal tender in their respective member states. However, even after the official date, they continued to be accepted by national central banks for periods ranging from several years to forever 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.
On 1 January 2007, Slovenia joined the Eurozone.
Eurozone
The euro is the sole currency in Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia and Spain. These 13 countries together are frequently referred to as the Eurozone or the euro area, or more informally "euroland" or the "eurogroup". Outside of the area covered by the map, the euro is the legal currency of the French overseas possessions of French Guiana, Réunion, Saint-Pierre et Miquelon, Guadeloupe, Martinique, Saint-Barthélemy, Saint Martin, Mayotte, and the uninhabited Clipperton Island and the French Southern and Antarctic Lands; the Portuguese autonomous regions of the Azores and Madeira; and the Spanish Canary Islands.
By virtue of some bilateral agreements, the European microstates of Monaco, San Marino, and Vatican City mint their own euro coins on behalf of the European Central Bank. They are, however, severely limited in the total value of coins they may issue.
Andorra, Montenegro and Kosovo adopted the foreign euro as their legal currency for movement of capital and payments without participation in the ESCB or the right to mint coins. Andorra is in the process of entering a monetary agreement similar to that of the microstates above.
Several possessions and former colonies of EU states have currencies pegged to the euro. These are French Polynesia, New Caledonia, Wallis and Futuna (the CFP franc); Cape Verde; the Comoros; and fourteen nations of Central and West Africa (the CFA franc). See Currencies related to the euro.
Although not legal tender in Denmark and the United Kingdom, the euro is accepted in some stores throughout both countries, particularly international stores in large cities, and shops in Northern Ireland near the border with the Republic of Ireland, where the euro is the official currency. Similarly, the euro is widely accepted in Switzerland, even by official boards, such as the Swiss Railways.
Future prospects (2008–)
Pre-2004 EU members
From Greece's participation in 2001 until the EU enlargement in 2004, Denmark, Sweden and the United Kingdom were the only EU member states outside the monetary union. The situation for the three older member states also looks different from that of the newer EU members; the three countries have no clear roadmap for adopting the euro:
Denmark negotiated a number of opt-out clauses from the Maastricht treaty after it had been rejected in a first referendum. On 28 September 2000, another referendum was held in Denmark regarding the euro resulting in a 53.2% vote against joining. However, Danish politicians have suggested that debate on abolishing the four opt-out clauses may possibly be re-opened. In addition, Denmark has pegged its krone to the euro (€1 = DKr 7.46038 ± 2.25%) as the krone remains in the ERM. Although not part of the European Union, both Greenland and the Faroe Islands use the Danish krone (the Faroes in the form of the Faroese króna), and so also fall within the ERM. Denmark will hold a new referendum by 2011.
Sweden: Sweden is obligated to join the euro by the 1994 Act of Accession, when they meet the economic conditions. However, the krona has never been part of ERM II, rendering Sweden ineligible. In 2003, a public referendum rejected euro membership, and Sweden has no plans to adopt the euro. The EU has made it clear that it will tolerate this with respect to Sweden but not those member states that joined in 2004 or 2007.
The United Kingdom has an opt-out from eurozone membership under the Maastricht treaty and is not obligated to join the euro. While the government is in favour of membership provided the economic conditions are right (requiring that "five economic tests" be met), the general population remain opposed and the question has never been put to referendum. The United Kingdom was forced to withdraw the pound sterling from the ERM (the precursor to ERM II) on Black Wednesday (16 September 1992) following pressure from currency speculators, and the pound is not part of ERM II.
Post-2004 EU members
As of 2007, 11 new EU member states had a currency other than the euro; however, all of these countries are required by their Accession Treaties to join the euro. Some of the following countries have already joined the European Exchange Rate Mechanism, ERM II. They and the others have set themselves the goal of joining the euro (EMU III) as follows:
Remaining currencies likely to be yieldedCurrency Abbr. Rate Conv goal
1 January 2008 for Cyprus and Malta - Approved by the Ecofin and conversion rate fixed on
10 July 2007
1 January 2009 for Slovakia
1 January 2010 for Lithuania and Bulgaria
1 January 2011 for Estonia
1 January 2012 or later for Hungary, Latvia, Poland, the Czech Republic and Romania.
Too high an inflation rate postponed the entry of Lithuania and Estonia as planned on 1 January 2007. Some of these currencies do not float against the euro, and a subset of those were unilaterally pegged to the euro before joining ERM II. See European Exchange Rate Mechanism, currencies related to the euro, and individual currency articles for more details.
Originally, the Czech Republic aimed for entry into the ERM II in 2008 or 2009, but the current government has officially dropped the 2010 target date, saying it will clearly not meet the economic criteria. The new goal is 2012.
Similarly Latvia had aimed to join the Euro in 2008 but inflation of over 11% has resulted in a delay as the country does not meet the current criteria. The government's official target is now 1 January 2012 although the head of the Bank of Latvia has suggested that 2013 may be a more realistic date.
The Fifth Report on the Practical Preparations for the Future Enlargement of the Euro Area stated on 16 July 2007 that only Cyprus, Malta (both 2008), Slovakia (2009) and Romania (2014) had currently set official target dates for adopting the euro.
Cyprus, Estonia, Latvia, Lithuania, Malta and Slovakia have already finalised the design for their respective coins' obverse sides.
Sunday, December 30, 2007
Euro
Zverejnil skylight o 7:53 AM
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