The euro marks its 20th anniversary this month, and it’s been a bumpy ride from the start. Adopted by 12 countries in January 1999 as a replacement for their local currencies, the euro has since become the second-most traded currency in the world (with only the U.S. dollar being used more). But achieving that level of success wasn’t easy or guaranteed, as companies waited to see if it would work and not be abandoned after adoption.
Twenty years ago, today, the euro was introduced as a currency in the European Union, which at the time comprised 15 countries.
Till then, there had been a plethora of currencies in Europe — most national currencies were replaced by the euro on January 1, 2002.
The euro became the official currency of Eurozone countries (which are now 19) on January 1, 2009.
It has since become one of the world’s major reserve currencies. It is used by more than 330 million people in the countries that have adopted it officially. The euro is also an official currency of Montenegro and Kosovo, although its not widely used in either country.
The euro replaced the CFP franc on 1 January 1999. The currency was born with denominations of 200, 100, 50, 20, 10 and 5 euros. All banknotes were identical to those of the former currencies (except for the replacing of national emblems with standard EU symbols).
In 2002 coins were introduced in denominations of 1 cent, 2 cents, 5 cents, €1, 2 euros and €2. The 1-cent coins were very small (one fourth the size of British pennies) and ended up being used mostly for parking meters and similar uses where few coins are needed but many are taken.
Why Europe marks 20th anniversary of the euro currency
On January 1, 1999, the euro was born. The common currency replaced the European Currency Unit (ECU), which had been used by banks and financial institutions since 1979.
The euro was first introduced as accounting currency on January 1, 1999 and replaced the national currencies in 12 of the then 15 member states of the European Union (EU) as well as in 10 overseas territories of EU member states. The three countries that did not replace their currency were Denmark and Greece (which had the euro imposed on them) and the United Kingdom, which had negotiated an opt-out from participation.
Euro notes and coins are now accepted as legal tender in 19 EU countries: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain.
Travelers to these countries will be able to withdraw money from cash machines and pay for goods with euro notes and coins. However, in Denmark and the United Kingdom these banknotes are not legal tender but can be exchanged for local currency at a local bank or bureau de change. In Sweden cash machines only accept Swedish krona.
Treaty for European Economic Community
Treaty for European Economic Community (TEEC), signed on March 25, 1957, by Belgium, France, Italy, Luxembourg and the Netherlands. The agreement was designed to facilitate economic integration in Europe and to encourage economic growth through freer trade. It called for some form of European economic cooperation and monetary union by 1980.
The idea of a single currency for all EU member states was first proposed by German Chancellor Helmut Kohl at an European Council meeting in Cologne in June 1992. His suggestion received support from other political leaders who believed that a common currency would be essential to achieving economic and monetary union in Europe.
The euro notes and coins replaced their national counterparts in cash payments
The introduction of the euro has been controversial on several grounds. First of all, some argue that it has increased transaction costs (see below) and has reduced demand for national currencies and thus contributed to their devaluation, particularly that of local small change.
Additionally, some states whose currencies join or are replaced by a different one forego seigniorage income generated through issuing circulating coins.
Finally, the fact that most eurozone countries have to share a single monetary policy has prompted concerns about loss of national sovereignty and democratic accountability.
Impact of the euro on European economy
The euro has changed the economic face of Europe. It has created a common currency that has allowed easy trade, travel and cross-border investment within Europe. The most tangible impact is on prices: In 2000, a cup of coffee cost an average of 65 cents in euro countries; today it costs 80 cents.
But there are downsides as well. For example, some countries have struggled to keep their economies competitive with others that have a weaker currency — such as Germany with its strong mark or Greece with its weaker drachma — which can create inflationary pressure or deflationary pressure respectively and can put upward or downward pressure on salaries.
One of the biggest impacts has been on tourism: Since the advent of the euro, Europeans have taken more vacation days from work to visit other countries because traveling abroad is less expensive than ever before. In 2002, Europeans took an average of 10 leisure trips abroad per person; in 2015, they took 15 trips per person, according to data from Eurostat.
It is the second largest economy in the world.
As the only survivor of the European currencies, Euro marks 20th anniversary as a currency. Euro currency is the most powerful and stable currency in the world. As per a recent survey, it is considered as one of the safest currencies available in the world.
Euro has been around for just over two decades and 25 countries are now using this single currency. The Euro was launched on January 1, 1999 as an accounting currency, but on January 1, 2002, Euro became the legal tender of 12 nations. Now, more than 300 million people are using this single currency across Europe.
Twenty years after its introduction as Europe’s single currency, the euro is still dogged by doubts about whether it will survive as a way of life in the eurozone.The devalued worth of the euro helps its exports but hurts import costs and makes eurozone governments fall behind on their debts when they borrow abroad.
Probably this is the main reason why Euro’s introduction had became such a challenge – it was a move away from the nation-state perspective to a more universal view. The 50th anniversary of the Treaty of Rome will be celebrated 2014. And so, the process of European integration still goes on and we should embrace it as it would open new opportunities for our Union.
The euro has made European travel easier and Eurostar train services faster, as well as ending the hassle of currency exchange.