On this day January 1, 2002

Euro banknotes and coins become legal tender in twelve of the European Union’s member states.

euro_banknotesThe euro (currency sign: ; currency code: EUR) is the official currency of fifteen member states of the European Union (EU).

The states, known collectively as the Eurozone are: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia, and Spain.

The currency is also used in five further countries with formal agreements and six other countries without such agreements. Hence it is the single currency for over 317 million Europeans. Including areas using currencies pegged to the euro, the euro directly affects close to 500 million people worldwide.

With more than €731 billion in circulation as of November 2008 (equivalent to US$1,022 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 (USD).

Based on official estimates of 2008 GDP and purchasing power parity among the various currencies, the Eurozone is the second largest economy in the world.

The euro was introduced to world financial markets as an accounting currency in 1999 and launched as physical coins and banknotes on 1 January 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 Eurosystem (composed of the central banks of the euro zone 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 Maastricht Treaty of 1992 obliged all then-current members of the EU to adopt the euro upon meeting certain monetary and budgetary requirements, however, not all states have done so. The United Kingdom and Denmark negotiated exemptions.

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 the 1993 implementation of the Maastricht Treaty have pledged to adopt the euro in due course.

In addition, three European microstates (Vatican City, Monaco, and San Marino), although not EU members, have adopted the euro due to currency unions with member states. Three other European states Andorra, Montenegro, and Kosovo have adopted the euro unilaterally, while not being EU members either.

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