What is the European Single Currency?  

European Monetary Union

The Euro-Zone Countries  

Exchange Rates and the End of the Old Currencies

EU Countries Not Participating in the Euro

The Euro Notes & Coins

The European Central Bank

EUROPEAN MONETARY UNION

The European Single Currency was launched as a virtual currency on 1^st January 1999.    The euro became a real currency when the notes and coins were issued on 1st January 2002.  The euro has replaced the separate currencies of the European Union member states participating in EMU (European Monetary Union).  The twelve member countries committed to joining the euro had the exchange rates of their national currencies "irrevocably" fixed on 1st January 1999.     EMU and the implementation of the Euro was laid down in the Treaty on European Union (the so-called Maastricht Treaty), signed  7^th February 1992 by all EU  member states. 

Britain and Denmark negotiated so called 'opt out' clauses that meant that these countries reserved the right to take the final decision to join the euro at a later date.   Denmark held a referendum on 28th September 2000 and voted against joining the euro.  The British Labour Government has promised that there will be a British referendum before the final decision is taken.  Sweden has not yet made a final decision.

THE EURO-ZONE COUNTRIES

The countries in the first wave of EMU are: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain.

EXCHANGE RATES AND END OF THE OLD CURRENCIES

The exchange rates of the old currencies was irrevocably fixed as of 1st January 1999.   These are shown below with the last date that they will be accepted as legal tender in their respective countries.

Country.        Old Currency.     Exch.  Rate (1999).  End as legal tender.          

Austria            Schilling                13.7603                      28th Feb

Belgium           Franc                    40.3399                     28th Feb

Finland            Markka                5.94573                     28th Feb

France            Franc                    6.55957                     17th Feb

Germany         Mark                    1.95583                     31st Dec 

Greece            Drachma               340.75                       28th Feb

Ireland            Punt                       0.787564                  9th Feb

Italy                Lira                        1,936.27                   28th Feb

Luxembourg   Bel/Lux Franc         40.3399                    28th Fe                    

Netherlands    Guilder                    2.20371                    28th Feb

Portugal          Escudo                    200.482                   28th Feb

Spain              Peso                        166.386                   28th Feb

EU COUNTRIES NOT PARTICIPATING IN THE EURO

Britain, Denmark & Sweden.

THE EURO NOTES & COINS

The euro notes and coins went into circulation on 'E Day' 1^st January 2002.  Euro currency denominations are as follows: 1, 2, 5, 10, 20 and 50 euro cent coins; 1 and 2 euro coins; and 5, 10, 20, 50, 100, 200 and 500 euro notes.   Each euro coin carries a common European face, while on the obverse each member state can decorate the coins with their own motifs.   The euro notes have a common design on both sides (see the Home Page for the 'See the Coins' & 'See the Notes').

THE EUROPEAN CENTRAL BANK

The 1992 Treaty on European Union established the European Central Bank to administer the Euro.  The ECB resides in Frankfurt.  The powers of the ECB include:

• Exclusive rights to authorize the issuing of banknotes and to approve the issuing of coins.

• The holding and managing of the official foreign reserves of the euro-zone countries.

• The setting of interest rates to apply to all euro-zone countries

• The setting of monetary policy for all euro-zone countries.

The terms of the Treaty on European Union emphatically state that the priority of the Bank is to deliver "price stability", i.e. low inflation, but price stability is not defined.  The ECB can make up its own targets as it goes along, and it does not have to publish these figures anyway as its proceedings "shall be confidential".   Price stability means pursuing deflationary monetary policies irrespective of the economic requirements or wishes of individual member state governments or their central banks, whatever the circumstances.  The Treaty states that the European Central Bank must not take instructions from the governments of member states, or their central banks, and indeed it is illegal for it to do so. 

The Executive Board of the European Central Bank consists of a President, Vice President, and four other members.  Board members have one vote each and decisions are reached by a simple majority.  ECB Board Members are appointed and hold office for between four and eight years.   They are un-elected and are unaccountable to the electorates of the EU.

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