| Author (Person) | Bower, Helen | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Publisher | ProQuest Information and Learning | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Title | In Focus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Details | 4.1.02 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Publication Date | 04/01/2002 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Content Type | News, Overview, Topic Guide | In Focus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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For more than 300 million European citizens midnight on 1 January 2002 signified more than the start of a New Year, it also marked the start of their new currency - the euro - as legal tender. Although the euro was officially launched on 1 January 1999 it has only existed as an electronic currency for the last three years, being used on foreign exchange markets and for transactions between banks and larger companies. Finally, as it entered into circulation and into the pockets and wallets of eurozone citizens it became a reality for millions of Europeans. The launch of euro notes and coins was celebrated with events throughout the eurozone as the European Union officials hailed the event a dawn of a new era for Europe. Romano Prodi, the president of the European Commission, said,
The president of the European Central Bank echoed Prodi's sentiments, saying
Background The arrival of the single currency in the pockets of Europeans represents the completion of the third and final stage of Economic and Monetary Union as set out by the Treaty on European Union. The first stage began on 1 July 1990 - before the treaty - and included the abolition of remaining capital controls between Member States. This was followed by stage two which began on 1 January 1994 and established the European Monetary Institute (EMI) which was given the task of preparing for the third stage of EMU. This stage began on 1 January 1999 when the European System of Central Banks, comprised of national central banks and the European Central Bank took over the responsibility for monetary policy. More information on the the European Union's Economic and Monetary policy can be found in the following sources within European Sources Online:
The European Commission SCADplus site also provides a good overview. It was decided at an Ecofin Council meeting on 2 May 1998 that 11 Member States would adopt the currency, on the basis they had met the necessary criteria. These countries are collectively referred to as the eurozone or euro area and comprise Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. Greece joined these countries in 1 January 2001 after it was deemed to have met the necessary convergence criteria (See European Sources Online: In Focus: When the third stage of EMU began on 1 January 1999 the exchange rates of the participating currencies were irrevocably set based on the following conversion rates:
Of the fifteen member states of the European Union three decided to opt out of economic and monetary union, namely Denmark, the United Kingdom and Sweden. These three countries are sometimes referred to as the 'outs'. Denmark was the first of the three 'outs' to hold a referendum on whether to join the single currency. In a referendum on 28 September 2000, voters in Denmark rejected joining the euro by a majority of 6.2%. A reported turnout of 88% registered 53.1% against joining the Euro, with 46.9% in favour (More information can be seen in the European Sources Online: In Focus: The date for a UK referendum on the Euro has not yet been set, although the Chancellor Gordon Brown reaffirmed the government's intention to hold one in a speech at the Mansion House in June 2001 intention to hold one in October 2001:
Overall the government's stance is that British membership of a successful single currency would offer the nation obvious benefits - in terms of trade, transparency, costs and currency stability as well as creating the conditions for higher and more productive investment and greater trade and business in Europe. However, the government stands firm that the economic conditions must be right and these will be assessed on the basis of five Economic Tests:
More information on the UK government's stance on the single currency can be found on the HM treasury website. In August 2001 the Swedish Goran Persson announced that the country might join the European currency in 2005 after a referendum if the introduction of the notes and coins went well. He said the Swedish government would begin evaluating the conditions of entry early in its next term of office. Sweden's next general election will be in early September next year. The Euro: Symbol and Images The name 'euro' was chosen by the European Heads of State or Government at the European Council meeting in Madrid in December 1995. The graphic symbol for the euro looks like an E with two clearly marked, horizontal parallel lines across it. It was inspired by the Greek letter epsilon, in reference to the cradle of European civilisation and to the first letter of the word 'Europe'. The parallel lines represent the stability of the euro. The design of euro notes was announced at the European Council meeting in Dublin, December 1996. Windows and gateways on the front of the banknotes are used to symbolise the European spirit of openness and co-operation while the 12 stars of the European Union represent the dynamism and harmony between European nations. The reverse of each banknote features a bridge which symbolise the close co-operation and communication between Europe and the rest of the world. Euro Notes
Euro Coins The eight denominations of coins vary in size, colour and thickness according to their values, which are 1, 2, 5, 10, 20 and 50 cent or EUR 1 and EUR 2. One euro is divided into 100 cent. The European Council meeting in Amsterdam, June 1997 took the final decision on the design of the euro coins after Luc Luycx of the Royal Belgian Mint won a European wide competition to design the euro coins. One of three designs common to all 12 euro area countries showing different maps of Europe surrounded by the 12 stars of the European Union is featured on one side of all coins. Individual designs relating to the respective Member State, surrounded by 12 stars are pictured on the reverse side of euro coins although all euro coins can be used anywhere in the euro area, regardless of their national sides. For example, a To view the country-specific coins you may click on the following links:
To help those with impaired sight recognise different values milled edges have been added to the coins and sophisticated bi-metal technology has been incorporated into the EUR 1 and EUR 2 coins which, together with lettering around the edge of the EUR 2 coin, prevents counterfeiting. However, the coins have been criticised because of their high nickel content. Dermatologists at Graz university hospital in Austria have shown that euro coins can cause contact dermatitis in those people sensitive to nickel. This means that those regularly handling coins such as cashiers may well find themselves developing the dermatitis. The coins could have been made out of a nickel free alternative known as Nordic gold. Impact of the euro on businesses and consumers In the countdown to the euro changeover there has been much speculation about the impact that the largest currency changeover ever made - requiring the exchange of 15 billion notes and 50 billion coins - will have on businesses and consumers throughout the eurozone. In the days following the launch there has been a general feeling that these fears have not been realised with the switch to euro coins and notes going relatively smoothly in most countries of the eurozone. There have been some technical hitches such as all cash machines in Austria breaking down for a brief period and in Italy pensioners were forced to queue for hours for their pensions. But most Europeans have got their hands on the euros they wanted and have been able to spend them too. However, the real impact on businesses is likely to show in the coming weeks and months. Pedro Solbes, European Commissioner for Economic and Financial Affairs has suggested that 90% of all transactions should be taking place in euros within the next two weeks but some busineses remain unprepared. Studies by the European Commission suggest that small and medium sized enterprises are particularly unprepared for the euro which could cause problems in areas such as the payments of staff, and purchases of goods and services. . Furthermore, the mere cost of the actual changeover - public awareness campaigns, changing payment systems - is likely to have a huge effect on businesses. Economists at BNP Paribas estimate that the total costs of the changeover could reach around €160-180 billion, almost twice the size of the Irish economy. Effects on consumer behaviour have also been predicted with people cutting down on their spending as they grow accustomed to a new currency. Paddy Miller, a professor of organisational behaviour at the ISE business school in Barcelona, has suggested that,
Furthermore, Europe wide surveys have shown that consumers fear price rises, with retailers taking the opportunity to round prices up and this could prove the ultimate factor in depressing consumer demand. Results so far paint a confusing picture of whether prices are set to rise with the euro. While Wim Duisenberg claimed that he had been able to buy a Big Mac and milkshake for exactly the same price as he had the previous week, the British Sun newspaper claimed that their paper cost £1.26 when converted from euros compared to its normal selling price of 30p. However, European Commissioner for Economic and Financial Affairs, Pedro Solbes, said that dual pricing had been found to be accurate in 95% of cases. Lower consumer demand could be exacerbated by a drop in retail turnover as retailers in shops have to use two tills to deal with both their national currency and euros. Euro commerce has estimated that just an extra 20 seconds added to each transacxtion would lead to a drop in retail turnover by 10%. The euro on the Global Markets Despite the fears on the continental front about how consumers and busineses would be affected, the smooth changeover to the euro has helped to boost the euro's value on the foreign exchanges. On the 2 January 2002 when the euro faced its first real consumer test it rose strongly against the dollar, pound and yen hitting a two-week high of $0.9066. This fell slightly on 4 January 2002 to $0.9003. leaving the sterling weak against the euro at 62.23p The political aspect of the euro The arrival of the euro in European citizens' pockets has almost as much political significance as it does economic. As Romano Prodi said of the euro on 1 January 2002,
He claimed that the euro as 'a little piece of Europe in our hands' would lead to an increase in European identity and in the long term, a euro would be,
EU leaders are certainly hoping that the euro will help to increase the sense of being European but national citizens are not totally convinced. The latest Flash Eurobarometer published in November 2001 showed that only 20% of those European citizens surveyed fully agreed that the euro would help them to feel more European than now compared to 22% who thought it definitely would not. Ultimately, there are the national symbols on one side of every coin to remind people of the different nationalities and while the country-specific coins will eventually be mingled throughout the eurozone it is likely to take be many years before the euro really fosters a European identity. Future challenges Aside from creating a European identity the euro faces many more real challenges in the future. First and foremost, it needs to become a domestic currency as respected as the Deutschmark and an international currency to rival the dollar but there are still a number of factors which could block the path to success. For examples, controversial issues such as the co-ordination of economic policy, the role of the European Central bank, tax harmonisation and the use of the euro as a reserve currency still need to be resolved. The future enlargement of the EU and the adoption of the single currency in Central and Eastern Europe will also pose major challenges to the euro as it replaces more unstable currencies in this area. The euro may have passed its first test of arriving in the pockets and wallets of euroxzone citizens but it has still to prove itself in many ways. Further information within European Sources Online: European Sources Online: Topic Guide:
European Sources Online: In Focus:
European Sources Online: European Voice
European Sources Online: Financial Times
Further information can be seen in these external links: EU Organisations European Commission DG Press and Communication DG Economic and Financial Affairs
DG Health and Consumer Protection European Central Bank
International Organisations International Monetary Fund
Organisation for Economic Co-operation and Development
National Organisations Austria Belgium Finland Germany Greece Ireland Italy Luxembourg The Netherlands Spain Portugal United Kingdom
Non-governmental organisations Association for the Monetary Union of Europe Euro Information Service EuroPortal: Your Launchpad to Euro Currency Links Consumers in Europe Group
News Organisations BBC Online Further and subsequent information on the subject of this In Focus can be found by an 'Advanced Search' in European Sources Online by inserting 'single currency', 'euro', 'economic and monetary union' etc in the keyword field. Helen Bower Overview of one of the most momentous events in the history of European integration - the introduction of a single European currency. |
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| Subject Categories | Economic and Financial Affairs | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
