The
introduction of the euro took place principally between 31 December 1998, when the exchange rates between the
euroThe euro is the official currency of 16 of the 27 Member States of the European Union . The states, known collectively as the Eurozone, are Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain...
and legacy currencies in the
eurozoneThe eurozone is an economic and monetary union of 16 European Union member states which have adopted the euro currency as their sole legal tender. It currently consists of Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal,...
became fixed, and early 2002, when euro notes and coins were introduced and the legacy currencies withdrawn.
Since 2002, the eurozone has expanded by four countries.
Background (1992-1999)
The euro was established by the provisions in the 1992
Maastricht TreatyThe Maastricht Treaty was signed on 7 February 1992 in Maastricht, the Netherlands after final negotiations on 9 December 1991 between the members of the European Community and entered into force on 1 November 1993 during the Delors Commission. It created the European Union and led to the creation...
on
European UnionThe European Union is an economic and political union of 27 Member States, located primarily in Europe. Committed to regional integration, the EU was established by the Treaty of Maastricht on 1 November 1993 upon the foundations of the pre-existing European Economic Community...
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 3% of their GDP, a debt ratio of less than 60% of
GDPThe gross domestic product or gross domestic income is a basic measure of a country's economic performance and is the market value of all final goods and services made within the borders of a country in a year...
, low
inflationIn economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation is also an erosion in the purchasing power of money – a loss of real...
, and interest rates close to the EU average.
Economists that helped create or contributed to the euro include
Robert MundellRobert Alexander Mundell, CC is a professor of economics at Columbia University and the recipient of the Nobel Memorial Prize in Economics in 1999. Mundell laid the groundwork for the introduction of the euro through his pioneering work in monetary dynamics and optimum currency areas, for which he...
,
Wim DuisenbergWillem Frederik "Wim" Duisenberg was a Dutch Politician, Economist and Financier. He was first President of the European Central Bank from 1998 until 2003, and was instrumental in the Introduction of the euro in the European Union in 2002...
,
Robert TollisonRobert D. Tollison is an American economist who specializes in public choice theory.-Education:A native of Spartanburg, South Carolina, Tollison attended local Wofford College where he earned an A.B. in business administration and economics in 1964. He completed an M.A. in economics at the...
, Neil Dowling and
Tommaso Padoa-SchioppaTommaso Padoa-Schioppa is an Italian banker and economist who was Italy's Minister of Economy and Finance from May 2006 until May 2008.-Biography:...
. (For macro-economic theory, see below.)
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 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 UnitThe European Currency Unit was a basket of the currencies of the European Community member states, used as the unit of account of the European Community before being replaced by the euro on January 1, 1999, at parity. The ECU itself replaced the European Unit of Account, also at parity, on March...
) 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.) These rates were set by Council Regulation 2866/98 (EC), of 31 December 1998. 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.
Preparation for transition to the euro
The currency was introduced in non-physical form (traveller's 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
notesEuro banknotes are the banknotes of the euro, the currency of the eurozone . They have been in circulation since 2002 and are issued by the European Central Bank , each bearing the signature of the President of the European Central Bank...
and
coinsThere are eight euro coins, ranging in value from one cent to two euros . The coins first came into use in 2002. They have a common reverse, portraying a map of Europe, but each country in the eurozone has its own design on the obverse, which means that each coin has a variety of different designs...
were introduced on 1 January 2002.
Beginning on 1 January 1999, all bonds and other forms of government debt by Eurozone nations were denominated in euros.
The designs for the new coins and notes were announced between 1996 and 1998, and production began at the various mints and printers early in 1999. The task was large, and would require the full three years. In all, 7.4 billion notes and 38.2 billion coins would be available for issuance to consumers and businesses on 1 January 2002. In 7 nations, the new coins, struck in the run-up to 1 January 2002, would bear a 2002 date. In
BelgiumThe Kingdom of Belgium is a country in northwest Europe. It is a founding member of the European Union and hosts its headquarters, as well as those of other major international organizations, including NATO...
,
FinlandFinland , officially the Republic of Finland
, is a Nordic country and democracy situated in the Fennoscandian region of northern Europe. It borders Sweden on the west, Russia on the east, and Norway on the north, while Estonia lies to its south across the Gulf of Finland...
,
FranceFrance , officially the French Republic , is a country located in Western Europe, with several overseas islands and territories located on other continents. Metropolitan France extends from the Mediterranean Sea to the English Channel and the North Sea, and from the Rhine to the Atlantic Ocean...
, the
NetherlandsThe Netherlands is a country in Northwestern Europe, constituting the major portion of the Kingdom of the Netherlands. It is a parliamentary democratic constitutional monarchy. The Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east...
, and
SpainSpain , officially the Kingdom of Spain , is a country located in southwestern Europe on the Iberian Peninsula.
[The Spanish constitution does not establish any official denomination of the country, even though España , Estado español and Nación española are used interchangeably...]
, the new coins would bear the date of striking, so those 5 countries would be the only ones to strike euro coins dated 1999, 2000, and 2001.
Small numbers of coins from
MonacoMonaco , officially the Principality of Monaco , is a small sovereign city-state located in South Western Europe on the northern central coast of the Mediterranean Sea, having a land border on three sides only with France, and being about away from Italy. Its size is just under 2 km² with an...
,
Vatican CityVatican City , officially the State of the Vatican City , is a landlocked sovereign city-state whose territory consists of a walled enclave within the city of Rome, the capital city of Italy...
, and
San MarinoThe Most Serene Republic of San Marino is a country situated in the Apennine Mountains. It is a landlocked enclave, completely surrounded by Italy. Its size is just over 60 km² with an estimated population of almost 30,000. Its capital is the City of San Marino...
were also struck. These immediately became popular collector's items, commanding premiums well above face value. New issues continue to do so to this day.
Meanwhile, a parallel task was to educate the European public about the new coins. Posters were issued showing the designs, which were used on items ranging from playing cards to T shirts. As a final step, on 15 December 2001, banks began exchanging "
euro starter kitsEuro starter kits are packs of euro coins of all the eight denominations sealed in a plastic bag. The scope of these kits is primarily to familiarise the citizens of that nation that is going to join the eurozone with the new currency, the euro. Another objective is to fill up cash registers well...
", plastic pouches with a selection of the new coins in each country (generally, between 10 and 20 euros worth--though Finland's contained one of each coin, totalling €3.88). They would not be usable in commerce until 1 January, when notes would be made available as well. Larger starter kits, containing a roll of each denomination, were available as well in some nations.
Retailers and government agencies had a considerable task as well. For items to be sold to the public, dual pricing was commonly utilised. Postage stamps for governments (as well as stamps issued by the
United Nations Postal AdministrationThe United Nations Postal Administration is the postal agency of the United Nations. It issues postage stamps and postal stationery in dollar denominations for the United Nations offices in New York, in Swiss francs for the offices in Geneva and in euros for the offices in Vienna...
for the UN offices in Vienna) often bore denominations both in the legacy currency and euros, assuring continued utility beyond 2001.
Banks bore a huge task, not only in preparation for the change of the notes and coins, but also in the back office. Beginning in 1999, all deposits and loans were technically in euros, but deposits and withdrawals continued in the legacy currency. Statements would bear balances in both currencies beginning no later than 1 July 2001, and earlier if required by the customer's needs.
Beginning on 1 December 2001, coins and notes were distributed from secure storage, first to large retailers, and then to smaller ones.
It was widely expected that there would be massive problems on and after 1 January. Such a changeover, across twelve populous countries, had never been attempted before.
Change of currency
As midnight struck to usher in 2002, a celebration took place outside European Central Bank offices in Frankfurt. A huge illuminated mock-up of a euro coin was displayed in front of the building.
When the celebration began, the new coins and notes had already been valid for one hour in Greece and Finland. In fact, they had been valid for three hours on the French island of
RéunionRéunion is an island located in the Indian Ocean, east of Madagascar, about south west of Mauritius, the nearest island.Administratively, Réunion is one of the overseas départements of France...
in the
Indian OceanThe Indian Ocean is the third largest of the world's oceanic divisions, covering about 20% of the water on the Earth's surface. It is bounded on the north by South Asia ; on the west by Africa; on the east by Indochina, the Sunda Islands, and Australia; and on the south by the Southern Ocean...
. The first official purchase using euro coins and notes took place there, for one kilogram of
lycheeThe lychee or laichi and lichu is the sole member of the genus Litchi in the soapberry family Sapindaceae. It is a tropical fruit tree. It is primarily found in China, India, Madagascar, Nepal, Bangladesh, Pakistan, Taiwan, Vietnam, Indonesia, Thailand, the Philippines, Southern Africa and Mexico...
s. The coming of midnight in Frankfurt at the ECB offices, though, symbolised the transition.
In Finland, the Central Bank had opened for an hour at midnight to allow citizens to exchange currency, while a huge euro pyramid had decorated
Syntagma SquareSyntagma Square , is located in central Athens, Greece. The Square is named after the Constitution King Othon was forced to grant the people after a popular and military uprising, on September 3 1843....
in
AthensAthens , the capital and largest city of Greece, dominates the Attica periphery; as one of the world's oldest cities, its recorded history spans around 3,400 years....
, as the euro was welcomed to continental Europe. Other countries noted the coming of the euro as well--Paris's
Pont NeufThe Pont Neuf is the oldest standing bridge across the river Seine in Paris, France. Its name, which was given to distinguish it from older bridges that were lined on both sides with houses, has remained....
was decorated in EU colours, while in the northern German town of
GifhornGifhorn is a town and capital of the district Gifhorn, in Lower Saxony, Germany. It is situated at the confluence of the Ise river and the Aller river, near the cities of Hannover, Celle, and Wolfsburg...
a sombre, symbolic funeral for the Mark took place.
Except for
GermanyGermany , officially the Federal Republic of Germany , is a country in Central Europe. It is bordered to the north by the North Sea, Denmark, and the Baltic Sea; to the east by Poland and the Czech Republic; to the south by Austria and Switzerland; and to the west by France, Luxembourg, Belgium,...
, the plan for introduction of the new currency was basically the same. Banks would accept the exchange of legacy currencies, begin to dispense euros from
ATMAn automated teller machine is a computerized telecommunications device that provides the clients of a financial institution with access to financial transactions in a public space without the need for a human clerk or bank teller...
s, and only euros would be available as withdrawals were made, beginning on 1 January. Merchants would accept legacy currency, but give change only in euros. In Germany, the
MarkThe Deutsche Mark or German mark was the official currency of West Germany and, from 1990 until the adoption of the euro, all of unified Germany...
would no longer be a legal tender on 1 January, but would have to be exchanged at the banks.
Despite the massive amounts of euros available, chaos was feared. In France, these fears were accentuated by a threatened postal workers' strike. The strike, however, was settled. Similarly, workers at the French bank
BNP ParibasBNP Paribas is one of the largest global banking groups in the world, headquartered in Paris with its second global headquarter in London. It was created through the merger of Banque Nationale de Paris and Paribas. In 2008 it was ranked as the 13th largest company in the world by Forbes and the...
threatened to disrupt the introduction of euro currency with a strike. That was also settled.
In practice, the roll-out was smooth, with few problems. By 2 January, all ATMs in 7 countries and at least 90 percent in 4 others were issuing euros rather than legacy currency, with Italy, the worst offender, having 85% of ATMs dispensing euros. The unexpected tendency of consumers to spend their legacy currency, rather than exchange it at banks, led to temporary shortages of euro small change, with some consumers being given change in legacy currency.
Some businesses did take advantage of the currency exchange to raise prices. According to a study by the
Deutsche BundesbankThe Deutsche Bundesbank is the central bank of the Federal Republic of Germany and as such part of the European System of Central Banks . Due to its strength and former size, the Bundesbank is the most influential member of the ESCB. Both the Deutsche Bundesbank and the European Central Bank are...
, there was a price rise, but consumers refused to buy as much. A coffee bar in Italy that took advantage of the transition to raise coffee prices by a third was ordered to pay compensation to customers.
Aftermath
Nations were allowed to keep legacy currency in circulation as legal tender for 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 after 31 December 2001. Most member states, though, permitted their legacy currency to remain in circulation the full two months. The legacy currency was exchangeable at commercial banks in the currency's nation for a further period, generally until 30 June 2002.
However, even after the official dates, they continued to be accepted for exchange by national central banks for varying periods--and indefinitely in
AustriaAustria , officially the Republic of Austria , is a landlocked country of roughly 8.3 million people in Central Europe. It borders both Germany and the Czech Republic to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the west...
,
GermanyGermany , officially the Federal Republic of Germany , is a country in Central Europe. It is bordered to the north by the North Sea, Denmark, and the Baltic Sea; to the east by Poland and the Czech Republic; to the south by Austria and Switzerland; and to the west by France, Luxembourg, Belgium,...
,
IrelandIreland is the third-largest island in Europe and the twentieth-largest island in the world. It lies to the north-west of continental Europe and is surrounded by hundreds of islands and islets. To the east of Ireland, separated by the Irish Sea, is the island of Great Britain...
, and
SpainSpain , officially the Kingdom of Spain , is a country located in southwestern Europe on the Iberian Peninsula.
[The Spanish constitution does not establish any official denomination of the country, even though España , Estado español and Nación española are used interchangeably...]
. Coins from those four countries, Italy, and Finland remain exchangeable. The earliest coins to become non-convertible were the
Portuguese escudoThe escudo was the currency of Portugal prior to the introduction of the Euro on 1 January 1999 and was removed from circulation on 28 February 2002. The ISO 4217 code of the escudo was PTE. The escudo was subdivided into 100 centavos. Its symbol was the cifrão , similar to the dollar sign, but...
s, which ceased to have monetary value after 31 December 2002, although banknotes remain exchangeable until 2022. All banknotes current on 1 January 2002 will remain valid until at least 2012.
Efforts to secure the return of German coins continue. In 2005, Deutsche Telekom modified 50,000 pay phones to take Deutsche Mark coins, at least on a temporary basis. Callers were allowed to use DM coins, at least initially, with the Mark pegged to equal one euro, almost twice the usual rate.
In France, receipts still indicate the value of products in the legacy currency along with the euro value, as do receipts in Slovenia. In other eurozone countries this has long been considered unnecessary.
In June 2008,
The New York TimesThe New York Times is an American daily newspaper founded in 1851 and published in New York City. The largest metropolitan newspaper in the United States, "The Gray Lady"—named for its staid appearance and style—is regarded as a national newspaper of record...
reported that many merchants in the French town of Collobrières, in
ProvenceProvence is a region of southeastern France on the Mediterranean adjacent to Italy. It is part of the administrative région of Provence-Alpes-Côte d'Azur...
, choose to accept exchangeable franc notes.
Expansion of the euro
Greece
Greece joined the euro on 1 January 2001, after the initial launch in 1999 but before the introduction of notes and coins in 2002.
The procedure used to fix the irrevocable conversion rate of 340.750 between the
Greek drachmaDrachma, pl. drachmas or drachmae is the name of the currency used in Greece during several periods in its history:...
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 as a virtual currency, the conversion rate for the Greek drachma was fixed several months beforehand, in Council Regulation 1478/2000 (EC), of 19 June 2000.
Slovenia
- Participation in ERM II beginning 28 June 2004.
- On 11 July 2006 the Council of EU adopted a decision allowing Slovenia to join the euro area as from 1 January 2007.
- Introduction of the euro 1 January 2007.
- Exchange rate 1 EUR = 239,640 SIT.
Cyprus
- On 13 February 2007, the Republic of Cyprus formally applied to join the eurozone on 1 January 2008. The final decision was expected to be taken in Brussels on 21–22 June at an EU Summit to be ratified by all EU heads of state.
- On 9 March 2007, the campaign to inform the citizens of Cyprus about the euro officially began in Cypriot media.
- On 15 March 2007, the House of Representatives passed the necessary laws for the introduction of the euro on 1 January 2008.
- On 16 May 2007, the Commissioner for Economic & Financial Affairs of the EU, Joaquín Almunia
Joaquín Almunia Amann is a Spanish politician and prominent member of the European Commission, responsible for Economic and Monetary Affairs.Born in Bilbao, he is married and has two children...
, recommended that Cyprus adopt the euro as scheduled.
- On 20 June 2007, the European Parliament voted affirmatively on this issue and on 21 June 2007, the date was confirmed by the EU leaders.
- On 10 July 2007, the EU Finance Ministers set the permanent exchange rate to CYP 0.585274 to 1 euro.
- On 23 October 2007, the designs were officially published in the Official Journal of the European Union
The Official Journal of the European Union is the gazette of record for the European Union. It has been published since the Treaty of Nice entered into force on 1 February 2003. It is published in each of the 23 official languages of the member states...
.
- On 1 January 2008 the euro replaced the Cypriot pound as the official currency.
Malta
On 16 May 2007, the Commissioner for Economic & Financial Affairs of the EU,
Joaquín AlmuniaJoaquín Almunia Amann is a Spanish politician and prominent member of the European Commission, responsible for Economic and Monetary Affairs.Born in Bilbao, he is married and has two children...
, recommended that Malta adopt the euro as scheduled, a decision later confirmed by the Council of Finance Ministers of 10 July 2007. On the same day, dual displaying became mandatory and the first Maltese euro coins were struck at
Monnaie de ParisThe Monnaie de Paris or, more administratively speaking, the "Direction of Coins and Medals", is an administration of the French government charged with issuing coins as well as producing medals and other similar items...
. The first Maltese euro coins were available for the public on 1 December 2007, as business starter packs worth €131 each started being available for small businesses to fill up their cash registers with sufficient amount of euro coins before the €-day (Jum €). Mini-kits each worth €11.65 were available for the general public on 10 December 2007.
Maltese citizens could obtain euro information directly from their town or village between December 2007 and January 2008. From the Euro Centres (Ċentru l-ewro) which opened during the day. People trained specifically on matters related to the changeover to the euro were available to provide council at euro centres along with information materials.
In December 2007, as part of the euro changeover celebrations, streets of
VallettaValletta is the capital city of Malta, colloquially known as Il-Belt in Maltese. It is located in the central-eastern portion of the island of Malta and the city proper has a population of 6,315....
were covered with carpets depicting euro coins. Celebrations reached climax on New Year’s Eve with a firework display near the Grand Harbour area, several other activities had to be moved indoors because of the stormy weather that struck the island on that night.
Maltese coins which were current at the time of the euro transition may be exchanged through 1 February 2010.
Slovakia
Publicity for the transition from the koruna to the euro on 1 January 2009 included an "euromobile", with a professional actor driving around the countryside holding impromptu quiz shows about the euro. Winners received euro T shirts, euro conversion calculators, and chocolate euro coins.
Euro starter kits, available for 500 koruna, were a popular Christmas gift in 2008. The coins therein, however, were not valid as legal tender in the Eurozone until 1 January 2009, with koruna exchanged through 17 January 2009, though redeemable at the central bank in Bratislava until a date to be determined. Anyone using Slovakian euro coins before 1 January could have been fined. Businesses using the transition to raise prices also were subject to penalty.