Euro Currency Launched
Eleven European countries adopted the euro on 1 January 1999, fixing their exchange rates irrevocably and handing monetary policy to the European Central Bank. It existed for its first three years only as an accounting currency — used for bank transfers, bond issues and electronic payments, with national notes and coins continuing as denominations of it at fixed rates. The physical changeover came on 1 January 2002, when some 15 billion notes and 50 billion coins replaced twelve national currencies in about two months. The project ran back to the Werner Report of 1970 and was made concrete by Maastricht in 1992, which set the convergence criteria: inflation, interest rates, a deficit under three per cent of output, debt under sixty, and two years of exchange rate stability. Several members met the debt criterion only by generous interpretation, and Greece was admitted in 2001 on figures later shown to be misstated. The bargain was political. France wanted German monetary power bound into a European institution; Germany wanted a central bank built on the Bundesbank's model, independent and mandated to price stability alone, and got it. The defect was known and accepted at the time. A monetary union without a fiscal union leaves member states responsible for their own debts and banks with no ability to devalue or print, and no central budget to absorb a shock hitting one part and not another. That defect arrived in 2010. Twenty countries now use it, and about 350 million people. Britain, Denmark and Sweden stayed out. No member has ever left.
- Year: 1999 CE
- Category: Political
