The European Union and the Euro

On January 1st, 1999, a new currency was born. Created out of the desire of 11 (now 13) countries to have a standardized currency amongst them, the Euro began as a leveling of conversion rates between the country’s currencies and, in 2002, entered circulation in the form of unique coins and banknotes.

Of the 27 member states of the European Union, 13 have adopted the Euro as their form of currency. While 12 of the remaining states will convert to the Euro as soon as they meet the criteria necessary, the UK and Denmark have been given the option of deciding if and when they will convert.

The Euro banknote comes in seven denominations and is a standardized design throughout the union. The coins, however, have a standard design on one side and a national design unique to each country on the reverse. Each country produces their own coins in their national mint, although all decisions regarding the creation and circulation of the currency are made by the Eurosystem, consisting of the European Central Bank and the national banks of each of the 13 member countries.

Countries outside of the European Union have opted to use the Euro as well, including Monaco and Vatican City, although it is not their primary currency. Others, such as Tunisia, Botswana, and Russia have established unilateral exchange rates with the EU.

The standardized euro currency has been a success on all fronts. Travel is easier between European countries, the single financial market allows for more diversified investment options for savers, and borrowers have found that money is easier to raise on capital markets since the Euro’s inception. It also represents unity across the European Union and serves to initiate further integration amongst EU members.

The standardized currency is also a signal to the rest of the world that the European nation stands strong and united, a fact that is not lost on investors. This allows for a more diverse and stable market environment, resulting in the Euro’s growing presence as an international investment and reserve option.

Foreign trade has also benefited as countries have noticed the benefits of dealing in a single foreign market and the lower costs associated with European trade since the Euro came into circulation. Overall, the Euro offers many important benefits to those who have adopted its use, including protection from outside influences such as the fluctuation of other currencies and natural disasters.