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Eurozone

Eurozone (euro area)
Currency Euro
Union type Monetary union
Established 1 January 1999
Members
Governance
Political control Eurogroup
Group president Jeroen Dijsselbloem
Issuing authority European Central Bank
ECB president Mario Draghi
Affiliated with European Union
Statistics
Population (2014) 334,570,678[1]
GDP (2012) €9.5 trillion[2]
Interest rate 0.05%[3]
Inflation 1.6%[4]
Unemployment 11.7%[5]
Trade balance €82 bn surplus[6]

The eurozone (About this sound pronunciation ), officially called the euro area,[7] is a monetary union of 19 European Union (EU) member states that have adopted the euro (€) as their common currency and sole legal tender.

The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. Other EU states (except for Denmark and the United Kingdom) are obliged to join once they meet the criteria to do so.[8] No state has left, and there are no provisions to do so or to be expelled.[9] Andorra, Monaco, San Marino, and Vatican City have formal agreements with the EU to use the euro as their official currency and issue their own coins.[10][11][12] Kosovo and Montenegro have adopted the euro unilaterally,[13] but these countries do not officially form part of the eurozone and do not have representation in the ECB or the Eurogroup.[14]

Monetary policy of the zone is the responsibility of the European Central Bank (ECB) which is governed by a president and a board of the heads of national central banks. The principal task of the ECB is to keep inflation under control. Though there is no common representation, governance or fiscal policy for the currency union, some co-operation does take place through the Eurogroup, which makes political decisions regarding the eurozone and the euro. The Eurogroup is composed of the finance ministers of eurozone states, but in emergencies, national leaders also form the Eurogroup.

Since the financial crisis of 2007–08, the eurozone has established and used provisions for granting emergency loans to member states in return for the enactment of economic reforms. The eurozone has also enacted some limited fiscal integration, for example in peer review of each other's national budgets. The issue is political and in a state of flux in terms of what further provisions will be agreed for eurozone reform.

Member states

In 1998 eleven member states of the European Union had met the euro convergence criteria, and the eurozone came into existence with the official launch of the euro (alongside national currencies) on 1 January 1999. Greece qualified in 2000 and was admitted on 1 January 2001 before physical notes and coins were introduced on 1 January 2002 replacing all national currencies. Between 2007 and 2015, seven new states acceded.

State Adopted Population
(thousand, 2012)
Nominal GNI
nominal (million USD, 2012)
Relative GNI
of total (nominal)
GNI per capita
nominal (USD, 2012)
Pre-Euro currency Exceptions ISO code
23x15px Austria 1999-01-01[15] 8,430 404,279 Template:Number table sorting/error% 43,850 Schilling AT
23x15px Belgium 1999-01-01[15] 11,128 498,767 Template:Number table sorting/error% 44,820 Franc BE
23x15px Cyprus 2008-01-01[16] 1,129 22,799 Template:Number table sorting/error% 26,110 Pound [a] CY
23x15px Estonia 2011-01-01[17] 1,329 21,684 Template:Number table sorting/error% 16,310 Kroon EE
23x15px Finland 1999-01-01[15] 5,414 252,262 Template:Number table sorting/error% 46,590 Markka FI
23x15px France 1999-01-01[15] 65,697 2,749,098 Template:Number table sorting/error% 41,850 Franc 23x15px New Caledonia[b]
23x15px French Polynesia[b]
23x15px Wallis and Futuna[b]
FR
23x15px Germany 1999-01-01[15] 80,426 3,632,832 Template:Number table sorting/error% 45,170 Mark DE
23x15px Greece 2001-01-01[18] 11,093 263,029 Template:Number table sorting/error% 23,710 Drachma GR
23x15px Ireland 1999-01-01[15] 4,587 179,390 Template:Number table sorting/error% 39,110 Pound IE
23x15px Italy 1999-01-01[15] 59,540 2,067,214 Template:Number table sorting/error% 34,720 Lira 23px Campione d'Italia[c] IT
23x15px Latvia 2014-01-01[19] 2,034 28,598 Template:Number table sorting/error% 14,060 Lats LV
23x15px Lithuania 2015-01-01[20] 2,944 44,060 Template:Number table sorting/error% 14,900 Litas LT
23x15px Luxembourg 1999-01-01[15] 531 38,125 Template:Number table sorting/error% 71,810 Franc LU
23x15px Malta 2008-01-01[21] 419 8,274 Template:Number table sorting/error% 19,730 Lira MT
23x15px Netherlands 1999-01-01[15] 16,755 806,108 Template:Number table sorting/error% 48,110 Guilder 23x15px Aruba[d]
23x15px Curaçao[e]
23x15px Sint Maarten[e]
23x15px Caribbean Netherlands[f]
NL
23x15px Portugal 1999-01-01[15] 10,515 217,521 Template:Number table sorting/error% 20,690 Escudo PT
23x15px Slovakia 2009-01-01[22] 5,408 93,032 Template:Number table sorting/error% 17,200 Koruna SK
23x15px Slovenia 2007-01-01[23] 2,057 46,965 Template:Number table sorting/error% 22,830 Tolar SI
23x15px Spain 1999-01-01[15] 46,761 1,371,856 Template:Number table sorting/error% 29,340 Peseta ES
23x15px Eurozone 333,253 12,701,834 100% 38,115

The 2012 data above of eurozone states were published by World Bank in May 2014. Latvia and Lithuania were not in the eurozone in 2012.

Enlargement

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Nine countries (Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, Sweden, and the United Kingdom) are EU members but do not use the euro. Before joining the eurozone, a state must spend two years in the European Exchange Rate Mechanism (ERM II). As of 2015, the National Central Bank (NCB) of Denmark participates in ERM II.

Denmark and the United Kingdom obtained special opt-outs in the original Maastricht Treaty. Both countries are legally exempt from joining the eurozone unless their governments decide otherwise, either by parliamentary vote or referendum. Sweden, which joined the EU in 1995 after the Maastricht Treaty was signed, is required to join the eurozone under the terms of its accession treaty as soon as it fulfils the convergence criteria, which include being part of ERM II for two years. However, the Swedish people turned down euro adoption in a 2003 referendum and since then the country has intentionally avoided fulfilling the adoption requirements by not joining ERM II, which is voluntary.[24][25]

Interest in joining the eurozone increased in Denmark, and initially in Poland, as a result of the 2008 financial crisis. In Iceland, there was an increase in interest in joining the European Union, a pre-condition for adopting the euro.[26] However, by 2010 the debt crisis in the eurozone caused interest from Poland, as well as the Czech Republic, to cool.[27] Lithuania adopted the euro in 2015.[28]

Non-member usage

File:Eurozone participation.svg
Eurozone participation
  19 European Union member states in the eurozone
  7 European Union member states not in ERM II but obliged to join once convergence criteria are met
  1 European Union member state in ERM II, with an opt-out (Denmark)
  1 European Union member state not in ERM II, with an opt-out (United Kingdom)
  4 non-European Union member states using the euro with a monetary agreement (Andorra, Monaco, San Marino and Vatican City)
  2 non-European Union member states using the euro unilaterally (Kosovo and Montenegro)

The euro is also used in countries outside the EU. Four states – Andorra, Monaco, San Marino, and Vatican City —[10][13] have signed formal agreements with the EU to use the euro and issue their own coins. Nevertheless, they are not considered part of the eurozone by the ECB and do not have a seat in the ECB or Euro Group.

Kosovo[g] and Montenegro officially adopted the euro as their sole currency without an agreement and, therefore, have no issuing rights.[13] These states are not considered part of the eurozone by the ECB. However, sometimes the term eurozone is applied to all territories that have adopted the euro as their sole currency.[29][30][31] Further unilateral adoption of the euro (euroisation), by both non-euro EU and non-EU members, is opposed by the ECB and EU.[32]

Expulsion and secession

Although the eurozone is open to all EU member states to join once they meet the criteria, the treaty is silent on the matter of states leaving the eurozone, neither prohibiting nor permitting it. Likewise there is no provision for a state to be expelled from the euro.[33] Some, however, including the Dutch government, favour such a provision being created in the event that a heavily indebted state in the eurozone refuses to comply with an EU economic reform policy.[34] Jens Dammann has argued that even now EU law contains an implicit right for member states to leave the eurozone if they no longer meet the criteria that they had to meet in order to join the eurozone.[35]

The outcome of leaving the euro would vary depending on the situation. If the country's own replacement currency was expected to devalue against the euro, the state might experience a large-scale exodus of money, whereas if the currency were expected to appreciate then more money would flow into the economy. A rapidly appreciating currency would be detrimental to the country's exports.[36]

One problem is that if Greece were to replace the euro with a new currency, this cannot be achieved very quickly. Banknotes must be printed for example, which takes up to six months.[37] The changeover would likely require bank deposits be converted from euros to the new devalued currency. The prospect of this could lead to currency leaving the country and people withdrawing cash, causing a bank run and necessitating capital controls.[38]

Administration and representation

Further information: European Central Bank, Eurogroup and Euro summit
File:Frankfurt EZB-Neubau.20130909.jpg
The European Central Bank (seat in Frankfurt depicted) is the supranational monetary authority of the eurozone.

The monetary policy of all countries in the eurozone is managed by the European Central Bank (ECB) and the Eurosystem which comprises the ECB and the central banks of the EU states who have joined the eurozone. Countries outside the eurozone are not represented in these institutions. Whereas all EU member states are part of the European System of Central Banks (ESCB). Non EU member states have no say in all three institutions, even those with monetary agreements such as Monaco. The ECB is entitled to authorise the design and printing of euro banknotes and the volume of euro coins minted, and its president is currently Mario Draghi.

The eurozone is represented politically by its finance ministers, known collectively as the Eurogroup, and is presided over by a president, currently Jeroen Dijsselbloem. The finance ministers of the EU member states that use the euro meet a day before a meeting of the Economic and Financial Affairs Council (Ecofin) of the Council of the European Union. The Group is not an official Council formation but when the full EcoFin council votes on matters only affecting the eurozone, only Euro Group members are permitted to vote on it.[39][40][41]

Since the global financial crisis of 2007–08, the Euro Group has met irregularly not as finance ministers, but as heads of state and government (like the European Council). It is in this forum, the Euro summit, that many eurozone reforms have been decided upon. In 2011, former French President Nicolas Sarkozy pushed for these summits to become regular and twice a year in order for it to be a 'true economic government'.

In April 2008 in Brussels, Juncker suggested that the eurozone should be represented at the International Monetary Fund as a bloc, rather than each member state separately: "It is absurd for those 15 countries not to agree to have a single representation at the IMF. It makes us look absolutely ridiculous. We are regarded as buffoons on the international scene."[42] However Finance Commissioner Joaquín Almunia stated that before there is common representation, a common political agenda should be agreed upon.[42]

Economy

Comparison table

Comparison of eurozone with other economies, 2012[43][44]
Population GDPa % world GDP by PPP</small> Exports Imports
Eurozone 335 million $11 trillion 14% 27% GDP 25% GDP
EU (28) 506 million $17 trillion 21% 18% GDP 17% GDP
United States 314 million $16 trillion 20% 14% GDP 17% GDP
China 1.354 billion $7.3 trillion 18% 26% GDP 24% GDP
India 1.200 billion $6.8 trillion 6.66% 24% GDP 31% GDP
Japan 128 million $5 trillion 6% 15% GDP 17% GDP

^a GDP in PPP, exports/imports of goods and services excluding intra-EU trade.

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This page is a soft redirect.The 20 largest economies in the world including the EU and the eurozone as a single entity, by nominal GDP (2014). The values for EU members that are not also eurozone members are listed both separately and as part of the EU.[45]
Comparison of Economies
Economy
Nominal GDP (billions in USD) - 2014
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Inflation

HICP figures from the ECB, taken from May of each year:[46]

  • 1999: 1.0%
  • 2000: 1.7%
  • 2001: 3.1%
  • 2002: 2.0%
  • 2003: 1.8%
  • 2004: 2.5%
  • 2005: 2.0%
  • 2006: 2.5%
  • 2007: 1.9%
  • 2008: 3.7%
  • 2009: 0.0%
  • 2010: 1.7%
  • 2011: 2.7%
  • 2012: 2.4%
  • 2013: 1.4%

Interest rates

Interest rates for the eurozone, set by the ECB since 1999. Levels are in percentages per annum. Between to June 2000 and October 2008, the main refinancing operations were variable rate tenders, as opposed to fixed rate tenders. The figures indicated in the table from 2000 to 2008 refer to the minimum interest rate at which counterparties may place their bids.[3]

Eurozone interest rates

Date Deposit facility Main refinancing operations Marginal lending facility
1999-01-01 2.00 3.00 4.50
1999-01-04[h] 2.75 3.00 3.25
1999-01-22 2.00 3.00 4.50
1999-04-09 1.50 2.50 3.50
1999-11-05 2.00 3.00 4.00
2000-02-04 2.25 3.25 4.25
2000-03-17 2.50 3.50 4.50
2000-04-28 2.75 3.75 4.75
2000-06-09 3.25 4.25 5.25
2000-06-28 3.25 4.25 5.25
2000-09-01 3.50 4.50 5.50
2000-10-06 3.75 4.75 5.75
2001-05-11 3.50 4.50 5.50
2001-08-31 3.25 4.25 5.25
2001-09-18 2.75 3.75 4.75
2001-11-09 2.25 3.25 4.25
2002-12-06 1.75 2.75 3.75
2003-03-07 1.50 2.50 3.50
2003-06-06 1.00 2.00 3.00
2005-12-06 1.25 2.25 3.25
2006-03-08 1.50 2.50 3.50
2006-06-15 1.75 2.75 3.75
2006-08-09 2.00 3.00 4.00
2006-10-11 2.25 3.25 4.25
2006-12-13 2.50 3.50 4.50
2007-03-14 2.75 3.75 4.75
2007-06-13 3.00 4.00 5.00
2008-07-09 3.25 4.25 5.25
2008-10-08 2.75 4.75
2008-10-09 3.25 4.25
2008-10-15 3.25 3.75 4.25
2008-11-12 2.75 3.25 3.75
2008-12-10 2.00 2.50 3.00
2009-01-21 1.00 2.00 3.00
2009-03-11 0.50 1.50 2.50
2009-04-08 0.25 1.25 2.25
2009-05-13 0.25 1.00 1.75
2011-04-13 0.50 1.25 2.00
2011-07-13 0.75 1.50 2.25
2011-11-09 0.50 1.25 2.00
2011-12-14 0.25 1.00 1.75
2012-07-11 0.00 0.75 1.50
2013-05-08 0.00 0.50 1.00
2013-11-13 0.00 0.25 0.75
2014-06-11 -0.10 0.15 0.40

Public debt

The following table states the ratio of public debt to GDP in percent for eurozone countries. The euro convergence criterion is 60%.

Country CIA 2007[47] OECD 2009[48][49] IMF 2009[50] CIA 2009[51] EuroStat 2010[52] EuroStat 2011[53]
23x15px Austria 59.10 72.7 67.10[54] 66.40 72.3 72.2
23x15px Belgium 84.60 100.4 93.70[55] 101.00 96.8 98.0
23x15px Cyprus 59.60 56.20[56] 56.20 60.8 71.6
23x15px Estonia 3.40 7.10 6.6 6.0
Eurozone 86.0[57]
23x15px Finland 35.90 52.6 44.00[58] 40.30 48.4 48.6
23x15px France 63.90 87.1 78.10[59] 77.60 81.7 85.8
23x15px Germany 64.90 76.5 72.50[60] 77.20 83.2 81.2
23x15px Greece 89.50 120.2 113.40 142.8 165.3
23x15px Ireland 24.90 72.7 64.00[61] 64.80 96.2 108.2
23x15px Italy 104.00 127.7 115.8[62] 115.80 119.0 120.1
23x15px Latvia 7.40 32.50
23x15px Lithuania 42.7
23x15px Luxembourg 6.40 18.0 16.40[63] 14.60 18.4 18.2
23x15px Malta 69.00 68.0 72.0
23x15px Netherlands 45.50 69.4 58.90[64] 60.90 62.7 65.2
23x15px Portugal 63.60 86.3 75.80[65] 76.80 93.0 107.8
23x15px Slovakia 35.90 39.8 35.70[66] 35.70 41.0 43.3
23x15px Slovenia 23.60 44.1 31.30 38.0 47.6
23x15px Spain 36.20 62.4 53.20[67] 53.20 60.1 68.5
Convergence Criterion 60.00 60.0 60.00 60.00 60.0 60.0

Fiscal policies

File:Government surplus or deficit (EU-USA-UK).png
Comparison of government surplus/deficit (2001-2012) of eurozone, United States and United Kingdom

The primary means for fiscal coordination within the EU lies in the Broad Economic Policy Guidelines which are written for every member state, but with particular reference to the 19 current members of the eurozone. These guidelines are not binding, but are intended to represent policy coordination among the EU member states, so as to take into account the linked structures of their economies.

For their mutual assurance and stability of the currency, members of the eurozone have to respect the Stability and Growth Pact, which sets agreed limits on deficits and national debt, with associated sanctions for deviation. The Pact originally set a limit of 3% of GDP for the yearly deficit of all eurozone member states; with fines for any state which exceeded this amount. In 2005, Portugal, Germany, and France had all exceeded this amount, but the Council of Ministers had not voted to fine those states. Subsequently, reforms were adopted to provide more flexibility and ensure that the deficit criteria took into account the economic conditions of the member states, and additional factors.

The Organisation for Economic Co-operation and Development downgraded its economic forecasts on 20 March 2008 for the eurozone for the first half of 2008. Europe does not have room to ease fiscal or monetary policy, the 30-nation group warned. For the eurozone, the OECD now forecasts first-quarter GDP growth of just 0.5%, with no improvement in the second quarter, which is expected to show just a 0.4% gain.

The European Fiscal Compact is a proposal for a treaty about fiscal integration described in a decision adopted on 9 December 2011 by the European Council. The participants are the eurozone member states and all other EU members except for the United Kingdom. Treaty text is still to be drafted and participation approvals from national parliaments are still to be granted.[68]

Historical eurozone enlargements and exchange-rate regimes for EU members

Further information: History of the euro

The chart below provides a full summary of all applying exchange-rate regimes for EU members, since the European Monetary System with its Exchange Rate Mechanism and the related new common currency ECU was born on 13 March 1979. The euro replaced the ECU 1:1 at the exchange rate markets, on 1 January 1999. During 1979-1999, the D-Mark functioned as a de facto anchor for the ECU, meaning there was only a minor difference between pegging your currency against ECU and pegging it against the D-mark.

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  text:"Exchange-rate regimes for EU members"

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BarData =

 bar:Belgium
 bar:France
 bar:Germany
 bar:Ireland
 bar:Italy
 bar:Luxembourg
 bar:Netherlands
 bar:Denmark
 bar:United_Kingdom
 bar:Greece
 bar:Spain
 bar:Portugal
 bar:Austria
 bar:Finland
 bar:Sweden
 bar:Slovenia
 bar:Cyprus
 bar:Malta
 bar:Slovakia
 bar:Estonia
 bar:Latvia
 bar:Lithuania
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 bar:Poland
 bar:Czech_Republic
 bar:Bulgaria
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 bar:Croatia

PlotData =

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 bar:Belgium         color:erm       from:13/03/1979  till:31/12/1998  shift:(-3,-5)   text:Belgium
                     color:euroland  from:01/01/1999  till:15/03/2015  
 bar:France          color:erm       from:13/03/1979  till:31/12/1998  shift:(-3,-5)   text:France
                     color:euroland  from:01/01/1999  till:15/03/2015  
 bar:Germany         color:erm       from:13/03/1979  till:31/12/1998  shift:(-3,-5)   text:Germany
                     color:euroland  from:01/01/1999  till:15/03/2015  
 bar:Ireland         color:erm       from:13/03/1979  till:31/12/1998  shift:(-3,-5)   text:Ireland
                     color:euroland  from:01/01/1999  till:15/03/2015  
 bar:Italy           color:erm       from:13/03/1979  till:16/09/1992  shift:(-3,-5)   text:Italy
                     color:eu        from:17/09/1992  till:24/11/1996  
                     color:erm       from:25/11/1996  till:31/12/1998  
                     color:euroland  from:01/01/1999  till:15/03/2015  
 bar:Luxembourg      color:erm       from:13/03/1979  till:31/12/1998  shift:(-3,-5)   text:Luxembourg
                     color:euroland  from:01/01/1999  till:15/03/2015  
 bar:Netherlands     color:erm       from:13/03/1979  till:31/12/1998  shift:(-3,-5)   text:Netherlands
                     color:euroland  from:01/01/1999  till:15/03/2015  
 bar:Denmark         color:erm       from:13/03/1979  till:15/03/2015  shift:(-3,-5)   text:Denmark
 bar:United_Kingdom  color:eu        from:13/03/1979  till:28/02/1987  shift:(-3,-5)   text:United_Kingdom
                     color:eupeg     from:01/03/1987  till:09/03/1988
                     color:eu        from:10/03/1988  till:07/10/1990
                     color:erm       from:08/10/1990  till:15/09/1992  
                     color:eu        from:16/09/1992  till:15/03/2015
 bar:Greece          color:eu        from:01/01/1981  till:31/12/1995  shift:(-3,-5)   text:Greece
                     color:eupeg     from:01/01/1996  till:13/03/1998
                     color:erm       from:14/03/1998  till:31/12/2000  
                     color:euroland  from:01/01/2001  till:15/03/2015  
 bar:Spain           color:eupeg     from:01/01/1986  till:18/06/1989  shift:(-3,-5)   text:Spain
                     color:erm       from:19/06/1989  till:31/12/1998
                     color:euroland  from:01/01/1999  till:15/03/2015  
 bar:Portugal        color:eu        from:01/01/1986  till:30/09/1990  shift:(-3,-5)   text:Portugal
                     color:eupeg     from:01/10/1990  till:05/04/1992
                     color:erm       from:06/04/1992  till:31/12/1998 
                     color:euroland  from:01/01/1999  till:15/03/2015  
 bar:Austria         color:eupeg     from:01/01/1995  till:08/01/1995  shift:(-3,-5)   text:Austria
                     color:erm       from:09/01/1995  till:31/12/1998  
                     color:euroland  from:01/01/1999  till:15/03/2015  
 bar:Finland         color:eu        from:01/01/1995  till:13/10/1996  shift:(-3,-5)   text:Finland
                     color:erm       from:14/10/1996  till:31/12/1998  
                     color:euroland  from:01/01/1999  till:15/03/2015  
 bar:Sweden          color:eu        from:01/01/1995  till:15/03/2015  shift:(-3,-5)   text:Sweden
 bar:Slovenia        color:eu        from:01/05/2004  till:27/06/2004  shift:(-3,-5)   text:Slovenia
                     color:erm       from:28/06/2004  till:31/12/2006
                     color:euroland  from:01/01/2007  till:15/03/2015  
 bar:Cyprus          color:eupeg     from:01/05/2004  till:01/05/2005  shift:(-3,-5)   text:Cyprus
                     color:erm       from:02/05/2005  till:31/12/2007  
                     color:euroland  from:01/01/2008  till:15/03/2015  
 bar:Malta           color:eupeg     from:01/05/2004  till:01/05/2005  shift:(-3,-5)   text:Malta
                     color:erm       from:02/05/2005  till:31/12/2007  
                     color:euroland  from:01/01/2008  till:15/03/2015  
 bar:Slovakia        color:eu        from:01/05/2004  till:27/11/2005  shift:(-3,-5)   text:Slovakia
                     color:erm       from:28/11/2005  till:31/12/2008
                     color:euroland  from:01/01/2009  till:15/03/2015  
 bar:Estonia         color:eupeg     from:01/05/2004  till:27/06/2004  shift:(-3,-5)   text:Estonia
                     color:erm       from:28/06/2004  till:31/12/2010  
                     color:euroland  from:01/01/2011  till:15/03/2015  
 bar:Latvia          color:eu        from:01/05/2004  till:31/12/2004  shift:(-3,-5)   text:Latvia
                     color:eupeg     from:01/01/2005  till:01/05/2005
                     color:erm       from:02/05/2005  till:31/12/2013  
                     color:euroland  from:01/01/2014  till:15/03/2015  
 bar:Lithuania       color:eupeg     from:01/05/2004  till:27/06/2004  shift:(-3,-5)   text:Lithuania
                     color:erm       from:28/06/2004  till:31/12/2014
                     color:euroland  from:01/01/2015  till:15/03/2015  
 bar:Hungary         color:eupeg     from:01/05/2004  till:25/02/2008  shift:(-3,-5)   text:Hungary
                     color:eu        from:26/02/2008  till:15/03/2015
 bar:Poland          color:eu        from:01/05/2004  till:15/03/2015  shift:(-3,-5)   text:Poland
 bar:Czech_Republic  color:eu        from:01/05/2004  till:15/03/2015  shift:(-3,-5)   text:Czech_Republic
 bar:Bulgaria        color:eupeg     from:01/01/2007  till:15/03/2015  shift:(-3,-5)   text:Bulgaria
 bar:Romania         color:eu        from:01/01/2007  till:15/03/2015  shift:(-3,-5)   text:Romania
 bar:Croatia         color:eu        from:01/07/2013  till:15/03/2015  shift:(-3,-5)   text:Croatia

</timeline>

Sources: EC convergence reports 1996-2014, Italian lira, Spanish peseta, Portuguese escudo, Finish markka, Greek drachma, UK pound

The eurozone was born with its first 11 Member States on 1 January 1999. The first enlargement of the eurozone, to Greece, took place on 1 January 2001, one year before the euro had physically entered into circulation. The next enlargements were to states which joined the EU in 2004, and then joined the eurozone on 1 January in the mentioned year: Slovenia (2007), Cyprus (2008), Malta (2008), Slovakia (2009), Estonia (2011), Latvia (2014), and Lithuania (2015).

All new EU members having joined the bloc after the signing of the Maastricht treaty in 1992, are obliged to adopt the euro under the terms of their accession treaties. However, the last of the five economic convergence criteria which needs first to be complied with in order to qualify for euro adoption, is the exchange rate stability criterion, which requires having been an ERM-member for a minimum of two years without the presence of "severe tensions" for the currency exchange rate.

In September 2011, a diplomatic source close to the euro adoption preparation talks between the seven remaining new Member States who had yet to adopt the euro (Bulgaria, Czech Republic, Hungary, Latvia, Lithuania, Poland and Romania), claimed that the monetary union (eurozone) they had thought they were going to join upon their signing of the accession treaty may very well end up being a very different union entailing much closer fiscal, economic and political convergence. This changed legal status of the eurozone could potentially cause them to conclude that the conditions for their promise to join were no longer valid, which "could force them to stage new referendums" on euro adoption.[69]

Bailout provisions

The financial crisis of 2007–08 prompted a number of reforms in the eurozone. One was a u-turn on the eurozone's bailout policy that led to the creation of a specific fund to assist eurozone states in trouble. The European Financial Stability Facility (EFSF) and the European Financial Stability Mechanism (EFSM) were created in 2010 to provide, alongside the International Monetary Fund (IMF), a system and fund to bail out members. However the EFSF and EFSM were temporary, small and lacked a basis in the EU treaties. Therefore, it was agreed in 2011 to establish a European Stability Mechanism (ESM) which would be much larger, funded only by eurozone states (not the EU as a whole as the EFSF/EFSM were) and would have a permanent treaty basis. As a result of that its creation involved agreeing an amendment to TEFU Article 136 allowing for the ESM and a new ESM treaty to detail how the ESM would operate. If both are successfully ratified according to schedule, the ESM would be operational by the time the EFSF/EFSM expire in mid-2013.

Peer review

See also: Euro Plus Pact

Strong EU oversight in the fields of taxation and budgetary policy and the enforcement mechanisms that go with it have sometimes been described as potential infringements on the sovereignty of eurozone member states[70] However, in June 2010, a broad agreement was finally reached on a controversial proposal for member states to peer review each other's budgets prior to their presentation to national parliaments. Although showing the entire budget to each other was opposed by Germany, Sweden and the UK, each government would present to their peers and the Commission their estimates for growth, inflation, revenue and expenditure levels six months before they go to national parliaments. If a country was to run a deficit, they would have to justify it to the rest of the EU while countries with a debt more than 60% of GDP would face greater scrutiny.[71]

The plans would apply to all EU members, not just the eurozone, and have to be approved by EU leaders along with proposals for states to face sanctions before they reach the 3% limit in the Stability and Growth Pact. Poland has criticised the idea of withholding regional funding for those who break the deficit limits, as that would only impact the poorer states.[71] In June 2010 France agreed to back Germany's plan for suspending the voting rights of members who breach the rules.[72] In March 2011 was initiated a new reform of the Stability and Growth Pact aiming at straightening the rules by adopting an automatic procedure for imposing of penalties in case of breaches of either the deficit or the debt rules.[73][74]

See also

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Notes

  1. ^ The self-declared Turkish Republic of Northern Cyprus is not recognised by the EU and uses the Turkish lira. However the euro does circulate widely.
  2. ^ a b c French Pacific territories use the CFP franc, which is pegged to the euro.(1 franc = 0.00838 euro)
  3. ^ Uses the Swiss franc. However the euro is also accepted and circulates widely.
  4. ^ Aruba is part of the Kingdom of the Netherlands, but not the EU. It uses the Aruban florin, which is pegged to the US dollar.(1 dollar = 1.79 florins)
  5. ^ a b Currently uses the Netherlands Antillean guilder and plans to introduce the Caribbean guilder in 2014; [1] [needs update] both are pegged to the US dollar.(1 dollar = 1.79 guilder)
  6. ^ Uses the US Dollar.
  7. ^ Kosovo is the subject of a territorial dispute between the Republic of Kosovo and the Republic of Serbia. The Republic of Kosovo declared independence on 17 February 2008, but Serbia continues to claim it as part of its own sovereign territory. Kosovo's independence has been recognised by 108 out of 193 United Nations member states.
  8. ^ The ECB announced on 22 December 1998 that, between 4 and 21 January 1999, there would be a narrow corridor of 50 base points interest rates for the marginal lending facility and the deposit facility in order to help the transition to the ECB's interest regime.

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External links

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