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Further information: "International status and usage of the euro

After dropping to an interday low of $0.8296 on 26 October 2001, and a brief crash to $0.8115 on 15 January 2002, the euro soon recovered from its early slump. Its value last closed below $1.00 on 6 November 2002 ($0.9971), and increased rapidly from there. It peaked at $1.35 in 2004, and reached its highest value versus the "U.S. dollar at $1.5916 on 14 July 2008.[33] As its values increased against the "pound sterling in the late-2000s, peaking at 97.73p on 31 December 2008, its international usage grew rapidly.[34] The euro grew in importance steadily, with its share of foreign exchange reserves rising from nearly 18% in 1999 to 25% in 2003 - while the dollar share fell by an equivalent margin.[35] "Alan Greenspan in 2007 said the "eurozone had profited from the euro's rise and claimed it was perfectly conceivable that it could trade equally or become more important than the US dollar in the future.[36]

Late 2000s enlargements[edit]

""
""
Eurozone participation
"European Union (EU) member states
  19 in the "eurozone.
  7 not in ERM II, but obliged to join the eurozone on meeting convergence criteria ("Bulgaria, "Croatia, "Czech Republic, "Hungary, "Poland, "Romania, and "Sweden).
  1 in ERM II, with an "opt-out ("Denmark).
  1 not in ERM II with an opt-out ("United Kingdom).
Non-EU member states
  4 using the euro with a monetary agreement ("Andorra, "Monaco, "San Marino, and "Vatican City).
  2 using the euro unilaterally ("Kosovo[a] and "Montenegro).

Between 2007 and 2009, several states from the "2004 enlargement acceded to the eurozone. These were Slovenia in 2007, Cyprus and Malta in 2008, Slovakia in 2009. Most other 2004 countries faced greater difficulties in fulfilling the criteria to join.

Slovenia[edit]

Slovenia was the first country to join the eurozone after the launch of the coins and banknotes. Participation in ERM II began on 28 June 2004[37] and on 11 July 2006 the Council of EU adopted a decision allowing Slovenia to join the euro area as from 1 January 2007.[38] The euro replaced the "Slovenian tolar on 1 January 2007. The exchange rate between the euro and tolar had been set on 11 July 2006 at 239.640 SIT, but unlike the previous launches, cash and non-cash transactions were introduced simultaneously.

Cyprus[edit]

Cyprus replaced the "Cypriot pound with the euro on 1 January 2008.[39]

A formal letter of application to join the eurozone was submitted on 13 February 2007.[40] On 16 May 2007 the "European Commission, backed by the "European Central Bank, gave its go-ahead for the introduction in January 2008.[41][42]

The campaign to inform the citizens of Cyprus about the euro officially began in Cypriot media on 9 March 2007. On 15 March 2007, the Cypriot House of Representatives passed the necessary laws for the introduction of the euro on 1 January 2008. The "European Commissioner for Economic & Financial Affairs "Joaquín Almunia, on 16 May 2007, recommended that Cyprus adopt the euro as scheduled and the European Parliament concurred on 21 June 2007, the date was confirmed by the EU leaders. The final decision was taken by the EU finance ministers ("Ecofin) on 10 July 2007 and the conversion rate was fixed at 0.585274 CYP.[43] On 23 October 2007, the "coin designs were officially published in the "Official Journal of the European Union.[44]

On 1 January 2008 the euro replaced the Cypriot pound as the official currency.[45] The euro is only used in the government-controlled areas of the Republic, the "Sovereign Base Areas of "Akrotiri and Dhekelia (under UK jurisdiction, outside the EU) and in the "United Nations Buffer Zone in Cyprus.[46] The de facto "Turkish Republic of Northern Cyprus continues to use the "new Turkish lira as its primary currency and the euro as its secondary currency.[47]

Malta[edit]

""
""
"Valletta covered with floor designs of their new euro coins

Malta replaced the "Maltese lira with the euro on 1 January 2008.[39] The aims were officially confirmed on 26 February 2007.[48] On 16 May 2007, the Commissioner for Economic & Financial Affairs of the EU, "Joaquín Almunia, 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 Paris. 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.[49] Maltese coins which were current at the time of the euro transition may be exchanged through 1 February 2010.[29]

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.[50]

In December 2007, as part of the euro changeover celebrations, streets of "Valletta 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.

Slovakia[edit]

""
""
"Slovak euro coins starting set

"Slovakia adopted the euro on 1 January 2009. The "koruna was part of ERM II from 28 November 2005, requiring that it trade within 15% of an agreed central rate; this rate was changed on 17 March 2007 and again on 28 May 2008. The rate of 30.126 SKK from May 2008 was finally confirmed on 8 July 2008.[51]

To assist the process of conversion to the euro, on 1 April 2008, the "National Bank of Slovakia (NBS) announced their plan for withdrawal of the "Slovak koruna notes and coins.[52] A few days later, on 5 April 2008, Slovakia officially applied to enter the eurozone.[53] On 7 May 2008, the "European Commission approved the application and asked member states to endorse the bid during the EU finance ministers' meeting in July 2008.[54][55][56]

Slovakia fulfilled the "euro convergence criteria. At 2.2%, Slovakia's twelve-month inflation was well below the 3.2% threshold. However, for March 2008 annual inflation was 3.6%. Fiscal deficit was 2.2% versus the reference value of 3.0%. And finally, the government debt ratio was 29.4% of GDP in 2007, well below the maximum ratio of 60.0%.[57] Public opinion supported the switch, with 58% in favour and 35% opposed, but 65% worried about the inflationary impacts of the adoption.[58] Three months after the adoption of the currency 83 percent of Slovaks consider Slovakia's decision to adopt the euro to have been right.[59]

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.[60] 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.[60]

Recession era[edit]

""
""
The Lisbon Treaty formalised "Jean-Claude Juncker's post as President of the Eurogroup

As a result of the "global financial crisis that began in 2007/2008, the eurozone entered its first official "recession in the third quarter of 2008, official figures confirmed in January 2009.[61] The EU was in negative growth for the second, third and fourth quarters of 2008 and the first quarter of 2009 before returning to positive growth (for the eurozone as a whole).[62] Despite the recession, Estonia acceded to the eurozone and Iceland put in an EU application to join the euro, seeing it at the time as a safe haven.

Reform[edit]

In 2009, the "Lisbon Treaty formalised the "Eurogroup, the meeting of euro finance ministers, with an official president. "Jean-Claude Juncker served as president before and after formalisation and has been an advocate of strengthening the group, economic co-operation and common representation. Appetite for stronger economic co-operation grew due to the recession and the potential failure of some weaker eurozone members.[63] However Germany had opposed previous moves to strengthen the Eurogroup, such as "French President "Nicolas Sarkozy's attempts at Eurogroup summits, due to fears of undermining the ECB's independence. "Jean-Claude Trichet, who succeeded Duisenberg as ECB president in 2003, fended off numerous attacks from Sarkozy at the start of the recession. Before that formalisation of the Eurogroup, eurozone leaders held an extraordinary summit in reaction to the financial crisis on 11 October 2008 in Paris. Rather than the Eurogroup meeting as finance ministers, they met as head of states or government (similar to the "European Council) to define a joint action plan for the eurozone and the European Central Bank to stabilise the "European economy. These such meetings would be where many euro governance reforms would be agreed.

The leaders hammered out a plan to confront the financial crisis which will involve hundreds of billions of euros of new initiatives to head off a feared meltdown. They agreed a bank rescue plan: governments would buy into banks to boost their finances and guarantee "interbank lending. Coordination against the crisis is considered vital to prevent the actions of one country harming another and exacerbating the bank solvency and credit shortage problems.["citation needed]

Despite initial fears by speculators in early 2009 that the stress of such a large recession could lead to the break-up of the eurozone, the euro's position actually strengthened as the year progressed. Far from the poorer performing economies moving further away and becoming a default risk, bond yield spreads between Germany and the weakest economies decreased easing the strain on these economies. Much of the credit for the turn around in fortunes has been attributed to the ECB, which injected €500bn into the banks in June.[64] Indeed, the euro became to be seen as a "safe haven, as countries outside it such as Iceland fared worse than those with the euro. Iceland subsequently applied to the EU to get the benefit of using a larger currency with the support of the ECB.[65]

However, with the risk of "a default in Greece and "other members in late 2009–10, "eurozone leaders agreed to agree provisions for bailing out member states who could not raise funds (triggered for Greece in April 2010).[66][67] This was a u-turn on the EU treaties which rule out any bail out of a euro member to encourage them to manage their finances better. Yet with Greece struggling to restore its finances, other member states also at risk and the repercussions this would have on the rest of the eurozone economy; a temporary bail out mechanism was agreed and devised in the form of a "special purpose vehicle (SPV) named ""European Financial Stability Facility" (complemented by the "European Financial Stabilisation Mechanism and funds form the "International Monetary Fund), aiming at preserving financial stability in Europe by providing financial assistance to eurozone states in difficulty. The crisis also spurred consensus for further economic integration and a range of proposals such as a "European Monetary Fund" or federal treasury.[68][69][70]

However, in June 2010, 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 late 2010/early 2011 it was agreed to replace the European Financial Stability Facility and European Financial Stability Mechanism with a larger and permanent "European Stability Mechanism (ESM). The ESM required a treaty amendment to allow it and a separate treaty to establish it but, if ratified successfully, would be established in time to take over when the old facilities expire in 2013. Meanwhile, to support Italy and prevent it having to ask for a bail-out later, the ECB controversially started buying Italian bonds, as it had done with Greece.

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] The "Euro Plus Pact sets out a wide range of reforms to take place in the eurozone to ensure and the French and German governments further agreed to push for a 'true economic government' that would involve twice-yearly eurozone leader summits and a financial transactions tax.[75]

The "European Fiscal Union 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 without the United Kingdom and the "Czech Republic. The treaty entered into force on 1 January 2013 for the 16 states which completed ratification prior of this date[76] and on 1 April 2014 entered into force for all 25 signatories.

Baltic states[edit]

Despite speculation that the crisis in Greece could spread and that the euro might fail, some newer EU states have joined the currency. In 2010 Estonia gained the support of the "European Commission, "Central Bank and "Parliament for accession on 1 January 2011 with Estonia adopting the currency on that date.[77][78] In 2013 Latvia gained the support of the "European Commission, "Central Bank and "Parliament for accession on 1 January 2014 with Latvia adopting the currency on that date.[79][80] On 23 July 2014 "Lithuania became the last "Baltic state to gain permission to join the euro, which was adopted on 1 January 2015.[81]

Overview of eurozone enlargements and exchange-rate regimes for EU members[edit]

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 a currency against ECU and pegging it against the D-mark.

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 from Eastern Europe 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.[82]

See also[edit]

Notes[edit]

  1. ^ "Kosovo is the subject of a territorial dispute between the "Republic of Kosovo and the "Republic of Serbia. The Republic of Kosovo "unilaterally declared independence on 17 February 2008, but "Serbia continues to claim it as part of its "own sovereign territory. The two governments "began to normalise relations in 2013, as part of the "Brussels Agreement. Kosovo has received formal recognition as an independent state from "111 out of 193 "United Nations "member states.

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External links[edit]

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