The Introduction and Effects of the Euro

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The Introduction and Effects of the Euro 1 Introduction The euro has been in existence just long enough to generate sufficient data for a first look at its actual performance, having been introduced in January 1999. This assessment presents eight studies that use post-1999 data to provide a first look at how the euro is actually affecting trade, financial markets, macroeconomic policy-making, and Europe¡¯s economic performance. 1.1 What is the Euro? The Euro is the single currency used in 12 EU member states. The euro came into being in cashless form on 1 January 1999 when these member states formed an Economic and Monetary Union (EMU) and permanently locked the exchange rates of their currencies against the Euro. Euro notes and coins were put into circulation in these 12 EU states on 1 January 2002 . 1.2 Countries in the euro area The 12 countries in the euro area are: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain and Greece. The United Kingdom (UK) has decided not to participate but has indicated that it may consider joining at a later date. Euro notes and coins were put into circulation on 1 January 2002. The euro is part of the process of EMU. EMU is provided for in the Maastricht Treaty, which the people of Ireland endorsed by referendum in June 1992. As well as the Euro, EMU has involved the creation of an independent European Central Bank (ECB). The euro is used also in Andorra, Monaco, San Marino and Vatican City. Several overseas territories of the 12 "Euro zone" countries use the euro: these include the Canaries, Madeira, the Azores and the French Outre-Mer territories (Guyana, Martinique, Guadeloupe, Reunion and the collective territories of Mayotte and St Pierre and Miquelon) . 2 Development of Euro 1 July 1990 Stage one of economic and monetary union begins. Capital movements in the EU Member States are fully liberalized (except where temporary derogations have been granted). 1 January 1993 The single market is completed. 1 November 1993 • The composition of the ecru basket is frozen. • The Treaty on European Union signed in Maastricht enters into force. 1 January 1994 • The European Monetary Institute (EMI) is set up in Frankfurt. • Procedures for coordinating economic policies at European level are strengthened. • Member States strive to combat 'excessive deficits' and to achieve economic convergence. 31 May 1995 The Commission adopts Green Paper on the single currency (reference scenario for the transition to the single currency). 15 and 16 December 1995 • Madrid European Council
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