Single Currency

Single Currency in Europe

Description of Single currency

The Concise Encyclopedia of the European Union describes single currency in the following terms: [1] The European single currency is part of the wider EMU project, the central objective of the 1992 Maastricht Treaty. Under the Treaty, the new currency was to be introduced not later than 1999 through irrevocably fixed exchange rates and finally, by 2002, through the replacement of national currencies by the euro. Britain and Denmark negotiated opt-outs: applicant states had to meet certain ‘convergence criteria’. The participating countries were chosen and the conversion rates set in the spring of 1998. Since 1 January 1999, the national currencies that are to be abolished represent non-integral subdivisions of the euro. On the same date the former ECU was converted into the euro on a 1-for-1 basis. Between January 1999 and the end of 2001 the euro and national currencies operate in tandem. By January 2002 banknotes and coin will have been issued to the public, contracts must be converted into euros and new contracts must be denominated in euros. By the end of June 2002 the national currencies of participating member states will cease to be legal tender.

The coining of money is in all states the act of sovereign power.William Blackstone, c. 1765

The single currency is managed by the European Central Bank (ECB) in Frankfurt. The Maastricht Treaty stipulates that the Board and Governing Council of the ECB are to be free from interference by elected politicians, with internal price stability as their priority. The UK (although in principle favourable) and Denmark have to date exercised their right to opt out of the single currency. Sweden has no formal opt-out but has declined to participate. Greece has been informed that its application will be rejected for the time being (see more in this European encyclopedia). All the other EU states have adopted the euro, having been accepted, albeit sometimes controversially, as passing the financial qualifying tests. (For an extensive treatment of the political and economic background to the single currency, see EMu (see more in this European encyclopedia). See also Convergence criteria and Optimum currency area.)

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Notas y References

  1. Based on the book “A Concise Encyclopedia of the European Union from Aachen to Zollverein”, by Rodney Leach (Profile Books; London)

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