Euro : A Brief History of the EU’s Shared Currency

You probably know the euro as one of the biggest currencies in the world, so it’s easy to forget, but the euro is one of the world’s youngest currencies. Less than 20 years ago the euro did not exist! It was established in 1999 in 11 of 15 European Union (EU) member states. It has now grown to be used in 19 countries across the region. That makes the euro the primary currency of some 339 million people who actively use it on a daily basis [1] and many more who trade it across the world.

Where did the story of the euro begin?

Today the euro holds its high stance along with the U.S. dollar, British Pound, Swiss Franc and Japanese Yen. Over 175 million people around the world use currencies that are pegged to the euro.[2]

While the euro was officially introduced a little over 18 years ago, its history goes back much further. To understand the origins of the so-called common currency, we need to go all the way back to 1969 when the original members of the European Economic Community (EEC) met in The Hague to work on an economic and monetary union (EMU).

Throughout the decades, several countries joined the EEC, setting the stage for the Maastricht Treaty in 1991. This landmark agreement formalised the European Union and committed countries to the EMU.

By 1995, European leaders agreed to call the new common currency the euro. Its implementation meant eliminating fluctuating exchange rates throughout the region and made it easier for European companies to conduct cross-border trade. By sharing a common economic framework, it also ensured that Europe wouldn’t face the same fragmentation that has plagued its history.

The ECB is established in 1998

The European Central Bank (ECB) was the successor of the European Monetary Institute (EMI). It formally replaced the EMI on the 1st of June 1998. It officially started exercising its powers in 1999 when the euro was introduced.

The ECB was the final institution needed to complete the creation of the Economic and Monetary Union (EMU). The first ECB president was Wim Duisenberg, who had previously headed the Dutch central bank and the European Monetary Institute.

On the 1st of December 2009, the Treaty of Lisbon was entered into force and the ECB gained official status as an EU institution.

Fluctuations of the euro

The euro has fluctuated significantly throughout its history. When it was founded, it began trading at 1.1747 U.S. before quickly reaching a high of 1.1906. About a year-and-a-half later, it plunged to a record low of 0.8225 U.S. – some 30% below its original value. This prompted the European Central Bank (ECB) to intervene in the currency market in support of the euro.[3]

Throughout its history, the euro’s monetary policy has been formulated by the ECB. Like other central banks, the ECB promotes economic growth and price stability across the 19 members that share the euro.

It’s not all sunshine

The euro may continue to be one of the world’s biggest currencies, however, it has been plagued by multiple crises since the 2008 financial meltdown, as Brussels came to the aid of several member states. Although the euro region appears to be slowly getting back to health, a wave of populism is spreading throughout the region led by political parties calling for an exit from the currency zone. Euro-skeptic parties were recently defeated in France and the Netherlands, but are still gaining traction throughout the region.

To this day, no member-state has dropped out of the euro. Whether or not this remains the case depends on several factors that intersect politics and the economy.

[1] European Union. The euro.

[2] European Union. The euro.

[3] The Telegraph. Timeline: history of the euro.

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