THE IMPACT OF

EUROPEAN
CURRENCY
Brief History
Maastricht Treaty
• Also known as Treaty on European union
• Signed on 7 February 1992 between members of
European community
• Led to the creation of EURO.
 European
Monetary Union
 The euro was created to Why is
promote:
• growth,
• stability, Euro
• and economic integration
in Europe.
created?
Those countries that wanted to instate the Euro had to – and
still have to – comply with four criteria of
convergence. One year before joining the shared currency the
concerning country has to:
Ø Verify stable prices- inflation rate: max. +1.5％
Ø Government bonds-government bonds interest rates:max 2％
Ø states’ finances have to be solid
-government debt sum <60％
-new debt made per year <3％GDP
Ø joining country has to prove a stable exchange rate
-2 years prior to joining
-European Exchange Rate Mechanism
• 1st of January 1999, 11 countries
met these criteria
• Sweden, failed to meet two conditions in the convergence
requirements :
• laws governing Sweden's central bank were not compatible with
the Maastricht Treaty.
• the currency exchange rates in Sweden were not sufficiently stable
for the previous two years.
• Greece failed to meet all of the requirements
• On January 1st of 2002 the old
currencies were outdated, and
the Euro introduced as the sole
currency.
• And as of 2020, 19 countries
were already part of the
monetary union and exchanged
their former currency for Euros.
 Advantages
• When traveling to other countries that use the Euro, they don’t need to
exchange their money and can pay everything with Euros.
• Online-Shopping has also become easier for customers and producers.
• Generally speaking prices and salaries can be compared on a European scale
more easily.
• The countries sharing one currency also need to collaborate more closely with
each other.
 Disadvantages
• This mainly concerns economic and financial problems of
the participating countries and their inhabitants.
• Countries give up part of their control and parts of their
governmental autonomy.
• As a matter of fact, not every country complied with the
mutual stability pact. Which lead to shortages in the
national budget and rising debt.
To prevent this from happening, the European Central Bank
has implemented several solutions:
• The European Central Banks buys government bonds of
indebted European countries for low interest rates, to offer
those countries cheap loans.
• A debt limit for all members was installed.
• Moreover, fines are automatically due, if a country does not
abide by the criteria of the mutual stability pact.
Thank You
Ivy Jane Encarnacion
References:
• www.explainity.com/education-project/transskripte/
• https://www.explainity.de/englisch/europeanmonetaryunion-2/
• https://www.brookings.edu/research/international-effects-of-
the-euro/
• https://www.investopedia.com/ask/answers/09/euro-
introduction-debut.asp
• https://edition.cnn.com/2013/07/09/world/europe/eurozone-fast-
facts/index.html