Introduction to Euro

Presentation by:

• Swapna Dalvi
• Rohan Nimkar
 Introduction
• Sign: € and Code: EUR.
• Official currency of Euro zone.
• The name euro was officially adopted on 16 December 1995.
• The euro was introduced to world financial markets as an
accounting currency on 1 January 1999, replacing the
former European Currency Unit (ECU)
• The euro is the second largest reserve currency or anchor
currency.
• The second most traded currency in the world after the U.S.
dollar.
• Based on IMF estimates of 2008 GDP and purchasing power
parity among the various currencies, the euro zone is the second
largest economy in the world.
• The euro was established by the provisions in the
1992 Maastricht Treaty. In order to participate in
the currency, Member States are meant to
meet strict criteria such as a budget deficit of less
than three per cent of their GDP, a debt ratio of
less than sixty per cent of GDP, low inflation,
and interest rates close to the EU average.
• In the Maastricht Treaty, the United Kingdom and
Denmark were granted exemptions as per their
request from moving to the stage of monetary
union which would result in the introduction of
the euro.
 Euro Zone
• official the euro area consisting 16 countries
• an economic and monetary union (EMU) of 16 European
Union (EU) member states which have adopted the euro currency as
their sole legal tender.
• In 1998 eleven European Union member-states had met
the convergence criteria, and the euro zone came into existence with
the official launch of the euro on 1 January 1999.
•  Greece was qualified in 2000 and was admitted on 1 January 2001.
• Physical coins and banknotes were introduced on 1 January 2002.
• Slovenia qualified in 2006 and was admitted on 1 January 2007. 
• Cyprus and Malta qualified in 2007 and were admitted on 1 January
2008. 
• Slovakia qualified in 2008 and joined on 1 January 2009. That makes 16
member states with 329 million people in the euro zone.
 16 Countries Of Euro Zone
• Austria (1 January 1999) • Italy (1 January 1999)
• Belgium (1 January 1999) • Luxembourg (1 January 1999)
• Cyprus (1 January 2008) • Malta (1 January 2008)
• Finland, (1 January 1999) • Netherlands (1 January 1999)
• France (1 January 1999) • Portugal (1 January 1999)
• Germany (1 January 1999) • Slovakia (1 January 2009)
• Greece,  (1 January 2001) • Slovenia  (1 January 2007)
• • Spain (1 January 1999).
Ireland (1 January 1999)
• Eleven countries (Denmark, Sweden, the United Kingdom, Bulgaria,
the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland,
and Romania) are EU members but do not use the euro.
• Before joining the euro zone, a state must spend two years in
the European Exchange Rate Mechanism (ERM II). Since 1 January 2009,
the National Central Banks (NCBs) of Estonia, Latvia, Lithuania, and
Denmark have been participating in ERM II.
• The remaining currencies are expected to follow as soon as they meet
the criteria. Few countries have declared a target date, and
only Estonia has gained approval to join on 1 January 2011.
• Denmark and the United Kingdom obtained special opt-outs in the
original Maastricht Treaty. Both countries are legally exempt from
joining the euro zone unless their governments decides.
• The 2008 financial crisis increased interest in Denmark and initially in
Poland to join the euro zone.
• However, by 2010, the debt crisis in the euro zone caused interest from
Poland and the Czech Republic to cool, that means they are taking
cautious view of the timing of euro adoption.
Non-member usage

• The euro is also used in countries outside the EU.

• Three states (Monaco, San Marino, and Vatican City)
have signed formal agreements with the EU to use the
euro and mint their own coins. They are not considered
part of the euro zone by the ECB and do not have a seat
in the ECB or Euro Group.
• Some countries (Andorra, Kosovo and Montenegro) have
officially adopted the euro as their sole currency without
an agreement and, therefore, have no issuing rights.
• Andorra is currently negotiating an agreement with the
EU.
• These states are not considered part of the euro zone by
the ECB.
Euro Coins And Note
 Coins And Notes
• The euro is divided into 100 cents.
• All circulating coins have a common side showing the denomination
or value, and a map in the background. For the denominations
except the 1-, 2- and 5-cent coins that map only showed the 15
Member States which were members when the euro was
introduced. Later in 2007 this map was replaced by map of Europe.
• The coins are issued in €2, €1, 50c, 20c, 10c, 5c, 2c,
and 1c denominations.
• Commemorative coins with €2 face value have been issued with
changes to the design of the national side of the coin. These include
both commonly issued coins and nationally issued coins.
• The design for the euro banknotes have common designs on both
sides.
• Notes are issued in €500, €200, €100, €50, €20, €10, €5.
 Administration
• The euro is managed and administered by the Frankfurt-
based European Central Bank (ECB) and the Euro
system (composed of the central banks of the euro zone countries).
• The ECB has sole authority to set monetary policy.
• The ECB is entitled to authorize the design and printing of euro
banknotes and the minting of euro coins, and its president is
currently Jean-Claude Trichet.
• The Euro system participates in the printing, minting and
distribution of notes and coins in all Member States, and the
operation of the euro zone payment systems.
• All nations that have joined the EU since 1993 have pledged to
adopt the euro in due course.
• The 1992 Maastricht Treaty obliges most EU Member States to
adopt the euro upon meeting certain monetary and budgetary
requirements.
• The United Kingdom and Denmark negotiated exemptions.
 Usage of Currency
Direct Usage:
• The euro is the sole currency of 16 EU Member States: Austria,
Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland,
Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia,
Slovenia and Spain.
• Montenegro and Kosovo and several European micro states
(Andorra, Monaco, San Marino and Vatican City) as well as in three
overseas territories of EU states that are not themselves part of the
EU (Mayotte, Saint Pierre and Miquelon and Akrotiri and Dhekelia)
also use Euro as their sole currency.
• It is also gaining increasing international usage as a trading currency,
in Cuba, North Korea and Syria.
• In 2009 Zimbabwe abandoned its local currency and used major
currencies instead, including the euro and the United States dollar.
 Use as reserve currency
• Since its introduction, the euro has been the second most
widely held international reserve currency after the U.S.
dollar. The share of the euro as a reserve currency has
increased from 17.9% in 1999 to 26.5% in 2008.

• The euro inherited and built on the status of the second

most important reserve currency from the German mark.

• According to the IMF the total of Euros held as a reserve in

the world at the end of 2008 was equal to USD 1.1 trillion,
with a share of 22% of all currency reserves in advanced
economies, but a total of 31% of all currency reserves in
emerging and developing economies.
 GDP
• Germany on recently reasserted itself as the economic
growth engine of the euro zone, after gross domestic
product expanded at a stellar 2.2 per cent rate in the
second quarter compared with the previous three months.

• Buoyant German exports, aided by a decline in the value of

the euro, helped Europe’s largest economy record its
fastest expansion since reunification in 1990, equivalent to
an annualized rate of more than 8 per cent.
• Both Germany and France also raised their
growth estimates for the first quarter: up 0.3
points to 0.5 per cent for Germany, and 0.1
points to 0.2 per cent in the case of France.
• GDP increased by 1.0% in the euro area during
the second quarter of 2010,compared with
the previous quarter.
• In the first quarter of 2010, growth rates were
+0.2%. 
• Compared with the same quarter of the
previous year, seasonally adjusted GDP
increased by 1.7%.
 Euro Against Other Countries
1 Euro In euro
American Dollar    1.2711   0.78672 
Indian Rupee    59.3  0.0168634
GBP  0.8191   1.22085 

  Chinese Yuan    8.631   0.115861 

  Israeli New Shekel    4.84448   0.20642 

  Japanese Yen    108.54   0.00921319 

  Singapore Dollar    1.7274   0.578905 

  Canadian Dollar    1.3326   0.750415 

  Hong Kong Dollar    9.8823   0.101191