Euro History

The Euro (“EUR”) is the official currency of the European Union (EU). The Euro was introduced in 1999 as an implementation of the Maastricht Treaty of 1992. Fifteen member states of the EU have adopted the Euro, while eleven non-EU countries also use the currency. However, there are notable countries that have not adopted the Euro, including the UK, Sweden and Denmark, which are EU members; and Switzerland, which is not an EU member.

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Current Status

Initially, the Euro did not inspire much confidence among traders. The same criticism that led other countries to refuse adoption also caused worry in currency markets, namely, that member countries lose a great amount of influence over monetary policy, and so may eventually reject the Euro. However, the Euro has since become a dominant currency. In part due to economic difficulties in the US, and because of the economic success of the EU, the Euro has appreciated in value, as has the EU economy. In terms of GDP, the EU became the world’s largest economy in 2007, with the appreciation of the Euro (which has doubled in value compared to the US dollar since 2000). The Euro is also the most widely circulated currency in the world, having taken this position from the US dollar. By mid-2008, the value of Euros in circulation (i.e., the M0 money supply) had reached approximately $1 Trillion, compared to $833 billion US dollars.

Future Outlook

Many experts are very optimistic about the future of the Euro. With no end in sight for US economic problems, and the considerable gap between EU productivity compared to other leading and developing economies, the Euro will continue to climb. Equilibrium will eventually stop the climb, but at what time and at what currency value is highly speculative.

The most pressing issue facing the value of the Euro is the individual economic performance of member states. Various EU countries have not enjoyed the prosperity of others, leading to inflation (among other things). Although leading countries such as Germany have managed to keep inflation within a reasonable range, price erosion in less successful countries may effect the Euro’s value. This has led some to claim that the Euro is overvalued.

The Yen
The Swiss Franc
The US Dollar
The Pound

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