History of the Euro Currency

In 1999, several European nations adopted a single currency called the euro to strengthen and stabilize the continent's economy. While some goals of the euro have been realized, some remain out of reach.

The European Union

To help ease exchange rate volatility among different European nations, which hindered investment by companies in various states, the European Union (EU) developed the European Monetary System in 1979. This concept led to the creation of the European Currency Unit.

Building a Stronger Europe

Over time, it became clear that closer economic convergence was needed among European nations to build a stronger Europe. In 1991, members of the EU approved the Maastricht Treaty, which called for a single currency throughout Europe for the 21st century. This currency came to be called the euro and was adopted by 12 of the 15 member states of the EU on Jan. 1, 1999. The independent European Central Bank was created to oversee monetary policy.

Goals of the Euro

In creating the euro, the EU hoped to create a more stable European economy that would invite competition and opportunity for businesses and markets, improve economic growth across Europe, offer more integration among financial markets, create a stronger European presence in the global economy and develop a more politically unified Europe.

Members of the Euro System

Nations that have adopted the Euro are Belgium, Germany, Ireland, Spain, France, Italy, Luxembourg, the Netherlands, Austria, Portugal, Finland, Greece, Slovenia, Cyprus, Malta and Slovakia. Several other nations, such as Sweden, Bulgaria, Poland, Hungary and the Czech Republic, plan to adopt the euro in the future. Denmark and the United Kingdom are the only EU members who have opted not to join the euro system.

Problems with the Euro

While the euro has brought stability to European economies, the system does have limitations. All nations that operate under the euro system must, by default, have the same interest rate. This has created strains on some economies, such as Germany. If its economy slows, the government cannot lower interest rates to stimulate growth. Despite using a common currency, all European nations have not performed equally economically. While some nations experienced growth in exports, others were in decline. While some have gained competitiveness, some have fallen behind. The hope of some toward political unity is still far from the horizon.