Road to euro is classified into 4 phases-

€ On 2nd, May1998 a meeting was held in Brussels among the member countries.

€ 11 member European Monitory Union (EMU) adopted a single currency EURO.

€ It lead to the formation of ECB.

€ Mr. Dutchman was selected to head the ECB for a period of 8 years.

€ EURO was introduced on 1 January 1999 and ECB started functioning from this date.

€ It lead to the formation of common monitory and exchange rate policy.

€ Government debt instruments have been issued and inter-bank transactions have been settled in EURO.

€ ECB called for exporters to invoice in EURO.

€ EURO notes and coins were put in circulation.

€ People converted their currency note , bank a/c , contracts to EURO.

€ Direct conversion from currency of a member country to currency of another country was not permitted .

National currencies of some countries have been taken out of circulation.

EURO has become the only currency.

Officially adopted 16.Dec.1995

Official user Eurozone (16 countries)

Ranking 2nd largest reserve currency

Nickname The single currency

Pegged by 11 currencies

Central bank European Central bank

Inflation 1.5%, March 2010

€ 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).

€ Euro coins and banknotes entered circulation on 1 January 2002.

€ The euro is the official currency of the eurozone.

€ The eurozone consists of Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain.

€ Outside the eurozone, the euro is also the sole currency of several European micro states.

€ The euro is the second largest reserve currency.

€ The euro is the currency with the highest combined value of banknotes and coins in circulation in the world.

€ The eurozone is the second largest economy in the world.

€ Over 150 million people in Africa use a currency pegged to the euro, 25 million people outside the eurozone in Europe and another 500,000 people on Pacific islands.

€ The general indices of inflation, show no major effect of the introduction of the euro.

€ It had an effect on cheap goods which have seen their price round up after the introduction of the euro.

€ Removal of intra-regional conflicts.

€ Ensuring peace among the European countries.

€ Ensuring a stable monitory system.

€ Removal of exchange risk.

Headquarters Frankfurt, Germany

Established 1 June 1998

President Jean-Claude Trichet

Central bank of Eurozone

Currency Euro

Reserves €526bn in total

Preceded by 16 national banks

The euro is managed and administered by the Frankfurt-based European Central Bank (ECB) and the Eurosystem.

Eurosystem participates in the printing, minting and distribution of notes and coins in all member states, and the operation of the eurozone payment systems.

€ to define and implement the monetary policy for the euro area.

€ to conduct foreign exchange operations.

€ to hold and manage the official foreign reserves of the euro area countries

€ to issue banknotes in the euro area.

€ to promote the smooth operation of payment systems and smooth flow of exchange of information.

€ to collect the necessary statistical information either

from national authorities or directly from economic agents, e.g. financial institutions.

€ to review developments in the banking and financial sector.

€ Countries which previously had weak currencies have benefited from lower interest rates and have easier access to capital.

€ The introduction of the euro has had a positive impact on the movement of goods, financial assets, and people within the eurozone.

€ One of the striking benefits of a single European currency are low interest rates due to a high degree of price stability

Trade

Investment

Exchange rate

Interest rate

Tourism

€ Introduction of euro has increased trade within the eurozone by 5% to 10%.

€ A recent study estimates this effect to be between 9% and 14%.

€ Introduction of euro led to increase in physical investment by 5% in the eurozone.

€ FDI stocks have increased by about 20% during the first four years of the euro.

€ The euro has most specifically stimulated investment in companies that come from countries that previously had weak currencies.

€ The adoption of common currency Euro led to the reduction of the risk associated with changes in currency exchange rates.

€ The introduction of the euro created "significant reductions in market risk exposures for firms both in and outside of Europe".

€ The introduction of the euro has decreased the interest rates of most members countries, in particular those with a weak currency.

€ The countries whose interest rates fell most as a result of the euro are Greece, Ireland, Portugal, Spain, and Italy.

€ The introduction of the euro has had a positive effect on tourism flows within the eurozone.

€ Tourism has increased by 6.5%.

Exchange rate evolution of the euro compared to USD, JPY and GBP. Exchange rate at start is put to 1.

Currencies Jan-1999 Jul-2008

USD €1 = $1.18  €1 = $1.57

JPY €1 = ¥133  €1 = ¥168

GBP €1 = £0.71  €1 = £0.80

Years of unrestrained spending, cheap lending and failure to implement financial reforms left Greece badly exposed when the global economic downturn struck. This whisked away a curtain of partly fiddled statistics to reveal debt levels and deficits that exceeded limits set by the euro zone.

Greece's credit rating -- the assessment of its ability to repay its debts -- has been downgraded to the lowest in the euro zone, meaning it will likely be viewed as a financial black hole by foreign investors. This leaves the country struggling to pay its bills as interest rates on existing debts rise.

€ International Monetary Fund (IMF) is supporting GREECE by supplying its national currency i.e. EURO.

€ The IMF approved a three-year, 30-billion-euro ($38-billion) loan to Greece.

€ The IMF will make 5.5 billion euros immediately available to Athens, with 10 billion over the course of the rest of the year from the IMF and 30 billion from the EU this year.

1. Reduction in transaction cost.

2. No exchange rate uncertainty.

3.Transparency & competition .

Between 2008 and 2010, several things went wrong in Europe, the biggest of which was Greece’s financial crisis

Greece's financial difficulties have exposed numerous weaknesses which threaten Europe's common currency. Now, policy makers and economic experts are trying to find ways to stabilize the euro

€ It has led to financial integration thus significantly reshaped the European financial system.

€ Euro has significantly decreased the cost of trade in bonds, equity, and banking assets within the eurozone.

€ Globally, the introduction of the euro has led to an integration in terms of investment in bond portfolios, with eurozone countries and increased lending and borrowing among the countries.

-by Akanksha

Raman Apoorva Khire