Eurozone as of 2010 Non-eurozone states using the euro Estonia; potentially adopting in 2011
|Union type||Economic & Monetary|
|Political control||Euro Group|
|Group president||Jean-Claude Juncker|
|Issuing authority||European Central Bank|
|ECB president||Jean-Claude Trichet|
|Affiliated with||European Union|
|GDP (PPP)||€8.4 trillion|
|Trade balance||€22.3 bn surplus|
The eurozone ( pronunciation (help·info)), officially the euro area, is an economic and monetary union (EMU) of 16 European Union (EU) member states which have adopted the euro currency as their sole legal tender. It currently consists of Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain. Eight (not including Sweden, which has a de facto opt out) other states are obliged to join the zone once they fulfil the strict entry criteria.
Monetary policy of the zone is the responsibility of the European Central Bank, though there is no common representation, governance or fiscal policy for the currency union. Some cooperation does however take place through the euro group, which makes political decisions regarding the eurozone and the euro.
The term "eurozone" or "euro area" can also be taken informally to include third countries that have adopted the euro, for example Montenegro (see details on these countries below). Three European microstates–Monaco, San Marino and the Vatican City–have concluded agreements with the European Union permitting them to use the euro as their official currency and mint coins, but they are neither formally part of the eurozone nor represented on the board of the European Central Bank.
In 1998 eleven EU member-states had met the convergence criteria, and the eurozone came into existence with the official launch of the euro on 1 January 1999. Greece 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. As of 2009 there are 16 member states with 329 million people in the eurozone.
|Austria||1 January 1999||8,356,707|
|Belgium||1 January 1999||10,741,048|
|Cyprus||1 January 2008||801,622||Northern Cyprus|
|Finland||1 January 1999||5,325,115|
|France||1 January 1999||64,105,125|| New Caledonia
Wallis and Futuna
|Germany||1 January 1999||82,062,249|
|Greece||1 January 2001||11,262,539|
|Ireland||1 January 1999||4,517,758|
|Italy||1 January 1999||60,090,430||Campione d'Italia|
|Luxembourg||1 January 1999||491,702|
|Malta||1 January 2008||412,614|
|Netherlands||1 January 1999||16,481,139|| Aruba
|Portugal||1 January 1999||10,631,800|
|Slovakia||1 January 2009||5,411,062|
|Slovenia||1 January 2007||2,053,393|
|Spain||1 January 1999||45,853,045|
Eleven countries, Denmark, Sweden, the United Kingdom, Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania are in the European Union but do not use the euro. Before a state can join the eurozone, it must spend two years in the European Exchange Rate Mechanism (ERM II). As of the 1 January 2008, five National Central Banks (NCBs) participated in the mechanism (see table below). The remaining currencies are expected to follow as soon as they meet the criteria. Estonia, Latvia, Lithuania and Denmark are all members of ERM II and hence are in a position to join quickly once approved, however few countries now have a formal target date and only Estonia is expected to gain approval in 2010 for accession in 2011.
Denmark and the United Kingdom obtained special opt-outs in the original Maastricht Treaty of the European Union. Both countries are legally exempt from joining the eurozone unless their governments decide otherwise, either by parliamentary vote or referendum. The current Danish government has announced plans to hold a referendum on the issue following the adoption of the Treaty of Lisbon. Sweden gained a de facto opt-out by using a legal loophole. It is required to join the Euro as soon as it fulfills the convergence criteria, which includes being part of ERM II for two years. However joining ERM II is voluntary and as Sweden has so far decided to stay outside of the Euro it has not joined ERM II.
The 2008 financial crisis has increased interest in Denmark and Poland to join the eurozone, and in Iceland to join the European Union, a pre-condition for adopting the euro. On the other hand, since Latvia is asking for help from the International Monetary Fund (IMF), it is possible that the IMF will force Latvia to give up its currency peg as a precondition; officially taking Latvia out of the ERM II and possibly moving the euro adoption date even further from 2013 than currently planned.
The euro is used beyond the EU states which have joined the economic and monetary union. Three states, Monaco, San Marino and Vatican City, have signed formal agreements with the EU to use the euro, and to mint their own coins. However, although they have formally adopted the euro and mint coins, they are not considered part of the eurozone by the ECB and do not have a seat in the ECB or Euro Group.
Several other countries have officially adopted the euro as their sole currency, such as Andorra, Kosovo[a] and Montenegro, without even an agreement. These states are also not considered part of the official eurozone by the ECB. However, in some usage, the term eurozone is applied to all such states and territories that have adopted the euro as their sole currency. Further unilateral adoption of the euro (euroisation), by both non-euro EU and non-EU members, is opposed by the ECB and EU.
The monetary policy of all countries in the eurozone is managed by the European Central Bank (ECB) and the European System of Central Banks (ESCB) which comprises the ECB and the central banks of the EU states who have joined the zone. Countries outside the European Union, even those with monetary agreements such as Monaco, are not represented in these institutions. The ECB is entitled to authorise the design and printing of euro banknotes and the minting of euro coins and its president is currently Jean-Claude Trichet
The eurozone is represented politically by its finance ministers, known collectively as the Euro Group which is presided over by a president, currently Jean-Claude Juncker. The finance ministers of the EU member states that use the euro meet a day before a meeting of the Economic and Financial Affairs Council (Ecofin) of the Council of the European Union. The Group is not an official Council formation but when the full EcoFin council votes on matters only affecting the eurozone, only Euro Group members are permitted to vote on it.
On 15 April 2008 in Brussels, Juncker suggested that the eurozone should be represented at the International Monetary Fund as a bloc, rather than each member state separately: "It is absurd for those 15 countries not to agree to have a single representation at the IMF. It makes us look absolutely ridiculous. We are regarded as buffoons on the international scene." However Finance Commissioner Joaquín Almunia stated that before there is common representation, a common political agenda should be agreed.
|Eurozone||317 million||€8.4 trillion||14.6%||21.7% GDP||20.9% GDP|
|EU (27)||494 million||€11.9 trillion||21.0%||14.3% GDP||15.0% GDP|
|United States||300 million||€11.2 trillion||19.7%||10.8% GDP||16.6% GDP|
|Japan||128 million||€3.5 trillion||6.3%||16.8% GDP||15.3% GDP|
|GDP in PPP, exports/imports as goods and services excluding intra-EU trade.|
Interest rates for the eurozone, set by the ECB since 1999. Levels are in percentages per annum. Prior to June 2000, the main refinancing operations were fixed rate tenders. This was replaced by variable rate tenders, the figures indicated in the table after that refer to the minimum interest rate at which counterparties may place their bids.
|Date||Deposit facility||Main refinancing operations||Marginal lending facility|
|01 Jan 1999||2.00||3.00||4.50|
|04 Jan 1999||2.75||3.00||3.25|
|22 Jan 1999||2.00||3.00||4.50|
|09 Apr 1999||1.50||2.50||3.50|
|05 Nov 1999||2.00||3.00||4.00|
|04 Feb 2000||2.25||3.25||4.25|
|17 Mar 2000||2.50||3.50||4.50|
|28 Apr 2000||2.75||3.75||4.75|
|09 Jun 2000||3.25||4.25||5.25|
|28 Jun 2000||3.25||4.25||5.25|
|01 Sep 2000||3.50||4.50||5.50|
|06 Oct 2000||3.75||4.75||5.75|
|11 May 2001||3.50||4.50||5.50|
|31 Aug 2001||3.25||4.25||5.25|
|18 Sep 2001||2.75||3.75||4.75|
|09 Nov 2001||2.25||3.25||4.25|
|06 Dec 2002||1.75||2.75||3.75|
|07 Mar 2003||1.50||2.50||3.50|
|06 Jun 2003||1.00||2.00||3.00|
|06 Dec 2005||1.25||2.25||3.25|
|08 Mar 2006||1.50||2.50||3.50|
|15 Jun 2006||1.75||2.75||3.75|
|09 Aug 2006||2.00||3.00||4.00|
|11 Oct 2006||2.25||3.25||4.25|
|13 Dec 2006||2.50||3.50||4.50|
|14 Mar 2007||2.75||3.75||4.75|
|13 Jun 2007||3.00||4.00||5.00|
|09 Jul 2008||3.25||4.25||5.25|
|08 Oct 2008||2.75||4.75|
|09 Oct 2008||3.25||4.25|
|15 Oct 2008||3.25||3.75||4.25|
|12 Nov 2008||2.75||3.25||3.75|
|10 Dec 2008||2.00||2.50||3.00|
|21 Jan 2009||1.00||2.00||3.00|
|11 Mar 2009||0.50||1.50||2.50|
|08 Apr 2009||0.25||1.25||2.25|
|13 May 2009||0.25||1.00||1.75|
The primary means for fiscal coordination within the EU lies in the Broad Economic Policy Guidelines which are written for every member state, but with particular reference to the 16 current members of the eurozone. These guidelines are not binding, but are intended to represent policy coordination among the EU member states, so as to take into account the linked structures of their economies.
For their mutual assurance and stability of the currency, members of the eurozone have to respect the Stability and Growth Pact, which sets agreed limits on deficits and national debt, with associated sanctions for deviation. The Pact originally set a limit of 3% of GDP for the yearly deficit of all eurozone member states; with fines for any state which exceeded this amount. In 2005, Portugal, Germany, and France had all exceeded this amount, but the Council of Ministers had not voted to fine those states. Subsequently, reforms were adopted to provide more flexibility and ensure that the deficit criteria took into account the economic conditions of the member states, and additional factors.
The Organisation for Economic Cooperation and Development downgraded its economic forecasts on 20 March 2008 for the eurozone for the first half of 2008. Europe does not have room to ease fiscal or monetary policy, the 30-nation group warned. For the euro zone, the OECD now forecasts first-quarter GDP growth of just 0.5%, with no improvement in the second quarter, which is expected to show just a 0.4% gain.
As a result of the global financial crisis that began in 2007/2008, the eurozone entered its first official recession in the third quarter of 2008, official figures confirmed in January 2009. On 11 October 2008 the Euro Group heads of state and government (rather than finance ministers) held an extraordinary summit in Paris to define a joint action plan for the eurozone and the European Central Bank to stabilise the European economy.
The leaders hammered out a plan to confront the financial crisis which will involve hundreds of billions of euros of new initiatives to head off a feared "meltdown". They agreed a bank rescue plan: governments would buy into banks to boost their finances and guarantee interbank lending. Coordination against the crisis is considered vital to prevent the actions of one country harming another and exacerbating the bank solvency and credit shortage problems. In the Great Depression, so-called "beggar-thy-neighbour" measures taken unilaterally by countries are considered to have deepened the economic loss.
Despite initial fears by speculators in early 2009 that the stress of such a large recession could lead to the break up of the eurozone, the euro's position actually strengthened as the year progressed. Far from the poorer performing economies moving further away and becoming a default risk, bond yield spreads between Germany and the weakest economies decreased easing the strain on these economies. The ECB has been attributed much of the credit for the turn around in fortunes, injecting €500bn into the banks in June.
In early 2010, fears of a sovereign debt crisis developed concerning eurozone countries such as Greece, Spain, Ireland, Portugal and Italy. This led to a crisis of confidence as well as the widening of bond yield spreads and risk insurance on credit default swaps between these countries and other eurozone members, specifically Germany and France..
With Greece facing severe economic difficulties, the EU adopted a plan to help its recovery, including surveillance from the ECB and loans. The European Council also stated for the first time that if it came to it, the EU would bail out the country if needed. The crisis has sparked renewed discussion of fiscal integration as the lack of a federal treasury and budget being seen as a major weakness of the eurozone and there is the possibility the upcoming 10-year economic plan may lay the foundations for fiscal co-ordination. The attack by speculators on Greece was seen by some, including the Greek government, as an attack on the eurozone, using Greece as the weak-link.
The crisis has given momentum to calls for a more integrated eurozone with Belgian Prime Minister Yves Leterme proposing a common finance ministry for the eurozone known as the European Debt Agency which would manage eurozone government debt. A similar plan came from France and Germany for creating a European version of the International Monetary Fund (IMF) so IMF style resources and expertise could be used, while solving the problem within Europe. The plan is also backed by the Socialists and the Italian President who stated that "The European Central Bank [and] the European institutions are aware that there's something missing from our common tool box to tackle unforeseen and serious crises in one of the eurozone nations." The Commission is preparing a formal proposal on an EMF however some see the plan as too far fetched as there is no appetite for treaty reform after Lisbon.
Regardless, an EMF or EDA wouldn't be operational in time to help Greece. French President Sarkozy declared that "France is by the side of Greece in the most resolute fashion ... The euro is our currency. It implies solidarity. There can be no doubt on the expression of this solidarity" and that if the eurozone let a member fail, there would have been no point in creating the currency. In the long term, Germany wants an EMF to be accompanied by stronger enforcement mechanisms. For example a country that does not reign in its debt can have its EU funds withdrawn or its voting rights suspended. This however may be opposed by France which has had trouble controlling its own spending. Meanwhile, Spain has proposed that the EU enact the article in the Lisbon Treaty which will create the European Public Prosecutor. Spain wants this post to co-ordinate legal action against those speculators who were attacking the euro.
|a.||^ Kosovo is the subject of a territorial dispute between the Republic of Serbia and the self-proclaimed Republic of Kosovo. The Assembly of Kosovo unilaterally declared its independence on 17 February 2008, a move that is recognised by 65 of the 192 UN member states and the Republic of China (Taiwan), but not by other UN member states. Serbia claims it as part of its own sovereign territory.|
The Eurozone (also called Euro area or Euroland) is the set of countries in the European Union which have adopted the Euro (€) currency. The European Central Bank is responsible for managing the supply of money within the eurozone and political decisions are taken by the "euro group", which is a meeting of the politicians from each euro country in charge of that country's economy.
= There are 17 members in the Eurozone
Joined on 1 January 2001 12 Greece
Joined on 1 January 2007 13 Slovenia
Joined on 1 January 2009 16 Slovakia
Joined on 1 January 2011 17 Estonia
There are other countries outside the European Union which use the euro as well, but these are not officially in the eurozone.