January 1, 2002: the advent of the euro

1Verse January 2002 marks the advent of euro coins and banknotes. The single currency was created in 1999, and it already has a turbulent history, punctuated by a serious crisis at the beginning of the 2000s. The aim of the ambitious construction of the eurozone in particular was to promote economic and political integration within the European Union and to promote convergence between European economies. These goals are not really achieved today.

creation of the euro

In thinking since the seventies, Create the Euro It is included in the Maastricht Treaty signed in 1992. It was actually done in 1999. The eurozone was then made up of 11 EU member states: Germany, Austria, Belgium, Spain, Finland, France, Ireland, Italy, Luxembourg, the Netherlands and Portugal. Euro coins and banknotes began to circulate in these countries from January 1, 2002. The euro then became the second most widely used currency on an international scale after the dollar.

About twenty years ago, the euro already owned troubled historywas particularly marked by the sovereign debt crisis between 2010 and 2012. Initially designed to facilitate economic and political integration within the European Union, Enhance global influence from the mainland and Accelerate the convergence of European economiesThe balance sheet for the euro remains mixed.

The euro and the sovereign debt crisis

Two decades of the eurozone’s existence were marked, first of all, by a large-scale crisis at the beginning of the 2000s. Sovereign debt crisis Multiple causes: the economic consequences of the crisis Mortgage 2007-2008, excessive public and/or private debt, weak economic growth, etc. However, it was amplified by austerity policies Then it was carried out. It initially aimed to restore the balance of public accounts, but eventually led to a decline in economic activity in the respective economies.

The effects of this crisis have been particularly heterogeneous Not all eurozone countries have been affected in the same way by this crisis. Greece was the country most affected. Moreover, the latter did not restore the level of GDP per capita that it was in 2009. More precisely, GDP per capita, in Greece, was 20% lower in 2019 (i.e. before the outbreak of Covid-19) to the crisis of 2009 The crisis also had lasting effects in Spain and Cyprus, which returned to the level of economic activity they had in 2009 respectively in 2015 and 2017.

Eurozone, an ideal monetary area?

For some economists, the sovereign debt crisis has also exposed fundamental flaws in the eurozone. The latter, since its inception, was far from forming an ideal monetary area. The concept of the optimal monetary area originated from the Canadian economist Robert Mundell, which makes it possible to identify certain conditions under which it is advantageous for a geographical area to adopt a common currency. If adopting a common currency can have advantages, particularly in terms of trade intensification and financial integration, it also has a high cost: the loss of autonomy with respect to monetary policy.. By adopting a common currency, the member states of the monetary area lose, in effect, the possibility of working on monetary policy or exchange rate instruments.

According to R. Mundell, the monetary area should be ‘ideal’ Adaptive mechanisms to reduce the impact of asymmetric shocks, meaning that it only affects one country or group of countries in the region. Several types of adjustment mechanisms are possible: strong labor mobility, a system of tax transfers between different member countries, etc. Such mechanisms do not exist in the Eurozone, where budget solidarity between different countries is in a rudimentary stage, especially in the absence of a large European budget.

Economic and financial integration is still limited

Finally, the eurozone has not fulfilled all its promises in terms of economic and financial integration. It is recognized that the main trading partners of the countries that have adopted the single currency are other members of the Eurozone. However, this was the case before the creation of the euro.

Germany is France’s largest trading partner.

A study by the European Central Bank (ECB) estimates the intensification of intra-eurozone trade resulting from the creation of the single currency at 5%, which is relatively low compared to the expectations it raised. In fact, the Barriers to trade such as differences in language or legal systems remain high within the eurozone itself. Thus the same study calculates that two European regions exchange 6 times less with each other if they are not located in the same country.

The first night of the euro | IN . Archive

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