The common European currency – the euro – is celebrating its 20th birthday. The euro was launched on 1 January 1999 when ten European countries fixed their exchange rates to it and handed decisions on interest rates to the newly founded European Central Bank (ECB). Euro notes and coins started their circulations three years later. The single currency was seen as a solution to the constant disputed over exchange rates in the post-World War II.
Since 1999, the club of countries using the new currency has grown in size and influence. The Eurozone has grown to 19 countries from original 11 and is being used in non-member states Andorra, San Marino, Monaco, and Vatican City. Kosovo and Montenegro have adopted the currency unilaterally and as such are not considered member states and do not have representation in the ECB. The size of the euro-area economy has increased to reach 11.2 trillion, marking a 72-percent increase. The Eurozone is now the world’s second largest only after the United States.
Mario Draghi, President of the European Central Bank, once said that the euro was like a bumblebee – a “mystery of nature” that shouldn’t be able to fly, but somehow does. Mr. Draghi used this metaphor during the peak of the 2007-2008 Greek debt crisis when the future of the common currency was unclear. The ECB President managed to keep the dream alive by flooding the Eurozone market by cash, which, however, left a stain on the euro’s reputation. Since the crisis, the euro area has established provisions for granting emergency loans to its members in return of reforms. The euro is credited with boosting trade between members but countries have generally had a hard time adjusting after giving up two safety tools – the ability to let their currency’s exchange rate fall to boost exports and to adjust their own interest rates to stimulate business activity.