History of the Formation of Euro
The Birth of the Euro and Its Effects
The Birth of the Euro and Its Effects
ROBERT SOLOMON
Guest Scholar The Brookings Institution
T
he euro was born at the beginning of this year as the currency of the newly formed European Economic and Monetary Union (EMU). As has been widely observed, this is a historic event. Not since the Roman Empire has a good part of Europe had the same currency. EMU was conceived in 1988–89 by a committee consisting mainly of central bankers chaired by Jacque Delors, then president of the European Commission. The initiative, however, came from the political authorities, especially those in France and Germany. Eleven of the fifteen European Union (EU) countries are EMU members—all but Denmark, Greece, Sweden, and the United Kingdom. The euro is managed by the new European System of Central Banks, also known as the Eurosystem. In January the euro began to be used in place of the national currencies in banking and other financial transactions and in the denomination of securities. But hand-to-hand currencies will not be replaced by euro notes and coins until 2002. Prices in some retail shopes are being quoted in both national currencies and euros, and credit card purchases can be made in euros. Antecedents of EMU EMU represents the latest in a long series of measures in the process of economic
Summer/Fall 1999 – Volume VI, Issue 2
141
Robert Solomon and monetary integration in western Europe, going back to the early postwar era. Trade among those countries was liberalized under the Marshall Plan, while restrictions were retained on imports from the United States. Six continental European countries established the Coal and Steel Community (the Schuman Plan) in 1952. The European Economic Community came into existence as a customs union or “common market” in 1958 among the same six nations. In 1970 they put forth a proposal to form a monetary union, but these plans were put aside because of the economic and monetary
The Birth of the Euro and Its Effects
ROBERT SOLOMON
Guest Scholar The Brookings Institution
T
he euro was born at the beginning of this year as the currency of the newly formed European Economic and Monetary Union (EMU). As has been widely observed, this is a historic event. Not since the Roman Empire has a good part of Europe had the same currency. EMU was conceived in 1988–89 by a committee consisting mainly of central bankers chaired by Jacque Delors, then president of the European Commission. The initiative, however, came from the political authorities, especially those in France and Germany. Eleven of the fifteen European Union (EU) countries are EMU members—all but Denmark, Greece, Sweden, and the United Kingdom. The euro is managed by the new European System of Central Banks, also known as the Eurosystem. In January the euro began to be used in place of the national currencies in banking and other financial transactions and in the denomination of securities. But hand-to-hand currencies will not be replaced by euro notes and coins until 2002. Prices in some retail shopes are being quoted in both national currencies and euros, and credit card purchases can be made in euros. Antecedents of EMU EMU represents the latest in a long series of measures in the process of economic
Summer/Fall 1999 – Volume VI, Issue 2
141
Robert Solomon and monetary integration in western Europe, going back to the early postwar era. Trade among those countries was liberalized under the Marshall Plan, while restrictions were retained on imports from the United States. Six continental European countries established the Coal and Steel Community (the Schuman Plan) in 1952. The European Economic Community came into existence as a customs union or “common market” in 1958 among the same six nations. In 1970 they put forth a proposal to form a monetary union, but these plans were put aside because of the economic and monetary