Euro why was it introduced

On January 2, , the new European currency , the euro, became official in 12 countries, known as the eurozone. The original currencies were no longer accepted in transactions after Feb. With a population of slightly more than million people, the eurozone became one huge market.

The euro countries all belong to the political organization, the European Union EU. Denmark , United Kingdom , and Sweden have not adopted the euro, although they may do so in the future.

In theory, countries with high unemployment do not need to worry much about inflation because of the availability of the unemployed to produce more goods. Unfortunately, interest rates cannot be simultaneously raised in the high growth country and lowered in the low growth country when they have a single currency like the euro. In fact, the euro caused precisely the opposite of standard economic policy to be implemented during the European sovereign debt crisis.

As growth slowed and unemployment increased in countries like Italy and Greece, investors feared for their solvency, driving up interest rates. Typically, there would be no solvency fears for governments under a fiat money regime because the national government could order the central bank to print more money.

However, the European Central Bank's independence meant printing money was not an option for eurozone governments. Higher interest rates increased unemployment and even caused deflation and negative economic growth in some countries. It would be fair to say that the euro contributed to an economic depression in Greece. The first stage of the euro was the European exchange rate mechanism ERM , under which prospective future members of the eurozone fixed their exchange rates to the German mark.

Germany has the largest economy in the eurozone and had a history of sound monetary policy since World War II. However, pegging exchange rates to the German mark may have created a bias in favor of Germany. The idea that the euro favors Germany is politically controversial, but there is some support for it.

In the s, Germany pursued a looser monetary policy to deal with the burdens of reunification. As a result, the strong U. The U. The German economy was relatively prosperous by , and European monetary policy was far too tight for weaker economies. Portugal, Italy, Ireland, Greece, and Spain all faced high debt, high interest rates, and high unemployment.

This time, monetary policy was too tight rather than too loose. The only constant was that the euro continued to work in favor of Germany. European Union. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile.

Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Your Money. Businesses advertised prices both in euros and in legacy currencies, and some were accused of using the switch as an excuse to raise prices.

Overall, however, the process of creating a new currency for a population of over million people went remarkably smoothly. The euro has long been a source of controversy. Conservatives in the United Kingdom opposed the idea of a European currency, and both the UK and Denmark negotiated opt-outs despite their membership in the EU. The eurozone's greatest test came during the European sovereign debt crisis, which began in , as many central banks dealing in euros were unable to pay their debts and were bailed out by other eurozone nations or EU institutions.

Despite continued concerns, seven EU nations have met the criteria and acceded to the euro since , and the nations of Kosovo and Montenegro have also adopted it as their official currency. But if you see something that doesn't look right, click here to contact us! Elected in , Patsy T. Mink is sworn in on January 4, , as the first Asian American woman and first woman of color to serve in the U. Throughout her career, the U. President Richard Nixon refuses to hand over tape recordings and documents that had been subpoenaed by the Senate Watergate Committee.

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