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EDITIONS
Thursday, 14 November, 2002, 16:21 GMT
Q&A: Euro basics
The euro - the European single currency - has been legal tender for almost a year. BBC News Online offers a guide to euro basics.

What is the euro?

The euro is the single currency of the European Monetary Union (EMU), which became legal tender in 12 member states of the European Union (EU) in January 2002.

Which countries use the euro?

Around 304 million people in Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal, Finland and Greece now use euro notes and coins.

Eurozone countries
Austria
Belgium
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
The Netherlands
Portugal
Spain
The euro is also being used in Andorra, Monaco, San Marino, the Vatican, and French overseas territories including Martinique and Guadalupe in the Caribbean and Reunion in the Indian Ocean.

It is also the official currency in Montenegro and Kosovo.

Which other countries could use the euro?

Denmark, Sweden and the UK are the only countries in the EU that have not so far adopted the euro.

Denmark is a member of the Exchange Rate Mechanism II (ERM II), which means that the Danish krone is linked to the euro.

There are 10 countries in eastern and southern Europe which may seek to join the euro after joining the EU: Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovenia, Slovakia.

What is the history of the euro?

The euro has come about after many years of debate, but it was with the Maastricht Treaty of 1991 that European Union leaders firmly agreed plans to introduce a single currency by the year 2000.

It was at that point that the UK opted out of adopting the single currency.

Euro facts
15 billion banknotes printed
50 billion coins minted
Seven notes from five to 500 euros
Eight coins from one cent to two euros
Notes depict windows, gateways, and bridges
Coins have national symbols on one side
In January 1999, the euro was launched as an electronic currency used by banks, foreign exchange dealers, big firms and stock markets in 11 countries - Belgium, Germany, Spain, Italy, Ireland, Luxembourg, the Netherlands, Austria, Portugal and Finland.

Exchange rates of the participating currencies were set and eurozone countries began implementing a common monetary policy.

In 2002, euro notes and coins became legal tender in 12 countries - Greece having also met the conditions needed to join.

How does the euro work?

Europe's monetary union works a bit like all states in the United States sharing the US dollar and having the same key interest rate.

For the eurozone, the interest rate is set by the European Central Bank (ECB), based in Frankfurt.

Monetary policies are co-ordinated by eurozone members and an independent monetary institution, the European System of Central Banks (ESCB).

The ESCB consists of the central banks of the Member States and the European Central Bank.

Each year, the Council of Finance Ministers (made up of finance ministers from EU states) sets broad economic policy guidelines.

It can put pressure on the participating states to conform to budgetary commitments.

These are set out in annual stability programmes.

Why was the euro introduced?

There were both political and economic reasons for creating a single currency.

Politically, supporters argue that the euro will strengthen European unity and help to promote stability, peace and prosperity in Europe.

And in economic terms, they believe the euro complements the free movement of people, goods, services and capital set up under the European single market.

Supporters say removing the costs of changing money between countries makes life easier for businesses.

Some experts expect the single currency to stimulate trade and investment, boosting jobs and growth.

What are the arguments against the euro?

Those opposed to the euro argue that it erodes national sovereignty.

They say it will chip away at the ability of national governments to shape policy.

They warn that the policies of the European Central Bank may not always suit countries whose economies are out of step with others.

They are concerned the single currency will eventually lead to political union - a "United States of Europe".

They suggest that voters won't have the power to hold those making economic decisions to account.

Will the UK join the euro?

The UK says it will hold a referendum on whether to join the euro once five economic tests on the potential effects of euro membership have been assessed.

A verdict is due by June 2003 at the latest.

What are the five tests?

They examine whether joining a single currency would be good for jobs, for foreign investment and for the City.

They will also assess whether the UK economy is marching in step with other European countries, and whether it has enough flexibility to adjust if it isn't.

What about Denmark and Sweden?

Sweden's economy has not met the conditions required for euro entry.

The country's government is favourable to the idea of joining, and a referendum may be held in 2003.

Danish voters rejected euro entry in a referendum in 2000.

There has been speculation about a second referendum being held in 2003.


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