Background information about the origins of the Euro

From January 1, 2002, most of Europe could pay with one currency, the Euro. If you delve into history, it soon becomes apparent that metaphorically speaking, the “birth” of the Euro was a “difficult birth” with a complicated “pregnancy” beforehand. The ideas behind the Euro originated immediately after the Second World War. In this article you can read what preceded the creation of the Euro, the reason for it, the how and why, and so on.

The pursuit of the unification of Europe

When you talk about the origins of the Euro, you cannot avoid a bit of history. The introduction of the Euro is so far the highlight of cooperation between the countries of the EU. This collaboration arose after the Second World War. This was desperately needed to clean up the ruins of the war. It started in 1952 with the creation of the European Coal and Steel Community ( ECSC ), followed by the European Economic Community ( EEC ). The EEC was established through the Treaty of Rome on March 25, 1957. The European Atomic Energy Community ( Euratom ) was also established. In 1967, the ECSC, the EEC and the Euratom merged to form the European Community, better known as the EU (European Union). Several European countries joined this after the establishment of the EU. In 1995, the EU consisted of a total of 15 European countries. Namely: Belgium, Denmark, Germany, England, Finland, France, Greece, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal, Spain and Sweden. It was obvious that the number of countries would be expanded later. When you talk about the unification of Europe, the introduction of the Euro is a very big step forward. Perhaps the highlight. Because precisely by introducing this currency, one Euro country has been created with more than 300 million people who all get paid in Euros, buy their bread with Euros, have savings in Euros in the bank or invest in Euros. Moreover, 90% of the goods and services that Europaland supplies are also purchased there and paid for in Euros. All Euroland stock exchanges decided to simultaneously switch to the Euro on January 1, 1999 . So from that day on, share prices on the stock exchange were quoted in Euros. The real trading in Euros took place three days later on January 4. This major event was widely reported in the media of many countries outside Europe.

Most important events leading up to the Euro

Since the creation of the Euro is associated with a very long series of events, here is a summary of the most important of these, stating the corresponding years.

  • 1967 : Creation of the European Union ( EU )
  • 1978 : The European Currency Unit ( Ecu ) is the European unit of account that has been used since 1978 by, among others, the European Commission. That year, the European Monetary System ( EMS ) was established. The ECU is not a real currency, but a currency basket made up of 12 European currencies. One ECU usually fluctuated between 2 and 2.5 guilders.
  • 1991 : On December 11, 1991, the Treaty of Maastricht laid down the foundations for EMU (Economic and Monetary Union). This came into effect in November 1993. And the actual establishment of the EMU took place on January 1, 1999. What is still important to mention here is that every Dutch citizen, regardless of the establishment of the EMU, retained his social security.
  • 1993 : Borders within the EU countries have been open since 1993. However, countries such as Great Britain and Ireland continued to maintain personal controls at the border for a while. France also still monitors drug smuggling.
  • 1995 : On 15 and 16 December 1995, the European Council decided during the Euro Summit in Madrid that “Euro” is the most appropriate name for a currency used in all EMU countries.
  • 1997 : During the Euro Summit of 16 and 17 June 1997, a so-called “Stability and Growth Pact” was established in the Treaty of Amsterdam . This means that the government of a country that adopts the Euro will apply a strict budget policy, so that budget deficits will be further reduced.
  • 1997 : The European Commission adopted the logo for the Euro in 1997.
  • 1998 : On May 3, 1998, the EU’s leaders and heads of state decided which countries will participate in the single currency as of January 1, 1999 and will therefore be in the EMU.
  • 1998 : On July 1, 1998, the ECB (European Central Bank), located in Frankfurt, was founded. From 1 January 1999, she is responsible for the joint monetary policy in the EMU and for the issuance of euro banknotes. The ECB operates completely independently of European governments and its only major objective is to maintain price stability. This complete independence makes the ECB more powerful than any other central bank in the world has ever been, because its policy cannot be hindered by political developments. Together with the national central banks – in the Netherlands this is De Nederlandsche Bank (DNB) – the ECB forms the European System of Central Banks (ESCB), which broadly determines monetary policy. The Dutchman Wim Duisenberg , who died in 2005, was the 1st President of the ECB, this appointment was for a term of 8 years. Duisenberg’s appointment did not come about without problems. After an eleven-hour meeting that took place in a crisis-like atmosphere, the EU member states decided that Duisenberg would become president of the ECB. While France tried to enforce that Duisenberg would not complete the entire 8 years of his mandate and would be succeeded by a Frenchman after 4 years. This did not happen; Duisenberg remained president until the autumn of 2003 and was succeeded by the Frenchman Jean-Claude Trichet.
  • 1999 : Introduction of the Euro. The Euro has the value of the ECU on the reference date of 1 January 1999 at 00:00. From this date, the ECU no longer existed, but was replaced by the Euro, the official currency in the eleven European countries that participated in the Economic and Monetary Union. Until January 1, 2002, the Euro only existed in cashless form; Only after this date did the Euro become currency. The value of the Euro compared to the guilder is fixed forever.
  • 2002 : On January 1, 2002, “ E-day ” took place. This means the changeover from national currencies to European currencies. The introduction of euro coins and euro banknotes was such a major operation that January 1 is therefore also called E-day.

Why did not all EU countries participate in EMU?

On January 1, 2002, euro banknotes and coins were introduced in 12 of the then 15 member states of the European Union. The question that is naturally asked is: Why did not all EU countries participate in EMU? At the beginning of 1988, all countries of the European Union were tested against the so-called convergence criteria , which simply meant a whole series of certain requirements and agreements that had to be met. For example, certain laws and regulations had to be adjusted and a country also had to have low inflation, low interest rates, a stable currency and healthy public finances. Countries that did not meet this requirement at that time could not join the EMU as of January 1, 1999. But for other countries there were other reasons not to join:

  • England had included in the Maastricht Treaty that it would not participate in EMU for the time being, even though it met the criteria.
  • The Danish government had included in the Treaty that the country would not participate unless it indicated that it wanted to participate.
  • Sweden had not participated in the European Monetary System, a condition for accession, for the past two years prior to the convergence criteria. National legislation in Sweden had also not been amended.

Another question that is asked is: Can a country that participates in EMU also leave and reintroduce its own national currency? The answer to this is: No. Participation in EMU is final . The Maastricht Treaty does not provide for the possibility for countries to leave the EMU. Apart from this legal barrier, it is unlikely for financial and political reasons that a country that has adopted the Euro would reintroduce its own currency. In practice, stepping out is therefore not possible.

The purpose/usefulness of the Euro

The main reason for the introduction of a single European currency is to put an end to the ever-fluctuating exchange rates within Europe. These constitute an obstacle to international trade. If an exchange rate suddenly falls or rises, transactions can suddenly take on a completely different meaning for a company. Companies can hedge against price risks, but this costs money. These costs are then ultimately passed on to the consumer. If exchange rate fluctuations disappear, this will save both businesses and consumers money and uncertainty. A second advantage of the Euro is that one common European currency, thanks to its large area of use, would become an important currency on the world market. The arrival of the Euro ensured that European countries jointly formed a large economy against world powers such as the US and China. This is beneficial for the financial sector and for businesses in Europe. Thanks to the new currency, consumers can more easily compare prices in different European countries. From 2002 onwards, they will no longer have to incur costs for exchanging guilders for other national currencies when traveling to other Euro countries. The introduction of the Euro is a means to achieve a stable, sustainably growing economy in the European Union. Residents of the countries participating in the EMU will benefit from this, but the other EU countries also benefit from a strong European economy.

Euro data

Euro data relating to:

  • Naming
  • Symbol
  • Currency sign and code
  • Value

Naming

The European Council decided during the Euro Summit in Madrid on 15 and 16 December 1995 that the euro is the most appropriate name for a currency used in all EMU countries. The word euro should officially be written without a capital letter, just like the word guilder used to be. However, practice shows that both Euro and Euro are used and accepted.

Symbol

On December 12, 1996, the symbol for the Euro was presented by the European Commission during the Euro Summit in Dublin. The symbol for the Euro had to be easy to write, be somewhat in line with other international symbols such as the dollar, the pound and the yen, and yet have a clear identity of its own. Since the word “Europe” is originally a Greek word, a stylized Greek capital letter E (epsilon) was used with an extra horizontal line in the middle (). The euro sign is usable and clearly legible in all European languages and is a design by the Frenchman Jean-Pierre Malivoir . The two middle lines, which run parallel to each other, symbolize the stability of the Euro. The symbol for the Euro is both graphically and aesthetically in line with the other major currency symbols. Currency sign and code The currency sign for the Euro is , E or EUR. The Currency Code (in full the ISO currency code, the code in international payments) is EUR in writing and 910 in numbers. The EUR code is slightly different from the usual currency coding. This is officially the first two letters of the country code followed by the first letter of the currency name according to spelling in the national language. For us, in the days of the guilder, this was NL (country code) followed by G (guilder), which then became NLG.

Value

The Euro has been given the value of the ECU on the reference date of January 1, 1999 at 00:00. The value of the Euro compared to the guilder has been definitively determined in six figures (five after the decimal point): 1 Euro = 2.20371 guilders. This recording of the value naturally also applied to the other 10 countries that participated in the new currency at the time. European regulations stipulate that for conversions the rate will always be used with the Euro as the starting point and not the other way around. This method of recording is also recommended for countries outside the euro area. For example, the dollar rate is noted as follows: 1 Euro = 1.1 dollar (and not: 1 dollar = 0.87 Euro).

Production of Dutch euro money

Euro coins

The euro coins are minted at the Royal Dutch Mint (called the Mint for short) in Utrecht. Dutch coinage has been minted here since 1567. The euro coins are minted with the so-called penning strike , where the two sides are struck in the same direction. This meant a drastic change for the Mint because the guilder coins were struck with the so-called mint strike , in which both sides are struck in opposite directions. As a result of this change, new production machines had to be installed in Utrecht. In December 1998, test minting of euro coins started. The very first euro coin minted was a one euro coin. This festive event took place on December 8, 1998 by Queen Beatrix. Real production started on January 4, 1999. The plan was for 2.8 billion euro coins to be ready in 2002. To meet this mega assignment, work was carried out continuously in two shifts from January 1999 and five coin presses were in operation day and night, which together spit out 3500 coins per minute.

Euro banknotes

In the Netherlands, euro banknotes are printed by Koninklijke Drukkerij Johan Enschedé & Zonen in Haarlem. Johan Enschedé is a printer of stamps, securities and secured documents. This company has been making Dutch money for more than 175 years. Production of the euro notes started on July 15, 1999 on behalf of De Nederlandsche Bank. A total of 605 million notes were printed at the time, of which 360 million entered circulation.