The euro – a single currency for the Eurozone, which consists of 19 of the 28 member states of the European Union – is introduced to financial markets on January 1 1999.
Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain are the 19 EU member states that adopt the currency.
The Maastricht Treaty, aiming at economic and monetary union by 1999 (across member states excluding the UK and Denmark), enters into force in 1993. In 2002 coins and notes start to circulate. The idea of economic harmonisation through a single currency is a goal for the EU (and, before the EU, of the League of Nations) as early as the 1920s, however.
Before Maastricht, the first meaningful push for monetary union comes in 1929, when Gustav Stresemann, Germany’s Foreign Minister during the Weimar Republic, raises the idea of a Europe-wide currency. In 1969 the European Commission sets out an agenda based around a need and desire for “greater coordination of economic policies and monetary cooperation” within the European Economic Area. The European Council charges Pierre Werner, Prime Minister of Luxembourg, with exploring methods of reducing currency exchange rate volatility. Though Werner does not propose a single currency in 1970, he advocates for the “total and irreversible fixing of parity rates and the complete liberation of movements of capital”.
A series of advances is interspersed with setbacks across the following two decades. US President Richard Nixon’s removal of gold backing from the US dollar in 1971 causes disruption to major world currencies, including having the effect of kicking European monetary union into the long grass. The 1979 creation of the European Monetary System brings renewed hope for progress by fixing exchange rates onto the European Currency Unit to stabilise them and counter inflation.
The Single European Act of 1986 outlines a plan for formal political cooperation within the European Economic Community, covering monetary policy. A European Council summit in 1988 helps to flesh out additional detail around monetary cooperation, before France, Italy and the European Commission throw their official support behind full monetary union with a central bank. The UK’s Margaret Thatcher opposes the proposal.
Various groups and committees are established between the 1988 summit and the 1993 Maastricht Treaty, notably European Commission President Jacques Delors’ convening of an ad hoc committee of central bank governors which lays out specific steps to ensure progress can be tied to an agreed timetable. Obstacles remain, with a number of countries wary of giving up sovereignty, particularly those with strong or stable currencies like Germany. Ultimately, German buy-in is secured by France, in return for French support of German reunification.
When the euro enters markets in 1999, the UK and Denmark retain their existing currencies, electing to opt-out of the currency union. The European Central Bank supersedes the European Monetary Institute on June 1 1998, becoming fully functional on January 1 1999 when the euro is ‘live’. The ECB’s first president is Dutchman Wim Duisenberg.
The first official purchase using the new currency takes place on Reunion – a French island in the Indian Ocean – when a kilogram of lychee fruit becomes the first item ever paid for in euros.
Since its inception, the currency continues to grow. A handful of countries join the European Union in 2004, and adopt the euro shortly thereafter. Slovenia (in 2007), Cyprus, Malta (both 2008) and Slovakia (in 2009) all replace their pre-membership currency with the euro. The Baltic States of Estonia, Latvia and Lithuania accede to the Eurozone between 2010 and 2015, while the ‘Eurogroup’ of euro-country finance ministers is formalised in 2009.