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Definition

Euro

On January 4, 1999, 11 member states of the EU initiated the European Monetary Union (EMU). They established a single currency, the euro, which is replaced the individual currencies of the participating member states. The 11 countries were Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. The United Kingdom, Sweden, and Denmark chose to maintain their individual currencies. Greece did not qualify for EMU but joined the Euro Zone in 2001. On December 31, 1998, the final fixed rates between 11 participating currencies and the euro put into place. On January 4, 1999, the euro was officially launched.

Although the result of a long-term and methodical program for the alignment of all political and economic forces in the EU, the launch of the euro was only the first of many steps to come. The impacts of the euro on the economic environment and on society in general within the participating countries have been and will continue to be dramatic. It is only now becoming apparent what some of the impacts might be.

The euro affects markets in three ways: 1) countries within the Euro Zone enjoy cheaper transaction costs; 2) currency risks and costs related to exchange rate uncertainty are reduced; and 3) all consumers and businesses both inside and outside the Euro Zone enjoy price transparency and increased price-based competition.

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