The euro is the single currency shared by 19 of the European Union's Member States, which together make up the euro area. The introduction of the euro in 1999 was a major step in European integration. It has also been one of its major successes: more than 337.5 million EU citizens in 19 countries now use it as their currency and enjoy its benefits.
The euro is not the currency of all EU Member States. Two countries (Denmark and the United Kingdom) have ‘opt-out’ clauses in the Treaty exempting them from participation, while the remainder (several of the more recently acceded EU members plus Sweden) have yet to meet the conditions for adopting the single currency. See the timeline below to have a glimpse of the historical evolution of the euro area since 1999.
Click here for a detailed list of countries that use the euro.
All EU Member States form part of EMU, which can be described as an advanced stage of economic integration based on a single market. It involves close co-ordination of economic and fiscal policies and, for those countries fulfilling certain conditions, a single monetary policy and a single currency – the euro. The process of economic and monetary integration in the EU parallels the history of the Union itself.
When the EU was founded in 1957, the Member States concentrated on building a 'common market'. However, over time it became clear that closer economic and monetary co-operation was necessary for the internal market to develop and flourish further. The goal of achieving the EMU, including a single currency, was not enshrined until the 1992 Maastricht Treaty (Treaty on European Union), which set out the ground rules for its introduction.
These state what the objectives of EMU are, who is responsible for what, and what conditions Member States must meet in order to adopt the euro. These conditions are known as the 'convergence criteria' (or 'Maastricht criteria'). These criteria include low and stable inflation, exchange rate stability and sound public finances.
The monetary policy of the eurozone is the responsibility of the European Central Bank (ECB), which was created for that purpose, and the national central banks of the euro area countries. Together they compose the Eurosystem.
Fiscal and structural policies remain in the hands of individual national authorities. However, they must coordinate these policies in order to attain the common objectives of stability, growth and employment. A major coordination structure is the Stability and Growth pact, which contains agreed rules on fiscal discipline.
The task of supervising financial institutions in the euro area has been entrusted to the European Central Bank and national supervisors. Working closely together within an integrated system, they check that banks comply with the EU banking rules in order to tackle problems early on.
Against the background of the current debt crisis important measures to improve the economic governance in the EU and the euro area in particular have been taken. EU Member States have strengthened the Stability and Growth Pact, introduced a new mechanism to prevent or correct macroeconomic imbalances and are increasingly coordinating structural policies. These are crucial steps to strengthen the "E" - the economic leg - of the EMU and to ensure the success of the euro in the long run.