The euro turns 20 years and continues as a second global currency despite imbalances

The euro turns 20 years and continues as a second global currency despite imbalances

The euro, one of the most tangible achievements of the European Union (EU), meets tomorrow 20 years after overcoming a serious crisis that has not prevented it from remaining a second world reserve currency despite the imbalances and indebtedness of many member countries.

The common currency of the 19 member countries of the European Union (EU) that make up the eurozone and the first major step for European political integration has had an irregular behavior over these two decades.

The first years of operation represented a stage of solid economic growth, which reached its zenith in 2008, when the financial crisis originated in the United States revitalized the European currency as a safe haven value against the dollar.

This positive period lasted until the end of 2009, when the euro weakened due to the sovereign debt crisis of countries such as Ireland, Greece, Portugal, Cyprus and Spain, which had to be rescued in exchange for fiscal austerity policies.

These hard economic adjustments left behind consequences such as job insecurity or the absence of public investments, aspects that weakened the welfare state and distanced many citizens from the idea of ​​European integration.

The European Central Bank (ECB), based in Frankfurt (Germany), had to reduce interest rates to the historical minimum of 0.05% and launch the purchase of assets to the banks to curb the cost of debt of the countries in a hurry.

In this time, the exchange rate has suffered significant fluctuations with respect to the evolution of the euro with the US dollar.

The European currency debuted in 1999 at a change of $ 1.16. Since then it has oscillated between its historical low, $ 0.82 in October 2000, and its highest point in July 2008, when it stood at $ 1.60.

In its last quote, in December 2018, it was changed for $ 1.13.

The history of the euro dates back to the establishment of the European Monetary System (EMS) in 1979, with the creation of the European unit of account (ecu) as a supranational currency to guarantee the stability of the exchange rates of the member countries.

However, it was not until 1990 when the then president of the European Commission, the French Jacques Delors, proposed the Economic and Monetary Union.

Two years later, the Maastricht Treaty set the criteria for convergence: containment of inflation, reduction of the public deficit and maintenance of public debt below 60 percent of GDP.

The denomination of the denomination euro was adopted in the summit of heads of State and Government of 1995, and the approval of the introduction of the euro for eleven of the fifteen countries in the European Parliament and the Council in 1998.

"The euro was a logical and necessary consequence of the single market, it facilitates travel, trade and transactions in the euro area and beyond," said the current ECB president, Mario Draghi, about the two decades of the currency. unique, according to a statement.

The euro, introduced as a financial currency on January 1, 1999, coexisted with the national currencies of these countries until they were withdrawn from circulation.

To date, nineteen countries have adopted the euro as their currency.

Germany, Austria, Belgium, Spain, Finland, France, Greece, Ireland, Italy, Luxembourg, the Netherlands and Portugal were the twelve countries of the EU that officially put the euro into circulation on January 1, 2002.

Later they were joined by Slovenia (2007), Malta and Cyprus (2008), Slovakia (2009), Estonia (2011), Latvia (2014) and Lithuania (2015).

Spain, which joined the euro in the first phase, has recorded advances in per capita GDP and also in real convergence with the rest of the eurozone economies.

Despite all its difficulties, the single currency has exceeded the most critical predictions after two decades of its entry into force.

"The euro and the close economic cooperation it needs have evolved over time, which has made it possible to overcome the difficulties," said the president of the Eurogroup, Mario Centeno, to summarize 20 years of the single currency.

The Portuguese, however, warned that "the work has not yet finished" and "requires permanent reform efforts, whether the economic situation favorable or unfavorable."

The eurozone economy closed 2017 with an increase of 2.5%, the biggest advance in GDP since the outbreak of the crisis, although the projections point to a slight deceleration due in part to the announced withdrawal of exceptional monetary stimuli.


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