The euro turns twenty years in consolidated circulation and looking to the future

This January 1 marks twenty years since the entry into circulation of the banknotes and coins of euro, two decades in which it has overcome existential crises and has established itself as the second currency in the world, only behind the US dollar.

As the coronavirus pandemic, which has reduced the use of cash, continues to hit the world, the euro is gearing up for its digital version and trying to cope with high inflation.

The euro, which began to take shape in the early 1990s, was introduced on January 1, 1999 as a virtual currency, used by banks and financial markets.

However, for most people it became a real currency on January 1, 2002, when banknotes and coins entered circulation in twelve European countries, including Spain, France, Germany and Italy. The most important currency exchange in history was thus produced.

Euro cash was received by Europeans with great enthusiasm, but also with fear of inflation and price rounding.

In the case of Spain, it was necessary to stop thinking in pesetas, a task to which the converting calculators and the promotional campaign starring the Garcias, which explained the benefits of the euro and its equivalence with pesetas, contributed.

The name of the euro was decided at the European Council held in Madrid in December 1995.

Four months before its introduction, banknotes and coins were handed over to banks and merchants by the ECB and national central banks, and ATMs and vending machines were adapted.

The ECB exclusively authorizes the issuance of banknotes, but both the ECB as the national central banks have the right of emission, according to the Maastricht Treaty (February 1992).

The initial volume was set at 14.9 billion euro banknotes; between 9,000 and 10,000 million were put into circulation and 5,000 million constituted logistical reserves.

One year after its introduction, there were 8.2 billion banknotes in circulation and, at the end of 2006, 11.3 billion. By August 2021, the number had risen to 27.4 billion banknotes.

The responsibility for coins rests with national governments, but the volume of coins to be issued is approved annually by the ECB.

The 2008 crisis and the rescue of Greece

Citizens were getting used to the euro and when they stopped thinking in pesetas, the international financial crisis of 2008 gave rise to the greatest existential crisis of the single currency.

In 2010, a sovereign debt crisis began in the euro area that led to the rescue of Greece, Ireland and Portugal and to provide Spain with assistance to rescue its banking system in exchange for sharp adjustments in their economies.

The cohesion of the euro zone faltered and from illusion to disenchantment, with doubts about the permanence of countries like Greece in the area of ​​shared currency.

That climate was taken advantage of from the extreme right and figures such as the French Marine Le Pen defended that France, the founding country of the European Union, abandon the euro.

Citizen support

However, the euro was saved and overcame the sovereign debt crisis. In that salvation, the former president of the European Central Bank Mario Draghi played a key role, who in 2012 assured during a speech that the ECB would do whatever was necessary to preserve the currency.

According to a Eurobarometer published in early December by the European Commission, 78% of the inhabitants of the eurozone believe that the euro is good for the European Union (EU) and 69% consider it beneficial for their own country, the second largest support for the single currency since 2002.

The community club ensures on its website that the euro encourages trade, competition and price transparency, as well as helping to keep prices stable in the eurozone.

He adds that the single currency has made it cheaper for home buyers, businesses and European governments to borrow money.

It also highlights that its stability makes it attractive for companies around the world that trade with Europe to accept prices in euros, which saves European companies the costs derived from currency fluctuations and those of converting euros to other currencies. In 2020, 60% of exports outside the euro area were invoiced in euros.

Likewise, it affirms that the standard of living in the euro area has improved since the euro was introduced as a virtual currency in 1999 because the nominal Gross Domestic Product (GDP) per capita has gone from 22,050 euros to 33,230 euros in 2020, while that the percentage of employed persons has advanced from 63.6% to 71.8%.

In any case, the euro continues to face challenges, in particular the rise in inflation in 2021 caused, above all, by energy prices. According to Eurostat, inflation in the euro area reached 4.9% in November, making it difficult to meet the 2% medium-term target set by the ECB.

Meanwhile, it seeks to strengthen the international role of the currency and advance the design and characteristics of the digital euro.