One currency for one Europe : the road to the euro.
Date: 2015-03-23
Institutions: Directorate-General for Economic and Financial Affairs
Subjects: Economic and Monetary Union, European Central Bank, European System of Central Banks, economic integration, euro, historical account, single monetary policy

One currency
for one Europe
The road to the euro

Economic and 
Financial Affairs

Contents

What is economic and monetary union?  .

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1957 > 1999 — The path to economic and monetary union  .
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1999 > 2002 — The euro is launched   .

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Managing economic and monetary union  .

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Looking forward to euro area enlargement .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 

Achievements so far   .

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The euro in numbers   .

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The euro in pictures   .

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Glossary  .

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What is economic and monetary union?

Generally, economic and monetary union (EMU) is part of the process of economic integration . Independent states can 
integrate their economies to varying degrees in order to achieve the benefits of size, such as greater internal efficiency 
and more robustness to external events . The degrees of economic integration can be divided into six steps .

Steps of economic integration 

1.   A preferential trading area (with reduced customs tariffs between certain countries)
2.   A free trade area (with no internal tariffs on some or all goods between the participating countries)
3.   A customs union (with the same external customs tariffs for third countries and a common trade policy)
4.   A common market (with common product regulations and free movement of goods, capital, labour and services)
5.   Economic and monetary union (a single market with a single currency and monetary policy)
6.   Complete economic integration (all the above plus harmonised fiscal and other economic policies)

Economic integration and EMU  
in Europe

Building on the past

Economic integration between independent states is 
not new. The Latin monetary union, comprising France, 
Belgium, Switzerland, Italy and Greece, existed from 
1865 until 1927. The Scandinavian monetary union of 
Sweden, Denmark and Norway lasted from 1873 until 
1924. The German Zollverein is perhaps one of the 
most successful examples, beginning with a customs 
union between German principalities in 1834 and 
producing a central bank, the Reichsbank, and a single 
currency, the Reichsmark, in 1875. 

The  degree  of  economic  integration  in  the  European 
Union  (EU)  varies .  All  EU  countries  are  part  of  what  we 
call  EMU  and  form  a  common  market,  known  as  the 
single  market .  They  all  coordinate  their  economic 
policymaking  to  support  the  aims  of  EMU .  When 
meeting  economic  convergence  criteria,  adopting  the 
euro as the single currency is an obligation laid down in 
the  EU  treaties .  Several  EU  countries  are  already  more 
integrated  and  therefore  have  adopted  the  euro .  These 
countries form the euro area and, as well as the single 
currency, have a single monetary policy conducted by 
the European Central Bank (ECB) . Those EU countries 
which  are  not  part  of  the  euro  area  retain  their  own 
currencies and conduct their own monetary policies . So, 
the degree of economic integration within EMU is a hybrid 
of  steps  4  and  5  in  the  list  above .  To  reach  complete 
economic integration would require all EU countries to join 
the euro area and harmonise their fiscal policies, including 
taxation,  and  other  economic  policies .  However,  new  
EU  economic  governance  rules  came  into  force  on  
13  December  2011 .  As  a  major  step  towards  closer 
economic 
the 
these 
surveillance  and  coordination  of  fiscal  and  economic 
policies  for  all  EU  countries .  Additional  agreements 
between  a  large  number  of  EU  countries  underpin  and 
complement this . 

rules  strengthen 

integration, 

Words printed in blue are explained in the glossary at the end

1

ONE CURRENCY FOR ONE EUROPE  The road to the euro1957 > 1999  

The path to economic and monetary union

EMU  was  a  recurring  ambition  of  the  European  Union 
from  the  late  1960s  because  it  promised  currency  sta-
bility  and  an  environment  for  higher  growth  and  em-
ployment .   However,  a  variety  of  political  and  economic 
 obstacles barred the way until the signing of the Maas-
tricht Treaty (Treaty on European Union or EU Treaty) 
in  1992 .  At  various  times,  weak  political  commitment, 
divisions over economic priorities, lack of economic con-
vergence  and  developments  in  international  currency 

markets outside the Union’s control all played their part 
in frustrating progress towards EMU . 

Nevertheless,  the  second  half  of  the  20th  century  saw 
a  constant  search  by  the  EU  countries  for  deeper  eco- 
nomic cooperation as a means of strengthening the political 
bonds between them and protecting the common market . 

The passage towards today’s economic and monetary union can be 
divided into four phases

1950

1960

1970

1980

1990

2000

1

1

2

From the Treaty of Rome to the Werner Report:  
1957 to 1970

From the Werner Report to the European Monetary  
System (EMS): 1970 to 1979

2

3

4

3

4

From the start of the EMS to Maastricht:  
1979 to 1991 

From Maastricht to the euro and the euro area:  
1991 to 1999

1957 to 1970  
From the Treaty of Rome to the Werner Report 

Treaty of Rome has little to say about money

Currency turmoil strikes in the late 1960s

The post-war order for the market economies of Europe, 
North  America  and  Japan  was  founded  on  the  Bretton 
Woods  system  which  provided  the  international  frame-
work for currency stability with gold and the US dollar as 
the  predominant  monetary  standard .  The  authors  of  the 
Treaty of Rome therefore assumed that stable curren-
cies would remain the norm, and that Europe’s construction 
could be securely based on achieving a customs union and 
a common market allowing the free movement of goods, 
services, people and capital . 

The  Bretton  Woods  system  had  already  begun  to  show 
signs of strain in the late 1950s, and by 1968–69 a new 
era  of  currency  instability  threatened  when  market  tur-
bulence  forced  a  revaluation  of  the  Deutschmark  and 
the devaluation of the French franc . This endangered the 
common price system of the common agricultural policy 
— which was, at that time, the main achievement of the 
European Community .

Signing of the Treaty of Rome  
(25 March 1957)

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Pierre Werner

ONE CURRENCY FOR ONE EUROPE  The road to the euro 
 
 
 
The Community seeks economic prosperity and 
political development in EMU

The Werner Report — EMU in three stages 

Against  this  troubling  background,  and  with  the  cus-
toms union largely achieved, the Community was anx-
ious  to  set  itself  new  goals  for  political  development 
during  the next decade . The 1969 Barre Report, which 
proposed  greater  economic  coordination,  brought  new 
impetus, and EMU became a formal goal at a summit in 
The Hague in 1969 . Europe’s leaders set up a high-level 
group under the then Luxembourg Prime Minister, Pierre 
Werner,  to  report  on  how  EMU  could  be  achieved  by 
1980 . 

The Werner group submitted its final report in October 
1970, setting out a three-stage process to achieve EMU 
within  a  10-year  period .  The  final  objective  would  be 
irrevocably  convertible  currencies,  free  movement  of 
capital,  and  the  permanent  locking  of  exchange  rates 
— or possibly a single currency . To achieve this the re-
port called for closer economic policy coordination with 
interest rates and management of reserves decided at 
Community level, as well as agreed frameworks for na-
tional budgetary policies . 

1970 to 1979 
From the Werner Report to the European Monetary System

While  the  EU  countries  were  divided  over  some  of  the 
report’s main recommendations, they agreed in principle 
in March 1971 on a three-stage approach to EMU . The 
first stage, narrowing of exchange-rate fluctuations, was 
to be tried on an experimental basis without any com-
mitment to the other stages .

Unfortunately, the Werner strategy took fixed exchange 
rates  against  the  dollar  for  granted .  When  the  US  ef-
fectively floated the dollar from August 1971, the fresh 
wave of market instability put upward pressure on the 
Deutschmark and squashed hopes of tying the Commu-
nity’s currencies more closely together .

Snake in the tunnel

To  retrieve  the  situation,  in  March  1972,  the  EU  coun-
tries created the ‘snake in the tunnel’ as a mecha-
nism for managing fluctuations of their currencies (the 
snake) inside narrow limits against the dollar (the tun-
nel) . Hit by oil crises, policy divergence and dollar weak-
ness,  within  two  years  the  snake  had  lost  many  of  its 
component  parts  and  was  little  more  than  a  Deutsch-
mark zone comprising Germany, Denmark and the Ben-
elux countries .

The ‘quick death’ of the snake did not diminish interest 
in trying to create an area of currency stability . A new 
proposal for EMU was put forward in 1977 by the then 
President  of  the  European  Commission,  Roy  Jenkins .  It 
was taken up in a more limited form and launched as 
the  European  Monetary  System  (EMS)  in  March 
1979 with the participation of all the EU countries’ cur-
rencies except the pound sterling .

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Roy Jenkins
President of the European
Commission from  
1977 to 1981

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ONE CURRENCY FOR ONE EUROPE  The road to the euro 
 
1979 to 1991 
From the start of EMS to Maastricht

Controlling inflation becomes EC priority

EMS — a decade of success

The European Monetary System (EMS) was built on the 
concept of stable but adjustable exchange rates defined 
in relation to the newly created European currency unit 
(ECU) — a basket currency based on a weighted aver-
age  of  EMS  currencies .  Within  the  EMS,  currency  fluc-
tuations  were  controlled  through  the  exchange  rate 
mechanism  (ERM)  and  kept  within  ± 2 .25 %  of  the 
central rates, with the exception of the lira, which was 
allowed to fluctuate by ± 6 % .

While  the  EMS’s  primary  purpose  was  to  reduce  ex-
change-rate  instability  which  was  seen  as  damaging 
to trade, investment and economic growth, its creation 
was  undoubtedly  helped  by  a  new  consensus  among 
EU countries that controlling and reducing inflation had 
to become an economic priority . The EMS was a radical 
new  departure  because  exchange  rates  could  only  be 
changed by mutual agreement of participating EU coun-
tries and the Commission — an unprecedented transfer 
of monetary autonomy .

In  the  first  few  years,  there  were 
many realignments in the EMS . But 
by the time of the negotiations on the 
Maastricht  Treaty  in  1990–91,  the  EMS 
had proved a success . Short-term volatility of exchange 
rates  between  EC  currencies  was  substantially  reduced 
thanks  to  a  mixture  of  converging  inflation  rates,  inter-
est rate management which targeted the exchange rate, 
joint  intervention  in  the  foreign  exchange  market  and 
capital controls .

This success formed an encouraging backdrop to the dis-
cussions on EMU, together with the valuable experience 
in the joint management of exchange rates gained by the 
Community’s central banks . 

The single currency would 
complete the single market

The case for EMU revolved around the need to complete 
the single market, the programme adopted in 1985 for 
removing all remaining barriers to the free movement 
of goods, services, people and capital. It was clear that 
the full benefits of the internal market would  
be difficult to achieve with the relatively high business 
costs created by the existence of several currencies  
and unstable  exchange rates.

In addition, many economists and central bankers 
took the view that national monetary autonomy was 
inconsistent with the Community’s objectives of free 
trade, free capital movements and fixed exchange rates. 
For many, this view was later confirmed by the turmoil 
which hit the ERM in 1992–93, causing the withdrawal 
of the lira and the pound sterling, and the widening of 
the  fluctuation bands to 15 %.

4

ONE CURRENCY FOR ONE EUROPE  The road to the euroThe Delors Report recommended EMU  
in three stages

In June 1988, the European Council meeting at Han-
over  set  up  the  Committee  for  the  Study  of  Economic 
and Monetary Union, chaired by the then President of the 
Commission,  Jacques  Delors,  and  including  all  EC  cen-
tral  bank  governors .  Their  unanimous  report,  submitted 
in April 1989, defined the monetary union objective as a 
complete  liberalisation  of  capital  movements,  full  inte-
gration of financial markets, irreversible convertibility of 
currencies,  irrevocable  fixing  of  exchange  rates  and  the 
possible replacement of national currencies with a single 
currency .

The report indicated that this could be achieved in three 
stages,  moving  from  closer  economic  and  monetary 
coordination  to  a  single  currency  with  an  independent 
 European Central Bank (ECB) and rules to govern the size 
and financing of national budget deficits .

The three stages towards EMU

1990

Stage 1 
(1990–94)

Stage 2 
(1994–99)

Jacques Delors
President of the European 
Commission from 1985 to 1995

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Complete the internal market and remove restrictions  
on further  financial integration.

Establish the European Monetary Institute to strengthen 
central bank cooperation and prepare for the European 
System of Central Banks (ESCB). Plan the transition 
to the euro. Define the future governance of the euro 
area. Achieve economic convergence between the EU 
countries.

2000

Stage 3 
(1999 onwards)

Fix final exchange rates and transition to the euro. The 
ECB and ESCB are responsible for independent monetary 
policymaking.  Implement binding budgetary rules in the 

EU countries.

5

ONE CURRENCY FOR ONE EUROPE  The road to the euro 
 
 
 
 
Towards political, economic and monetary 
union: the Maastricht Treaty

The  first  stage  of  EMU  involved  completing  the  inter-
nal market, starting with the coordination of economic 
policies and removing obstacles to financial integration . 
For  the  following  stages,  substantial  preparatory  work 
by central bank governors greatly eased the work of re-
vising the Treaty . 

The  Treaty  on  European  Union  was  approved  by  the 
Heads  of  State  or  Government  at  the  European  Coun-
cil  at  Maastricht  in  December  1991  where  it  was  de-
cided that Europe would have a strong and stable single 
 currency by the end of the century . 

For economic and monetary union to provide a frame-
work for more jobs and growth and to avoid disruption, 
it  was  necessary  for  the  Member  State  economies  to 
have  achieved  a  high  degree  of  convergence  before 
introdu cing the single currency . Therefore, the Treaty on 
European Union set the ‘Maastricht convergence criteria’ 
that EU countries would have to meet in order to adopt 
the  euro .  These  are  shown  in  Table  1 .  In  addition  to 
these, EU countries would have to achieve convergence 
of the national laws and rules governing their national 
central banks and monetary issues .

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And so to Maastricht

On the basis of the Delors Report, the Madrid Euro pean 
Council  of  June  1989  decided  to  proceed  to  the  first 
stage  of  EMU  in  July  1990,  and  the  1989  Strasbourg 
European Council called for an intergovernmental con-
ference  to  determine  the  Treaty  revisions  that  would 
be needed to move to the second and third stages and 
implement EMU .

Table 1. The Maastricht convergence criteria

What is measured

How it is measured

Convergence criteria

Price stability

Harmonised consumer price inflation rate

Not more than 1.5 percentage points above the 
rate of the three best performing EU countries

Sound public finances

Government deficit as % of GDP

Reference value: Not more than 3 %

Sustainable public finances

Government debt as % of GDP

Reference value: Not more than 60 %

Durability of convergence

Long-term interest rate

Exchange rate stability

Deviation from a central rate

The  Maastricht  convergence  criteria  were  designed  to 
ensure  that  an  EU  country’s  economy  was  sufficiently 
prepared  for  the  adoption  of  the  single  currency .  They 
provided  a  common  baseline  for  the  stability,  sound-
ness and sustainability of public finances for euro area 
candidates that reflected economic policy convergence 

Not more than 2 percentage points above the 
rate of the three best performing EU countries  
in terms of price stability

Participation in ERM for 2 years without severe 
tensions

and  a  resilience  to  economic  shocks .  The  exchange 
rate criterion was intended to show that an EU country 
could manage its economy without recourse to  currency  
depreciation . 

6

ONE CURRENCY FOR ONE EUROPE  The road to the euro 
 
1991 to 1999 
From Maastricht to the euro and the euro area

With agreement on the goal (EMU) and the conditions (the Maastricht criteria), the European Union could now move 
forward . Stage two of EMU began in July 1994 and lasted until the introduction of the single currency in 1999 . Within 
stage two a wide variety of preparatory activities were initiated .  

Between 1994  
and 1998, EU countries 
made significant 
progress in economic 
policy convergence and 
took steps to align their 
budgetary positions with 
the Maastricht criteria . 

1994

1995

1996

1997

1998

The European Monetary Institute (EMI) was established 
in Frankfurt in 1994. The forerunner of the ECB, the EMI 
began to coordinate monetary policy among the national 
central banks, which the Maastricht Treaty required to 
be independent, as well as working on the details of the 
single currency. 

The 1995 Madrid European Council agreed on the name 
for the new currency — the euro — and set out the 
scenario for the transition to the single currency that 
would start on 1 January 1999.

In 1996, the EMI presented the winning designs for the 
euro banknotes. The coins followed shortly afterwards, 
all coins bearing a common European side, chosen by the 
public and confirmed by the 1997 Amsterdam Council, and 
a national side, the designs for which were chosen by each 
participating Member State individually. 

The 1997 Amsterdam European Council agreed the rules 
and responsibilities of the Stability and Growth Pact (SGP) 
that aims to ensure budgetary discipline under EMU. The 
European Commission was given the key responsibility of 
monitoring adherence to the SGP.

In May 1998, 11 EU countries met the convergence 
criteria and thus formed the first wave of entrants who 
would go on to adopt the euro as their single currency. 
Denmark and the United Kingdom had ‘opted out’ from 
participating in the third stage of EMU, while Greece 
and Sweden did not fulfil all the criteria. The ECB and 
the European System of Central Banks (ESCB) were 
established in 1998, replacing the EMI, and on 1 January 
1999 the third stage of EMU began. 

7

ONE CURRENCY FOR ONE EUROPE  The road to the euro1999 > 2002 

The euro is launched

On 31 December 1998, the conversion rates between the 
euro and the currencies of the participating EU countries 
were irrevocably fixed . On 1 January 1999, the euro was 
introduced and the Eurosystem, composed of the ECB 
and  the  national  central  banks  (NCBs)  of  the  euro  area 
countries, took over responsibility for monetary policy in 
the  new  euro  area .  This  was  the  beginning  of  a  transi-
tional period that was to last three years and end with 
the  introduction  of  euro  banknotes  and  coins  and  the 
withdrawal  of  national  banknotes  and  coins .  In  2000, 
the Council decided, on the basis of a proposal by the 
Commission  and  after  consultation  of  the  European 
 Parliament,  that  Greece  fulfilled  the  necessary  con-
ditions  for  the  adoption  of  the  single  currency,  and  the 
country joined the euro area on 1 January 2001 .

While the euro replaced national currencies immediate-
ly,  with  the  national  currency  units  becoming  sub-units 
of the euro, it initially existed only as scriptural or ‘book’ 
money . National currency banknotes and coins remained 
the  means  of  everyday  cash  transactions .  During  the 
transitional  period  it  was  the  world  of  business  and  fi-
nance that began to use the euro in their everyday cash-
less operations . For the financial markets this transition 
happened immediately — the ground was well prepared 
and trading in financial markets was exclusively in  euros . 
For administrations and business there was a longer tran-
sition period as they gradually switched their  systems for 

Rates posted in euros
at an automatic distributor

accounting,  pricing  and  pay-
ments over to the euro . For cit-
izens  the  most  visible  part  of 
the  transition  was  the  appear-
ance of dual pricing on labels in 
shops  and  petrol  stations,  etc . 
This  was  part  of  an  extensive 
publicity  campaign  to  familiar-
ise  the  general  public  with  the 
euro  and  the  coming  introduc-
tion of banknotes and coins .

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A new year and a new currency

On  1  January  2002,  the  greatest  cash  changeover  in 
history took place . It was a challenge of unprecedented 
dimensions  that  involved  the  banking  sector,  cash-in-
transit companies, retailers, the cash-operated machine 
industry,  and  the  general  public .  Around  €144  billion  in 
euro  cash  was  provided  early  by  the  national  central 
banks to banks (frontloading) and by these banks to re-
tailers (sub-frontloading) to avoid bottlenecks in the sup-
ply chain . This meant that euro cash was widely available 
in all sectors in the first days of 2002 . By 3 January 2002, 
96 % of all automated teller machines (ATMs) in the euro 
area  were  dispensing  euro  banknotes .  And  already  one 
week  after  the  introduction  more  than  half  of  all  cash 
transactions were being  conducted in euros . 

Total value of euro banknotes in  circulation between January 2002 and January 2014 (billion EUR)

1 000 
900 
800 
700 
600 
500 
400 
300 
200 
100 
0 
2002  2003  2004  2005  2006  2007  2008  2009  2010  2011  2012  2013  2014 

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8

ONE CURRENCY FOR ONE EUROPE  The road to the euro 
 
 
The cash changeover was completed within two months . 
National banknotes and coins ceased to be legal tender 
by  the  end  of  February  2002  at  the  latest,  and  earlier 
in  some  euro  area  countries .  By  that  time,  more  than  
6 billion banknotes and close to 30 billion national coins 
had been withdrawn, and for over 300 million citizens in 
12 EU countries the euro had finally arrived .

the course of the economic and financial crisis, the EU has 
strengthened EMU with  stricter rules, an additional mech-
anism to monitor macroeconomic imbalances as well as 
an assessment of draft budgets of euro area countries . 
Additional  agreements  between  a  large  number  of  EU 
countries underpin and complement this . 

Monetary policy

Managing economic  
and monetary union

Like the single market, EMU is not an end in itself . It is 
an instrument to further the objectives of the European 
 Union — in particular, balanced and sustainable econom-
ic growth and high employment . The operations and insti-
tutions of EMU were designed from the outset to support 
these objectives through the management of the mon-
etary  and  economic  aspects  of  the  euro  area .  Drawing 
lessons  from  shortcomings  which  became  apparent  in 

The euro area has one currency with one monetary policy 
and independent, centralised decisionmaking .

The ECB and the central banks of all EU countries form 
the European System of Central Banks (ESCB) . Within the 
ESCB,  the  ECB  and  the  central  banks  of  the  euro  area 
countries  form  the  Eurosystem .  Decisions  on  monetary 
policy  in  the  euro  area  can  only  be  taken  by  the  Gov-
erning Council of the ECB, which comprises the governors 
of the national central banks of those EU countries that 
have adopted the euro and the members of the Executive 
Board of the ECB . The Governing Council of the ECB is its 
supreme decisionmaking body .

The ESCB and  
the Eurosystem

The primary objective of the ECB is to 
maintain price stability within the euro area  
as this provides the best framework for 
growth and employment. Price stability is 
notably maintained by the ESCB controlling 
interest rates and influencing markets.

Status as of 1 January 2015

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European Central Bank (ECB)
Executive Board

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Nationale Bank van België/  
Banque Nationale de 
Belgique

Deutsche Bundesbank

Eesti Pank

Central Bank and Financial  
Services Authority of Ireland 

Bank of Greece

Banco de España

Banque de France

Banca d’Italia

Central Bank of Cyprus

Latvijas Banka

Lietuvos bankas

Banque centrale du 
Luxembourg

Central Bank of Malta

De Nederlandsche Bank

Oesterreichische 
Nationalbank

Banco de Portugal

Banka Slovenije

Národná banka Slovenska

Suomen Pankki — Finlands 
Bank

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Bulgarian National Bank

Hrvatska narodna banka

Česká národní banka

Magyar Nemzeti Bank

Danmarks Nationalbank

Narodowy Bank Polski

Banca Naţională 
a României

Sveriges Riksbank

Bank of England

9

Total value of euro banknotes in  circulation between January 2002 and January 2014 (billion EUR)

ONE CURRENCY FOR ONE EUROPE  The road to the euro 
 
 
 
 
 
 
Economic policy

The  responsibility  for  euro  area  economic  policy  remains 
largely with the EU countries, although the EU treaties and 
strengthened EU economic governance rules require them 
to coordinate their economic policymaking with a view to 
achieving  the  objectives  of  the  EU .  This  coordination  is 
ensured through the  Commission and the  Ecofin Council, 
which  comprises  the  ministers  for  economy  and  finance 
of the EU countries . There are a number of structures and 

The Eurogroup

This is an informal grouping of the ministers of economy 
and finance of those EU countries that are in the euro 
area, which elects its own president who serves a term of 
two and a half years. The Commission and the ECB also 
take part in Eurogroup meetings. The Eurogroup is a 
forum for discussing euro area-related issues and policy 
coordination. 

The Stability and Growth Pact 

With its emphasis on surveillance of EU countries’ 
fiscal policies and public finances, the SGP, recently 
strengthened with stricter rules, aims to promote fiscal 
discipline within EMU and ensure sound government 
finances. The Commission monitors developments 
of government deficits and debt, which the treaties 
require to be less than 3 % and less than 60 % of GDP, 
respectively. If either of these limits is breached, the 
Council on the basis of a Commission recommendation 
can initiate an excessive deficit procedure against the 
EU country concerned. If no corrective action is taken on 
time, euro area countries can face financial sanctions. 

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Justus Lipsius building of the Council in Brussels

10

instruments that help coordination . On most economic pol-
icy issues, the European Parliament co-legislates with the 
Council and thus  actively  contributes to the formulation of 
EU rules . 

The European semester 

In the first six months each year, a period of policy 
discussion and coordination at EU level increases policy 
transparency between EU countries because it ensures 
that all national policies are analysed and assessed 
together before governments draw up their draft 
budgets. The commonly agreed policies can then be 
implemented in each EU country in the second half of 
each year.

The macroeconomic imbalance 
procedure 

The aim of the new procedure is to avoid and 
correct serious gaps in competitiveness and major 
macroeconomic imbalances in EU countries. Examples of 
imbalances are a country’s deteriorating export market 
shares, a high level of private sector indebtedness, or 
risky asset price bubbles. A number of such problems 
were building up in the past decade and could have 
negative spill-over effects on other EU countries if 
nothing were done to tackle them. The Commission 
screens EU countries based on a scoreboard of 
macroeconomic indicators and other detailed 
information. This allows the Commission and the Council 
to make recommendations to the concerned EU country 
at an early stage before imbalances become larger and 
harmful. In more serious cases, corrective measures are 
needed and are backed up by strict rules in the form of 
a new excessive imbalance procedure. This also foresees 
better enforcement through financial sanctions for  euro 
area countries that do not follow recommendations.

ONE CURRENCY FOR ONE EUROPE  The road to the euro 
 
 
Looking forward to euro area enlargement

Scenarios for 
 adoption of the euro

1. Madrid scenario

Adoption  
of the euro  
1.1.1999

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Euro day: cash 
 changeover 
1.1.2002

3.5.1998  
Council  
decision

28.2.2002 
End of dual  
circulation

2. Big bang scenario

Adoption of the euro  
Euro day: cash changeover

Council 
 decision

End of  
dual  
circulation

The  EU  countries  that  joined  the  EU  after  the  introduc-
tion  of  the  euro  are  part  of  EMU  —  which  means  that 
they  coordinate  their  economic  policymaking  with  the 
other EU countries and that their central banks are part 
of the ESCB . However, as they did not join the euro area 
immediately on accession, their official status until they 
adopt the single currency is ‘Member States with a dero-
gation’ . This status is granted by the Act of Accession and 
obliges them to become full  members of the euro area 
eventually .  The  new  EU  countries  did  not  join  the  euro 
area  immediately  upon  accession  because  they  did  not 
meet  the  convergence  criteria .  The  Treaty  of  Accession 
therefore allows them time to undertake the adjustments 
needed to achieve convergence . The first of the new EU 
countries to join the euro area was Slovenia in 2007, fol-
lowed  by  Cyprus  and  Malta  in  2008,  Slovakia  in  2009, 
Estonia in 2011, Latvia in 2014 and Lithuania in 2015 .

The need for convergence 

The convergence criteria — the Maastricht criteria — are 
the  economic  targets  and  institutional  changes  that  a 
country must achieve before adopting the single currency 
and entering the euro area . The macroeconomic indica-
tors shown in Table 1 (page 6) are used as a measure of 
convergence .

Scenarios for adoption

While countries that want to join the euro area have to 
meet the convergence criteria, the actual process of in-
troducing the euro may differ among later entrants . When 
the euro area was created, the founding EU countries had 
a  three-year  transitional  period  between  adopting  the 
euro as ‘book money’ for non-cash transactions in 1999 
and the introduction of euro cash in 2002 . In this ‘Madrid 
scenario’, as it is called, a three-year transitional period 
allowed individuals and  businesses to prepare for the sin-
gle  currency  before  it  appeared  in  their  pockets .  During 
this transitional period, they still used their national cur-
rency for cash transactions . However, for all subsequent 
EU  countries  of  the  euro  area,  the  applied  scenario  is 
called ‘Big bang scenario’ whereby they adopt euro cash 
immediately  upon  entering  the  euro  area  and  quickly 
withdraw their national currencies from circulation . 

11

ONE CURRENCY FOR ONE EUROPE  The road to the euro 
Euro area       

EU Member States 
with an opt-out

EU Member States that have 
not yet adopted the euro 

The euro area

Sweden 

Finland 

Dublin 

Ireland 

United 
Kingdom 

London 

Denmark 

Copenhagen 

Nether-
lands 

Amsterdam 

Berlin 

Brussels 

Germany 

Belgium 

Luxembourg 
Luxembourg 

Paris 

Stockholm 

Helsinki 

Tallinn 
Estonia 

Latvia 

Riga 

Lithuania 
Vilnius 

Warsaw 

Poland 

Prague 

Czech 
Republic 

Vienna 
Austria 

Slovakia

Bratislava 

Budapest 

Hungary 

Romania

France 

Portugal 

Lisbon 

Madrid 

Spain 

Madeira (PT) 

Canary Islands  
(ES) 

Saint Martin (FR) 

Azores (PT) 

French 
Guiana 
    (FR) 

Guadeloupe 
(FR) 

Martinique 
(FR) 

Réunion
(FR)

Saint Barthélemy 
(FR) 

Mayotte (FR) 

Bucharest 

Bulgaria

Sofia 

Greece 

Athens 

Slovenia 

Ljubljana 

Zagreb

Croatia

Italy 

Rome 

Valletta 

Malta 

Cyprus 

Nicosia

The euro area

Achievements so far

Sound institutions for a sound economy

Despite the problems which have become apparent dur-
ing  the  economic  and  financial  crisis,  the  institutional 
framework  for  managing  EMU  has  proved  a  clear  suc-
cess and reflects the strong commitment of the euro area 
countries  to  further  strengthen  economic  governance 
where  necessary  and  cooperate  on  economic  issues  of 
‘common concern’ . This cooperation is vital for the growth 
and jobs — and rising living  standards — that the single 
market and EMU support . 

Single  countries,  such  as  the  United  States  and  Japan, 
have  a  centralised  monetary  policy  and  a  centralised 
fiscal   policy  operated  by  a  single  government .  In  the 
euro  area,  things  are  different .  While  the  euro  area  has 
a  centralised  independent  monetary  policy  operated  by 
the  ECB,  fiscal  policy,  which  deals  with  the  income  and 
expenditure side of national budgets, is the responsibility 
of national governments, though subject to a number of 
rules at EU level . Therefore, the cooperation and coordi-
nation between euro area countries on matters of fiscal 
policy is the key element that drives economic and mon-
etary union . 

EMU is built on several strong groupings  
that have  together proved successful in managing 
its operations

•  The European 
Parliament is also 
involved in the governance of 
EMU, mainly via the obligation 
for the ECB President to report to it 
regularly and in person. This is known 
as the ‘monetary dialogue’. The 
Commissioner for Economic and 
Monetary Affairs also reports to it. 
And it must be consulted on any 
decision to admit a new country to the 
euro area, as well as appointments to 
the ECB Executive Board. 

•  The European System of Central Banks brings 
together the central banks of all EU countries. The 
Eurosystem is the ECB plus the national central banks 
of those EU countries that have adopted the euro. The 
ECB determines monetary policy with a clear mission to 
ensure price stability.

•  The European Commission, through its Commissioner 
and Directorate- General for Economic and Financial 
Affairs, monitors and assesses the economic situation in 
the EU countries and makes recommendations.

•  The Council, in its Economic and Financial Affairs 

configuration (Ecofin Council), is where the government 
ministers for economy and finance from the EU 
countries meet to define broad economic guidelines 
and take decisions on recommendations from the 
Commission, which also takes part in the meetings. 
Ministers from the euro area meet as the Eurogroup — 
an informal grouping in which the Commission and the 
ECB participate.

13

ONE CURRENCY FOR ONE EUROPE  The road to the euroEconomic stability — a benefit for all

The currency turbulence and high inflation during much of 
the 1970s and 80s brought difficulties and uncertainty to 
many . However, during the build-up to economic and mon-
etary union, inflation fell substantially . Subsequently, infla-

tion has been kept at low levels . The ECB’s primary mission 
is to control price inflation at an annual level of below, but 
close to, 2 % inflation over the medium term . The historical 
development of inflation is shown in the graph below .

Inflation convergence: euro area 19 (annual % increase)

30

25

20

15

10

5

0

-5

5
6
9
1

0
7
9
1

5
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1

0
8
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1

5
8
9
1

0
9
9
1

5
9
9
1

0
0
0
2

5
0
0
2

0
1
0
2

 .

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DE 
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IE 
EL 
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FR 
IT 
CY 
LV 
LT 
LU 
MT 
NL 
AT 
PT
SI
SK
FI
ECB target

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,

The advantages that low inflation and stable prices bring are  
many and benefit both businesses and consumers. 

•  Consumer borrowing is less expensive and future 

repayments less uncertain. So, ordinary citizens can 
borrow more safely, for example to buy a house or a 
car, with more certainty about the future repayment 
levels.

•  Businesses have more incentives for investment. When 
inflation is high and volatile, lenders build in a safety 
margin to the interest rate, a so-called risk premium. 

With low, stable inflation these safety margins are no 
longer necessary, so money is released for businesses 
to invest more — benefiting growth and jobs.

•  Society, social cohesion and the less well-off all benefit. 
Volatile changes in inflation increase the gap between 
the richer and poorer sections of society. With stable 
inflation, the less well-off are better protected against 
erosion of their wealth and purchasing power.

Mortgage rates in four euro area countries

20

15

10

5

0
1
9
9
1

14

DE
ES
NL
FI

 .

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9
1

3
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1

4
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1

5
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1

6
9
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1

7
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1

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0
0
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1
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2

2
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2

3
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2

4
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5
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0
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2

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0
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2

9
0
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2

0
1
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2

1
1
0
2

2
1
0
2

3
1
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2

4
1
0
2

ONE CURRENCY FOR ONE EUROPE  The road to the euro 
 
 
 
 
 
The single currency — a complement to the single market

Dealing with multiple currencies entails costs and makes 
price comparisons difficult, even within the single mar-
ket . The single currency — the euro — removes these 
disadvantages  and  brings  benefits  to  both   consumers 
and businesses .

•  The costs of exchanging money at borders, so-called 
transaction costs, have disappeared in the euro area . 
This reduces the costs for travellers, whether for busi-
ness, study or vacation . Previously, an individual with 
1 000  Deutschmarks  in  his  or  her  pocket,  who  trav-
elled through 15 EU countries, changing money in each 
one,  would  have  less  than  500  marks  left  on  return-
ing home — without having made a single purchase . 

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 Today, someone starting out with €1 000 would return 
home with the same amount in his or her pocket .

•  The euro brings price transparency to the single mar-
ket .  Consumers  and  businesses  can  easily  compare 
prices for goods and services across the EU . This has 
the effect of increasing competition among suppliers 
and keeping downward pressure on prices in the euro 
area .  This  transparency  is  supported  by  low,   stable 
price inflation because changes in relative prices can 
be  more  easily  identified .  Competition  is  further  in-
creased by the growth of e-commerce over the inter-
net, which allows easy cross-border price comparisons .

•  Transaction costs can be very large – before the adop-
tion of the euro they were estimated at 0 .3 % to 0 .4 % 
of  GDP  in  the  EU,  i .e .  €20–25  billion .  Companies  in-
curred a large part of these costs as they transferred 
goods,   people  and  capital  around  the  EU .  With  the 
disappearance  of  transaction  costs  within  the  euro 
area,  this  money  is  now  available  for  productive  in-
vestments  in  growth  and  jobs,  and  intra-EU  trade  is 
encouraged . Further, removing transaction costs within 
the single market makes the euro area attractive for 
foreign  investment .

15

ONE CURRENCY FOR ONE EUROPE  The road to the euro 
 
 
 
The international role of the euro

The euro is a strong international currency . Backed by the commitment of the euro area countries, the strong and visible 
management of monetary policy by the ECB, and the size and power of the euro area as a bloc, the euro has become 
an attractive world currency like the US dollar or the Japanese yen . Table 2 compares some major economic indicators 
of the euro area and the EU with the USA, Japan and China .

Table 2 

Key indicators (2013)

Euro area (19)

EU (28)

Population (millions)

GDP (in € trillions calculated 
at purchasing power parity)

Share of world GDP (% at PPP)

Exports (goods as % of GDP)

Imports (goods as % of GDP)

338 .6

8 .1

13 .1

13 .6(*)

13 .1(*)

508 .4

11 .4

18 .7

13 .3(*)

12 .9(*)

(*) Excluding intra-EU trade . 
Source: European Commission AMECO, IMF WEO and IMF DOTS . 

USA

316 .5

11 .8

19 .3

9 .4

13 .9

Japan

127 .3

3 .3

5 .4

14 .8

17

China

1 360 .7

9 .4

15 .4

23 .4

20 .6

Cooperation  and  Development  (OECD)  and  the  World 
Bank .  While  the  EU  countries  are  often  directly  repre-
sented on these bodies, the Ecofin Council, the Commis-
sion, and the ECB take part separately, 
or as part of an EU delegation, in 
relevant meetings of these 
international  organisa-

tions .

As the table shows, the euro area is a strong and open 
trading bloc . This openness, combined with the strength 
of the euro under EMU, brings  several advantages .

•  As the world’s largest trading power, the euro area is an 

attractive  destination  for  trading  nations  which 
want to do business within the single mar-
ket . Euro area businesses can invoice and 
pay in euros, which reduces their costs 
and  risk  and  allows  better   business 
planning .

•  The  euro  is  an  attractive  reserve 
currency for other countries . Around 
25 %  of  worldwide  reserves  are 
now held in euros .

•  The  strength  of  the  euro  and  its 

increasing  use  in  international  trade 
gives  the  euro  area  a  strong  voice  in 
international  financial 
organisations, such as the International Mon-
etary  Fund  (IMF),  the  Organisation  for  Economic 

institutions  and 

16

ONE CURRENCY FOR ONE EUROPE  The road to the euroThe euro in numbers

Around 14 billion euro banknotes, worth €633 billion, and 52 billion euro coins — using 250 000 tonnes of metal — were 
produced in preparation for the euro launch . Around 7 .8 billion banknotes worth €140 billion were available in the euro 
area on the morning of 1 January 2002 when euro cash was launched . Since then, demand has grown continuously, 
as the graph below shows  (the peaks in the growth are due to extra demand for banknotes around the Christmas  period) . 

Total number of euro banknotes in circulation
between January 2002 and January 2014 (billion banknotes)

17 
16 
15 
14 
13 
12 
11 
10 
9 
8 
7 
2002  2003  2004  2005  2006  2007  2008  2009  2010  2011  2012  2013  2014 

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 .

By January 2014, there were over 15 .7 billion euro bank-
notes in circulation with a value of over €930 billion and 
more than 105 .9 billion euro coins with a value of more 
than  €24  billion .  The  notes  can  be  withdrawn  from  all 
ATMs in the euro area .

The ECB has the exclusive right to authorise the issuance 
of  euro  banknotes .  Their  production  is  shared  between 
the national central banks . Euro coins are issued by the 
EU  countries  of  the  euro  area  in  volumes  approved  by 
the ECB . 

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ONE CURRENCY FOR ONE EUROPE  The road to the euro 
 
 
 
 
 
 
The euro in pictures

Euro banknotes all have the same designs 

These  were  chosen  through  a  competition  organised 
throughout  the  EU .  The  winning  designs  were  inspired 
by the theme ‘the ages and styles of Europe’ and depict 
architectural  styles  from  seven  periods  of  Europe’s  cul-
tural history: Classical, Romanesque, Gothic, Renaissance, 

 Baroque and Rococo, the age of iron and glass, and mod-
ern  architecture .  All  depict  elements  such  as  windows, 
gateways  and  bridges .  Banknotes  have  different  sizes, 
striking colours and raised areas on the surface that help 
the partially sighted recognise the denominations .

Security features

Both euro banknotes and coins have advanced 
security features to fight counterfeiting. A ‘raised’ 
print gives a special feel to banknotes, which also 
have watermarks, security threads and holograms 
visible from both sides. Unique metal compositions 
and machine-readable features protect the coins. 

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The ECB website presents an animation
to show the security features:
www .new-euro-banknotes .eu/

18

ONE CURRENCY FOR ONE EUROPE  The road to the euro 
Euro coins have  
different designs

Euro coins have a common design on one side, 
and a country-specific design on the reverse . 
Each euro area member chooses its own se-
ries of designs, reflecting its specific history or 
culture  —  often  selected  by  competition .  As 
well as the euro area countries, Monaco, San 
Marino,  the  Vatican  City,  and  Andorra  have 
permission  to  produce  euro  coins .  The  com-
mon  designs  show  a  map  of  Europe,  which, 
in  the  case  of  the  larger  denominations,  dif-
fers depending on when the coin was issued 
(the older coins show the EU before 2004; the 
newer  ones,  introduced  from  2007  onwards, 
show  the  whole  of  Europe  to  reflect  the  en-
largement of the  Union) .

This page shows the 5 cent, 50 cent, €1 and 
€2 coins of each euro area Member State. 
A complete set of all the euro coins  
can be seen at: www.ec.europa.eu/euro

Common side

Belgium

Lithuania

Germany

Luxembourg

Estonia

Malta

Ireland

Greece

Spain

France

Italy

Cyprus

Latvia

Netherlands

Austria

Portugal

Slovenia

Slovakia

Finland

Special designs for special events

Common commemorative designs

Each Member State of the euro area can is-
sue a €2 commemorative coin twice a year . 
These coins have the same features and 
properties and the same common side as 
normal €2 coins . What makes them dif-
ferent  is  their  commemorative  design  on 

the  national side . 

On  the  occasion  of  three  anniversaries,  all  euro  area 
countries issued a €2 coin with the same design on their 
national sides: 50 years of the Treaty of Rome, 10 years 
of EMU, and 10 years of euro  banknotes and coins . 

19

ONE CURRENCY FOR ONE EUROPE  The road to the euroGlossary

Bretton Woods: This was a system of international 
monetary management agreed in 1944 between the 
world’s major industrial powers . It required the signatories 
to link their currencies to the price of gold and thus support 
 international monetary stability .

Central bank: A national bank that manages a country’s 
money reserves and controls the physical supply of money .

The Council (Council of the European Union): 
Comprises the representatives of the governments of 
the EU countries . It is the decision-making body of the 
European Union . Government representatives meet in 
different Council configurations; for instance the government 
ministers responsible for environmental matters meet in the 
 Environment Council .

Ecofin: The Council of the European Union in its 
configuration comprising the ministers for economy and 
finance of EU countries .

EC Treaty: See Treaty of Rome .

EU economic governance rules: A set of EU rules which 
strengthen the Stability and Growth Pact and set up the 
macroeconomic imbalance procedure . 

Eurogroup: The ministers for economics and finance of the 
euro area countries .

European Central Bank (ECB): The central bank for the 
euro area . The ECB independently manages the monetary 
policy of the euro area .

European Commission: The European Commission is one 
of the main institutions of the European Union . It represents 
and upholds the interests of the EU as a whole . It drafts 
proposals for new European laws . It manages the day-to-day 
business of implementing EU policies and spending EU funds .

European Council: Meetings of the Heads of State or 
Government of the EU countries and the President of the 
European Commission .

European Monetary System (EMS): A system for 
managing currency fluctuations, put in place by the European 
Community in 1979 to replace the ‘snake in the tunnel’ .

European Parliament: With members from all EU countries, 
directly elected by EU citizens, Parliament shares responsibility 
with the Council for passing European laws, though with 
varying powers in different fields of activity . In EMU, it helps 
shape both legislation and the broader policy debate through 
its Committee on Economic and Monetary Affairs . 

European System of Central Banks (ESCB): 
Comprises the central banks of the EU and the ECB .

Eurosystem: Part of the ESCB that consists of the central 
banks of the euro area and the ECB .

20

Exchange rate mechanism (ERM): A feature of the 
European Monetary System, whereby EMS members agreed 
to maintain the relative prices of their currencies within 
narrow limits against the ECU . The ERM was replaced when 
the euro was introduced in 1999 by ERM II, whereby the 
currencies of EU countries are linked to the euro  within a 
fluctuation band of ± 15 % . 

Fiscal policy: Concerns the management of government 
revenues (e .g . taxation) and expenditure (e .g . spending on 
healthcare) .

Maastricht Treaty (Treaty on European Union): 
Signed in 1992 in the Dutch city of Maastricht between the 
Member States of the European Community, the Maastricht 
Treaty expanded the remit of the European Community, 
turning it into the European Union, and led to the creation of 
EMU and the euro .

Monetary policy: Concerns managing the supply of 
money in an economy, for example by printing money or 
 setting interest rates .

Single market: A customs union where there are 
common policies on the freedom of movement of capital, 
goods, labour and services . A single market is similar to 
a common market but has more emphasis on removing 
trade barriers such as technical standards and taxes — it 
is more ‘harmonised’ . The EU was a common market at 
first, and with the Maastricht Treaty in 1992 it became a 
single market .

Snake in the tunnel: A mechanism to manage currency 
fluctuations against the US dollar, put in place by the 
European Community in 1972 . ‘Snake’ refers to the 
currencies while ‘tunnel’ refers to the US dollar .

Treaty of Rome (Treaty establishing the European 
Economic Community): Signed in 1957 in Rome, this 
treaty established the European Economic Community, the 
forerunner of the European Community . It was renamed 
‘treaty establishing the European Community’ (EC Treaty) by 
the Maastricht Treaty .

Neither the European Commission nor any person acting on behalf 
of the Commission is responsible for the use which might be made 
of the following information .

More information on the European Union is available on the Internet 
(http://europa .eu) .

Luxembourg: Publications Office of the European Union, 2015

ISBN  978-92-79-42963-7 
doi:10 .2765/96604 

© European Union, 2015 
Reproduction is authorised provided the source is acknowledged .

Printed in Italy

Printed on elemental chlorine-free bleached paper (ECF)

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Freephone number (*):
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(*)   The information given is free, as are most calls (though 
some operators, phone boxes or hotels may charge you) .

European Commission Directorate-General  
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www .ec .europa .eu/economy_finance/

Eurostat — The Statistical Office  
of the European Communities 
http://ec .europa .eu/eurostat/

The European Central Bank 
www .ecb .eu

The European Commission
www .ec .europa .eu

The euro 
www .ec .europa .eu/euro

 
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http://ec.europa.eu/economy_finance/

History was made on 1 January 1999 when 11 European Union countries created 
a monetary union with a single currency, the euro . 

Euro banknotes and coins entered circulation on 1 January 2002 . But the history of 
Europe’s common currency has been a long time in the making and can be charted 
back to the origins of the European Union itself . Fifty years after the Treaty of 
Rome laid the foundations of today’s EU, and based on a comprehensive reform  
of the economic and monetary union, the euro is the most visible symbol of  
European integration .

The historic adventure of the euro is described in this booklet,  
available from the European Commission at  
www.ec.europa.eu/economy_finance/publications/general

ISBN 978-92-79-42963-7
doi:10.2765/96604