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3 January 2023

Monetary union

Approximately 347 million people in 20 EU countries use the euro as legal tender. The single currency is the most far-reaching outcome of European integration to date and benefits citizens, companies and EU member states.

#EuroABC – Monetary union

A monetary union is in place when several countries or regions have a single currency and follow a common monetary policy. The EU’s monetary union aims to achieve the common goals of maintaining price stability and introducing the euro in EU member states.

One currency, 20 countries

One euro, please: The majority of people in the EU use the euro to pay for their purchases, whether they’re in Athens to Riga or Malta. Twenty member states have already introduced the currency and more are expected to follow. Such an expansion of the eurozone would allow even more people in the EU to avoid foreign exchange fees and having to calculate the exchange rate, for example when they travel abroad on holiday. Meanwhile, businesses would face fewer foreign exchange risks.

The single currency was launched in 1999 as an ‘invisible’ currency, which was used only for accounting purposes and electronic payments. It was first introduced in 11 member states: Germany, France, Italy, Belgium, the Netherlands, Luxembourg, Spain, Portugal, Ireland, Austria and Finland. Two years later, Greece joined, too. On 1 January 2002, these 12 EU countries introduced coins and banknotes for the euro. Since then, Slovenia (2007), Malta and Cyprus (2008), Slovakia (2009), Estonia (2011), Latvia (2014), Lithuania (2015) and Croatia (2023) have joined the eurozone, which now comprises 20 countries.

In principle, the intention is for all EU member states to introduce the euro. However, to do so, they must meet certain requirements, the so-called Maastricht criteria:

  • Price stability: The rate of inflation must not exceed a critical value.
  • Budget requirements: If a state’s debts are too high, this could put a strain on the euro.
  • Exchange-rate stability: Before a country can introduce the euro, it must successfully complete a kind of trial phase, during which its currency is pegged to the euro.
  • Similar interest rates: The candidate country’s long-term interest rates must not be too high.

These criteria are all designed to ensure the stable economic development of the countries joining the eurozone and to avoid tensions once the euro is introduced.

One currency, many advantages

The single currency is the strongest symbol of European unity, well beyond the borders of Europe. Next to its symbolic impact, the euro has a range of benefits. By dismantling trade barriers and reducing transaction costs, the single currency promotes the core EU mandate of providing a single European market, which in turn encourages growth and employment. Finally, the euro also develops a stronger union, since a common monetary policy requires close cooperation among the participating member states in all areas of economic and financial policymaking.

#EuropeCounts

  • 20 EU member states have introduced the euro as their official currency to date.
  • Approximately 347 million people in the EU use the euro as legal tender – from Austria to Spain.
  • Around 40 percent of all German exports go to other eurozone countries.