When in Germany...
The story of the euro (€)
On January 1, 2002, twelve European Union countries, including Austria and Germany, put a brand new currency into circulation: the euro. Average Germans were not so sure they really wanted to give up their strong Deutsche Mark for this untested new money. The Austrians were also rather fond of their Schilling. But it was auf Wiedersehen to the old and in with the new.
In an effort to strengthen the European economy and eliminate intra-European trade barriers, the Council of Europe (Europäischer Rat) had met in Madrid in December 1995. The old ECU unit (created in 1979) was renamed the “euro,” a term that seemed to work well in all of the languages in the EU — and the new name was free of any lexical connection to existing national currencies.
The attractive euro banknotes were designed by an Austrian — on a Mac! The shiny new coins were designed by a Belgian. The euro symbol (€) was created by a German. Learn more on our Euro Timeline page.
How much is a euro worth today?
Over the three-year period of 1999 through 2001, the citizens of euro-countries were supposed to get used to the idea of the new money’s arrival, while government and business prepared to put it into circulation. Technically, the mark and other European currencies were just tandem partners to the euro, the true legal tender in all of the euro zone nations.
On January 1, 1999, its first official day of “cashless” trading in Sydney, Australia (the international date line and all that), the euro debuted at 1.1747 US dollars (USD), a positive sign to those who saw the euro as serious competition for the dominant world currency, the dollar. But the euro exchange rate later plunged below a dollar, reaching a record low of $0.827 in mid-2001. Supporters claimed the euro would gain strength once it finally got into the hands of consumers as spendable cash, and by mid-2004 it had indeed climbed to around $1.20 USD, also reflecting weakness in the dollar. By the end of 2007 the currency had reached record highs against the dollar: one euro cost over US$1.44. During 2008 the euro peaked at around US$1.60 before the mortgage crisis in the United States threw a monkey wrench into the world economy. By March 2009, the euro had fallen back almost to 2004 levels, in the US$1.27 range, but by September 2009, the euro was again climbing close to US$1.50.
In early 2010, it was discovered that Greece had been cooking its books and was in serious financial trouble, forcing other euro-zone countries to deal with a possible national bankruptcy. Several other EU members (Italy, Portugal, Spain) had troubled economies suffering from the worldwide recession. By mid-February 2010 the euro had dropped to an exchange rate of around US$1.36.
In January 2007 Slovenia became the first country to join die Eurozone since the euro’s 2002 debut, raising the number of countries using the euro from 12 to 13. On the first day of 2008 two more EU countries began using the euro: Cyprus and Malta, making the total 15. Slovakia made it 16 in 2009. (In the meantime, the EU had also expanded from 15 to 27 members.)
On January 1, 2011, Estonia became the latest country to become part of the euro zone, bringing the total to 17 nations using the euro. Because Ireland had recently joined Greece in its need for financial rescue in late 2010, most observers felt that Estonia might be the last to come on board for some time. The euro is in a crisis caused by its inability to coordinate economic policy for 17 different national economies. Apparently, a few countries have been using the euro to cover up domestic fiscal mismanagement. When they could no longer hide that fact, the rest of the euro zone had to bail them out in order to protect the currency. Greece, in particular, became a major problem for the euro zone in the fall of 2011, with Italy’s high cost of borrowing a close second.
However the dollar had its own problems, as the national debt of the United States was soaring due to the ongoing “Great Recession,” high unemployment and a do-nothing Congress. Meanwhile, the Swiss Franc (CHF), at about $1.07 USD, was soaring to new heights. But the Swiss, worried that such a high franc value was hurting Swiss exports and the Swiss economy, took steps to bring down its value compared to the euro and the US dollar.
The euro crisis remained largely unsolved in the closing months of 2011. The uncertainty seems likely to continue in 2012.
Next, see our Euro Timeline and the detailed story of the euro.
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