How the euro was created

The euro did not appear suddenly with the banknotes of 2002. It resulted from decades of monetary cooperation, political agreements, economic criteria, and technical preparation.

The currency began to exist legally and in financial markets on January 1, 1999. Cash arrived three years later.

Before the euro

European countries used national currencies such as the Spanish peseta, French franc, German mark, Italian lira, and Dutch guilder.

Trade among them required currency conversion and exposure to changing exchange rates. Devaluations and European currency crises could change competitive conditions and complicate the common market.

Coordination mechanisms developed from the 1970s, including the currency snake and the European Monetary System. They tried to limit movements among currencies, although both experienced pressure and realignments.

The economic and monetary union project

In 1988, the European Council asked a committee chaired by Jacques Delors to study a path toward economic and monetary union.

The report proposed three stages:

Greater integration and free capital movement.
Creation of common monetary institutions.
Introduction of one currency and a common monetary policy.

The Maastricht Treaty, signed in 1992, provided the legal basis. It set convergence criteria related to inflation, public finances, interest rates, and exchange-rate stability.

The name and institutions

European leaders agreed on the name euro in 1995.

The European Monetary Institute prepared the technical and institutional framework. The European Central Bank was established in 1998. It became responsible for monetary policy in the future euro area with the national central banks.

The project also required banknote design, production of billions of banknotes and coins, and changes to automated teller machines, accounting, contracts, and information systems.

January 1, 1999: the euro already exists

The euro launched in 11 countries on January 1, 1999.

From that date:

Conversion rates for participating currencies became irrevocably fixed.
Monetary policy moved to the Eurosystem.
The euro was used in financial markets, electronic payments, and accounting.
National banknotes and coins continued to circulate as expressions of the euro during the transition.

The national currencies no longer floated against each other. A peseta or mark represented a fixed fraction of one euro.

Greece joined the euro area in 2001, before cash was introduced.

January 1, 2002: banknotes and coins arrive

Euro banknotes and coins entered circulation in 12 countries on January 1, 2002.

For several weeks, they circulated with national cash. The old currencies then stopped serving as everyday payment instruments, although some central banks still exchange specified series.

The logistical operation was exceptional. Cash had to be supplied to banks and retailers in advance, and large quantities of national currency had to be withdrawn.

How national currencies were converted

Each currency had a fixed conversion rate. For example:

1 euro = 166.386 Spanish pesetas

This was not a quote that changed each day. It was fixed by law and applied to accounts, prices, and contracts.

Rounding had to be applied to the final result under common rules. The conversion rate itself could not be changed arbitrarily.

One currency without one state

The euro is unusual because several states use it and share monetary policy while keeping national budgets, tax systems, and public debts.

Banknotes are common. Coins have a common side and a national side, but all are legal tender throughout the euro area.

What it means for Cartonindex

The euro profile represents one common currency, not an average of former European currencies.

Comparisons must use EUR and current reference rates. The peseta, mark, or franc can be converted into euros at their irrevocable rates for historical purposes, but they no longer have independent market exchange rates.