 Used by 17 of 27 countries  Used for all payments starting in 2002  Should be used by all countries once they join THE EURO

 First Stage, which began on 1 July 1990  Completely free movement of capital within the EU  Step up efforts to remove inequalities between European regions THE THREE STAGES

 Setting up the European Monetary Institute (EMI) in Frankfurt  Made up of the governors of the central banks of the EU countries  Making (or keeping) national central banks independent of government control  Introducing rules to curb national budget deficits 2ND STAGE BEGAN ON 1 JAN 1994

 1 January 1999 to 1 January 2002  Euro was phased in as the common currency of EU countries that participated (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain)  Three countries (Denmark, Sweden and the United Kingdom) decided, for political and technical reasons, not to adopt euro  Slovenia joined in 2007, followed by Cyprus and Malta in 2008 Slovakia in 2009 and Estonia in RD STAGE-BIRTH OF EURO

 Each EU country must meet the following five convergence criteria: 1.Price stability: the rate of inflation may not exceed by more than 1.5 % the average rates of inflation of the three member states with the lowest inflation. 2.Interest rates: long-term interest rates may not vary by more than 2 % in relation to the average interest rates of the three member states with the lowest interest rates. 3.Deficits: national budget deficits must be below 3 % of GDP. 4.Public debt: this may not exceed 60 % of GDP. 5.Exchange rate stability: exchange rates must have remained within the authorized margin of fluctuation for the previous two years. HOW DO “I” JOIN THE EURO?

 Travelers do not have to change currencies  Shoppers can directly compare prices in different countries  Prices are stable thanks to the European Central Bank, whose job it is to maintain this stability  During the 2008 financial crisis, having a common currency protected euro-area countries from competitive devaluation and from attack by speculators THE PROS

 The structural weakness of some member states’ economies  To counter this risk, the EU institutions & the 27 member states decided, on 9 May 2010, to set up a ‘financial stabilization mechanism’ worth € 750 billion.  The key issue for the future is how to achieve closer coordination & greater economic solidarity between the member states, which need to ensure good governance of their public finances and to reduce their budget deficits. THE CONS