The History of the Euro Essay

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The History of the Euro

Recently members of the European Community have proposed the "Euro" as the name of a united currency. The idea for a common currency is not a new one. For years European banks have been using ECUs as the basis for the European Monetary System and it will now be exchangeable equally for new Euros. ECU stands for European Currency Unit, and is defined in terms of pieces of European currencies, making it a composite currency of all European countries. Since its creation, it has commonly used as a currency of denomination for eurobonds and bank certificates of deposit.
In March 1979 the European Monetary System was launched, and the goal toward a united currency was started. The system was based on the average
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However, that goal was not met completely (Santer, Jacques).
After January 1994, the second stage began with the creation of the European Monetary Institute or EMI in Frankfurt, Germany. The EMI was the beginning of the proposed European Central Bank. The EMI was created to hold the gold and foreign exchange reserves, and oversee the operation of the European Monetary System, and to promote the use of the ECU and the transition from ECUs to Euros. Its future responsibilities are to implement a common European monetary policy, conduct foreign exchange operations, and hold reserves of member countries. While it's working to achieve those goals, the EMI is also supposed to monitor some other economic convergence criteria among member countries, which included exchange rates, inflation, government debt, and interest rates. To be allowed to joined the new monetary union, as stated by the EMI in 1999 countries needed to have the following criteria by end 1997:
¨ "price stability" or A rate of inflation of the consumer price index not more than 1.5- percent points about the three member countries with the lowest inflation rates.
¨ Have kept its currency within the normal margins around its fixed value in terms of the ECU and to have not devalued against any other member country for two years.
¨ Long-term interest rates not more than 2 percent above the three member countries with the lowest rates of inflation.
¨ A government deficit that is not

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