The following is a brief guide to the euro, which will become the European Union's single currency in January 2002.
BRETTON WOODS The system of fixed exchange rates that was established in 1944 and lasted for more than 25 years. In a system of fixed exchange rates, each country's central bank intervenes in the foreign exchange market to prevent their currencies from trading outside a particular band. The system was named after a conference held in Bretton Woods, N.H.
COINS Euro coins appear starting Jan. 1, 2002, and will be the sole legal tender within the EU zone starting Feb. 28, 2002. There will be eight coins, all with a common face and a national face. They will have values of 1, 2, and 5 cents; 10, 20 and 50 cents; one euro; and two euros; There will be seven euro notes worth five, 10, 20, 50, 100, 200 and 500 euros.
COMMON MARKET Another name for the nations that made up the European Community (EC), created in 1958 by the Treaty of Rome. The EC was made up of three groups: the European Economic Community, the European Coal and Steel Community and the European Atomic Energy Community.
EURO The name of the common currency. The name was chosen by European Commission experts from about 30 suggestions. Its symbol (a Greek epsilon struck through with double horizontal lines that is meant to symbolize stability) could become as recognizable as the dollar sign.
EUROPEAN CENTRAL BANK (ECB) The Frankfurt-based institution sets Euro zone interest rates, guided by the need to maintain price stability. The ECB has a six-person board, headed by a president. Monetary policy decisions are made by the board and central bank governors from each participating country.
EUROPEAN COMMISSION The European Commission operates at the very heart of the European Union, acting as the source of policy initiatives, drafting legislation and overseeing the implementation of any treaties. Its 20 commissioners are chosen from the 15 European Union member countries.
EUROPEAN ECONOMIC COMMUNITY (EEC) Established under the Treaty of Rome in 1958, one of the goals of the EEC was to create a common market permitting the free movement of people, goods, services, and capital. The Rome treaty also established the European Coal and Steel Community, and the European Atomic Energy Community. Together, the three groups formed "The European Community," more popularly known as the "Common Market."
EUROPEAN MONETARY INSTITUTE (EMI) The function of the European Monetary Institute is to make possible the monetary unification. EMI is not the same as the European Central Bank (ECB). The EMI had two main tasks, one of which has been completed. They were: 1) to contribute to the fulfillment of the conditions necessary to reach the last stage of monetary union, in particular to ensure that countries meet financial criteria; and 2) to make the preparations for the establishment of the European System of Central Banks (ESCB), the conduct of a single monetary policy and the creation of a single currency.
EUROPEAN UNION (EU) The group of nations, called the European Community, became known as the European Union in 1993. Currently, the EU encompasses 15 countries: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal, Spain, Sweden, and the United Kingdom. Eleven of them are participating in the euro.
EXCHANGE RATE MECHANISM (ERM) A system of exchange-rate parities were enacted to force EU currencies to trade within narrow bands of each other, which was a crucial step toward blending Europe's economies into one. In 1992, the system was nearly brought to its knees when anxiety about a global recession sent currency markets into turmoil.
MAASTRICHT TREATY The 1992 pact laid the groundwork for monetary union. The treaty, which was put into effect in 1993, set out criteria (on inflation levels, government deficits, debt, exchange-rate stability, and long-term interest rates) that member states had to meet in order to develop a monetary union.
The treaty was seen then as a stepping stone toward fuller political union, designed to avoid a replay of two world wars and the bloodshed witnessed earlier this century.
Sources: Reuters, staff