Euro

Euro (Euro; symbol: €; ISO 4217 code EUR), commonly known as Euro in Hong Kong and Macao, is the currency of 20 countries in the European Union. These 20 countries are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, and Luxembourg. , Netherlands, Portugal, Slovenia, Spain, Malta, Cyprus, Slovakia, Estonia, Latvia, Lithuania and Croatia, collectively known as the Eurozone. A total of 330 million people currently use the euro. If currencies with a fixed exchange rate system with the euro are included, the euro affects 480 million people around the world.

The euro is the most significant result of European monetary reform since the Roman Empire. The euro not only completes the European single market and makes free trade among Eurozone countries more convenient, but it is also an important part of the EU's integration journey. Although Monaco, San Marino and the Vatican are not EU countries, since they previously used the French franc or the Italian lira as currency, they, like Andorra, are now authorized to mint their own euro coins in small quantities and use the euro. Some non-EU countries and regions, such as Montenegro and Kosovo, also unilaterally use the euro as a payment instrument.

How is the Euro Issued and Managed?

The euro system was officially launched on New Year's Day in 1999. In 1998, it was managed by the European Central Bank System composed of the European Central Bank and the central banks of each euro area country. The European Central Bank, headquartered in Frankfurt, Germany, has the power to independently formulate monetary policy. The central banks of the euro area countries are involved in the printing, minting and issuance of euro banknotes and euro coins, and are responsible for the operation of the euro area payment system. It is the first bank in the world to manage a supranational currency and the only institution qualified to issue euros within the European Union.

In 2012, the European Central Bank stated that it would try its best to prevent countries from defaulting and the spread of the crisis. In 2015, the European Central Bank printed money to combat economic recession and deflation. The European Central Bank is currently stimulating the European economy through massive purchases of government bonds and has begun to issue additional currency.

Designs and Value of Euro

The front of all euro coins is the same, marked with the face value of the coin, called the "common face", while the pattern on the back of the coin is designed by the issuing country. Constitutional monarchies often use the image of their monarch, while other countries usually use their national symbols. All the different coins can be used in all regions, for example a coin bearing the image of the King of Spain is legal tender in countries other than Spain that use the euro. There are 8 types of euro coins: 2 euros, 1 euro, 50 euro cents, 20 euro cents, 10 euro cents, 5 euro cents, 2 euro cents and 1 euro cent. Although the 1 and 2 cent coins are generally not used in Finland and the Netherlands, they are still legal tender.

The design of each denomination of euro banknotes is the same in all countries. There are 7 types of euro banknotes: 500 euros, 200 euros, 100 euros, 50 euros, 20 euros, 10 euros and 5 euros. Although high-denomination banknotes are not issued in some countries, they are still legal tender. Since the Euro 500 banknotes are easily used for money laundering, the European Central Bank announced on May 4, 2016 that it would no longer issue 500 Euro banknotes at the end of 2018 to reduce the use of large-denomination banknotes by criminal groups for illegal activities3.

Symbol of Euro

The design of the euro symbol (€) is inspired by the Greek letter Epsilon, which represents the foundation of European civilization. The letter E is also the first letter of Latin Europe. The two horizontal lines in the euro symbol symbolize the stability of the euro.

Euro Exchange Rate

The euro exchange rate is the amount of money you have to pay to exchange another currency for one unit or one hundred units (or other fixed amount) of euros. For example, on April 4, 2023, 1 US dollar can be exchanged for 0.9173 euros, 100 yen can be exchanged for 0.6920 euros, 1 pound can be exchanged for 1.1470 euros, and 1 yuan can be exchanged for 0.1333 euros.

The euro exchange rate is affected by many factors, including supply and demand, trade balance, interest rate levels, inflation rate, political situation, investor confidence, etc. Generally speaking, when the economic performance of a certain country or region is good, its currency will appreciate; conversely, when the economic performance of a certain country or region is poor, its currency will also depreciate.

Challenges of Euro

The Eurozone is composed of 19 countries among the 28 member states of the European Union that use the euro as their legal currency. They are the top three economies in the world. According to data from the European Union Statistics Office (Eurostat), the real GDP growth rate of the euro area in the fourth quarter of 2022 was 1.8%, an increase of 0.3 percentage points from the previous quarter, but still lower than the 2.1% in the fourth quarter of 2019. The major economies of the Eurozone, Germany, France, Italy and Spain, recorded real GDP growth rates of 1.9%, 1.4%, 0.8% and 2.4% respectively.

The main economic challenges facing the Eurozone are as follows:

• Impact of the COVID-19 epidemic: Since the beginning of 2020, the COVID-19 epidemic has caused serious humanitarian and public health crises around the world, and also dealt a heavy blow to economic activities and employment in the Eurozone. Although the EU has taken a series of fiscal, monetary and regulatory measures to support affected businesses and households, and promoted the development and deployment of vaccines, the epidemic still presents uncertainties and risks that may lead to more lockdown measures and social Isolation, in turn, affects consumer confidence and investment willingness.

• Lack of structural reforms: The Eurozone has experienced multiple financial and debt crises in the past decade, which exposed some structural problems, such as labor market rigidity, declining industrial competitiveness, and unsustainability of public finances. These problems need to be solved by deepening European integration, strengthening fiscal union, and improving banking union. However, these reforms often face political resistance and social opposition.

• The dilemma of low inflation and low interest rates: The euro zone has been in a state of low inflation and even deflation since 2013, well below the European Central Bank's target of close to but below 2%. This reflects factors such as lack of demand, excess supply, and falling energy prices. Low inflation also limits the space for the European Central Bank to adjust its monetary policy, forcing it to take unconventional measures, such as quantitative easing and negative interest rates, to stimulate the economy and avoid falling into a liquidity trap.

Future of Euro

As a regional and supranational currency, the euro has a unique history and significance. It is not only an important achievement of European integration, but also an important tool for Europe to exert influence on the global stage. However, the euro also faces many challenges and difficulties, which require a more coordinated and united approach among euro area countries to overcome. In the future, the development of the euro will depend on the following aspects:

1. Epidemic control and recovery: The COVID-19 epidemic is currently the biggest uncertainty in the Eurozone. Only by effectively controlling the epidemic can normal economic activities and social order be restored. The EU needs to speed up the production and distribution of vaccines and provide sufficient fiscal and monetary support to help the most affected countries and industries tide over the difficulties. At the same time, the EU also needs to formulate a long-term recovery plan to promote the development of green transformation, digital innovation, social inclusion and other aspects.

2. Advancement and deepening of reforms: The eurozone needs reforms at all levels to improve its competitiveness, resilience and cohesion. This includes strengthening fiscal rules and disciplines, improving banking union and capital markets union, establishing a true fiscal union, increasing fiscal transfers and risk sharing, etc. In addition, the Eurozone also needs to promote more structural reforms, such as improving the labor market, increasing productivity, and promoting education and skills training.

3. The role of geopolitics and global governance: As one of the largest trading blocs in the world, the Eurozone has an important impact on global economic stability and development. In the current volatile international situation, the Eurozone needs to maintain good cooperative relations with other major economies, especially the United States and China. At the same time, the Eurozone also needs to play a more active role in global governance and promote the resolution of issues such as multilateralism, free trade, and climate change. 

Conclusion

The euro is an innovative and challenging currency that reflects the European people's pursuit of a common destiny and common interests. Over the past 20 years, the euro has become one of the most important reserve currencies in the world and has brought many benefits to Europe. However, the euro also faces many problems and risks and needs to constantly