The introduction and effects of the Euro1 IntroductionThe euro has existed just long enough to generate sufficient data for a first look at its actual performance, having been introduced in January 1999. This assessment presents eight studies using post-1999 data to provide a first look at how the euro is actually influencing Europe's trade, financial markets, macroeconomic policymaking and economic performance. 1.1 What is the euro? The euro is the single currency used in 12 EU member states. The euro was born cashless on January 1, 1999, when these member states formed an Economic and Monetary Union (EMU) and permanently locked the exchange rates of their currencies against the euro. Euro banknotes and coins entered into circulation in these 12 EU Member States on 1 January 2002.1.2 Euro area countriesThe 12 euro area countries are: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain and Greece. The United Kingdom has decided not to participate but has indicated that it may consider joining at a later date. Euro banknotes and coins went into circulation on 1 January 2002. The euro is part of the EMU process. EMU is envisaged by the Maastricht Treaty, which the Irish people approved in a referendum in June 1992. In addition to the euro, EMU resulted in the creation of an independent European Central Bank (ECB). The euro is also used in Andorra, Monaco, San Marino and Vatican City. Several overseas territories of the 12 "eurozone" countries use the euro: these include the Canary Islands, Madeira, the Azores and the French Outre-Mer territories (Guyana, Martinique, Guadeloupe, Réunion and the collective territories of Mayotte and St Pierre and Miquelon ) .2 Development of the euro 1 July 1990 The first phase of economic and monetary union begins. Capital movements in EU member states are fully liberalized (except where temporary exemptions have been granted). 1 January 1993 The single market is completed. 1 November 1993 • The composition of the ecru basket is frozen. • The Treaty on European Union signed in Maastricht comes into force. 1 January 1994 • The European Monetary Institute (EMI) is founded in Frankfurt. • Procedures for coordinating economic policies at European level are strengthened. • Member States fight against “excessive deficits” and achieve economic convergence. 31 May 1995 The Commission adopts the Green Paper on the single currency (reference scenario for the transition to the single currency). 15 and 16 December 1995 • Madrid European Council