Basic facts about euro

11:53, December 31, 2010      

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Estonia will become the 17th European Union (EU) country to use euro on Saturday, at a time when the eurozone is still mired in a debt crisis. The following are basic facts about the euro.

Currently, the euro is the only official currency of 16 EU member states, known collectively as the eurozone.

The eurozone is a monetary union, within which all member states have to not only abandon their former currencies, but also transfer their power of setting national monetary policy to a transnational European Central Bank (ECB), located in Frankfurt, Germany.

The euro is managed and administered by the ECB and the European System of Central Banks, which consists of the central banks of its member states.

The idea of a single European currency emerged in as early as the 1970s, but it was not until the 1992 Maastricht Treaty that rules were set and roadmap was defined for an economic and monetary union, leading to the introduction of euro as the "book money" in 1999 and the circulation of euro coins and banknotes in 2002.

The introduction of euro was a major step in European integration. It is now the second largest reserve currency in the world, following the U.S. dollar.

According to the International Monetary Fund, by the third quarter of 2010, the share of global foreign exchange reserves held in the U.S. dollar was 61.3 percent, while that in the euro 26.9 percent.

Of the 27 EU member states, 16 countries are now using the euro, namely, Austria, Belgium, France, Finland, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Slovenia, Cyprus, Malta and Slovakia.

Estonia's adoption of the euro will mark the fifth enlargement of the eurozone. After Estonia joins in, the eurozone will boast a population of 331 million out of the EU's total of 501 million in 2010, and account for nearly three quarters of the EU's gross domestic product, totaling 1.2067 trillion U.S. dollars in 2010 at current prices.

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