Euro

The euro (sign: €; code: EUR) is the currency of the European Federation. It is divided into 100 cent and issued by the Federation's central bank, the Federal Bank of Europe, in Amsterdam. It replaced the national currencies of the member states as a unit of account on 1 January 1950, and euro notes and coins have circulated since 1 March 1952.

Through the Kaltkrieg the euro and the United States dollar were the two main currencies of world trade, and the currencies of the Dominion of Canada and of most of the former European territories in Africa were pegged to it. In held territory the euro has remained in normal use throughout the infestation, for wages, prices, savings and card payments.

History

Fixed rates

During the First Euro-American War the member states' currencies were tied to each other at fixed rates by a financial protocol to the Treaty of Prague, so that the Federation could borrow and buy war supplies in a common unit. The rates, known as the Prague rates, were kept after the Cessation, and the Federal Bank of Europe was established in Amsterdam in 1949 to manage them.

Introduction

The Federal Council decided on a single currency in 1948. The name euro was proposed by the Belgian economist Lucien Verhaegen and chosen in 1949 over écu, after the old French coin, and federal mark, as a name that could be used unchanged in every member state's language. The euro became the unit of account for the federal budget, for payments between banks and for prices quoted in more than one member state on 1 January 1950, at fixed rates to the national currencies:

Euro notes and coins were issued on 1 March 1952, and the national notes ceased to be legal tender at the end of that year. Britain withdrew the pound in 1955, after a transitional protocol. Spain and Portugal adopted the euro on joining the Federation in 1951, and Ireland in 1973.

Kaltkrieg

The Federal Charter of 1964 made the Federal Bank of Europe independent of the Council of Ministers from 1966, with a mandate of price stability. Inflation averaged about 2.5% a year between 1966 and 2019.

The Treaty of Ottawa of 1948 joined the Dominion of Canada to the Federation's customs area, and the Canadian dollar has been pegged to the euro since then. Most of the territories in Africa that became independent under federal policy between 1957 and 1965 kept a common African franc, pegged to the euro and guaranteed by the Federal Bank. Direct trade with the United States, reopened under licence after the Mattawa Declaration of 1975, was settled in both currencies.

Since 2020

The marine insurance crisis of 2021 brought a fall of about half in share prices across the market and a tightening of credit, and the Federal Bank lent to banks and insurers against the reinsurance scheme set up for escorted convoys. Prices of food and fuel rose sharply in 2021 and 2022, when most deep-sea shipping stopped. Annual inflation peaked at about 9% in 2022, when the Federal Bank raised its main rate to 6%, and fell to about 4% by 2024 and 3.1% in 2027.

Rationing of some foods, introduced in 2023, operates alongside the money economy: rationed goods are sold at fixed prices in euros against a ration entitlement. Cash use in held territory has fallen since 2023, as bank branches outside the larger cities were closed and the distribution of notes to evacuation centres was reduced, and about 80% of payments by value were made by card in 2027.

As of 2028 banks, card payments and payrolls in held territory operate as they did before 2020, and the Federation's stock exchanges have been thinly traded since the mid-2020s. The dollar has lost most of its value since the United States lost its coasts in 2027, and the euro is the main currency of trade between held regions.

Federal Bank of Europe

The Federal Bank of Europe is governed by a board of a President and the governors of the member states' national banks, which distribute notes and supervise banks in their own states. It sets the euro's interest rates and holds the Federation's gold and foreign reserves. Its headquarters are on the Frederiksplein in Amsterdam.

Notes and coins

Notes are issued in denominations of 5, 10, 20, 50, 100 and 500 euros, and coins of 1, 2, 5, 10, 20 and 50 cent and 1 and 2 euros. Each member state issues coins with its own design on one side; the other side is common. The fourth series of notes, issued from 2009, carries portraits of figures from European science and culture: Johannes Kepler (€5), Marie Curie (€10), Antonín Dvořák (€20), Leonardo da Vinci (€50), Isaac Newton (€100) and Erasmus (€500).

See also

• European Federation
• Marine insurance crisis
• Rationing in the European Federation
• Amsterdam