http://en.wikipedia.org/wiki/Euro
The euro is managed and administered by the Frankfurt-based European Central BankEurosystem (composed of the central banks of the Eurozone countries). As an independent central bank, the ECB has sole authority to set monetary policy. (ECB) and the The Eurosystem participates in the printing, minting and distribution of
notes and
coins in all member states, and the operation of the Eurozone payment systems.
The 1992
Maastricht Treaty obliges most EU member states to adopt the euro upon meeting
certain monetary and budgetary requirements, however, not all states have done so. The
United Kingdom and
Denmark negotiated exemptions,
[8] while
Sweden turned down the euro in a 2003 referendum, and has circumvented the obligation to adopt the euro by not meeting the monetary and budgetary requirements. All nations that have joined the EU since 1993 have pledged to adopt the euro in due course.
The euro was established by the provisions in the 1992
Maastricht Treaty. In order to participate in the currency, member states are meant to meet
strict criteria such as a
budget deficit of less than three per cent of their
GDP, a debt ratio of less than sixty per cent of GDP, low
inflation, and
interest rates close to the EU average. In the Maastricht Treaty, the United Kingdom and Denmark were granted exemptions per their request from moving to the stage of monetary union which would result in the introduction of the euro.
The rates were determined by the Council of the European Union,
[29] based on a recommendation from the European Commission based on the market rates on 31 December 1998. They were set so that one
European Currency Unit (ECU) would equal one euro. The European Currency Unit was an accounting unit used by the EU, based on the currencies of the member states; it was not a currency in its own right.
They could not be set earlier, because the ECU depended on the closing exchange rate of the non-euro currencies (principally the pound sterling) that day.
Outside the Eurozone, a total of 23 countries and territories which do not belong to the EU have currencies that are directly pegged to the euro including 14 countries in mainland Africa (they use the
CFP franc, the
CFA franc and the
Moroccan dirham), 2 African island countries (
Comorian franc and
Cape Verdean escudo), 3 French Pacific territories and another Balkan country,
Bosnia and Herzegovina (
Bosnia and Herzegovina convertible mark).
With the exception of Bosnia and Herzegovina (which pegged their currency against the German mark) and Cape Verde (formerly pegged to the Portuguese escudo) all of these non-EU countries had a currency peg to the French Franc before pegging their currencies to the euro. Pegging a country's currency to a major currency is regarded as a safety measure, especially for currencies of areas with weak economies, as the euro is seen as a stable currency, prevents runaway inflation and encourages foreign investment due to its stability.
Low levels of inflation are the hallmark of stable and modern economies. Because a high level of inflation acts as a tax (
seigniorage) and theoretically discourages investment, it is generally viewed as undesirable. In spite of the downside, many countries have been unable or unwilling to deal with serious inflationary pressures.
Some countries have successfully contained them by establishing largely independent central banks. One such bank was the Bundesbank in Germany; as the European Central Bank is modelled on the Bundesbank,[39] it is independent of the pressures of national governments and has a mandate to keep inflationary pressures low.
I belive if memory serves me right that way back when the EEC was set up France and Germany wanted to introduce a common currency that they would be in charge of. This was resisted as the fear at the time was that after loosing two wars Germany was tying for European domination via monetary means rather than military. Britain and others did not like this idea as they wished to retain independance and also a common currency would weaken the pound and result in loss of revenue, status and control.
However due to our stubborness along with otheres their original idea has been severely modified and even though the Euro banking system is based on a German banks model and has its headquarters in Germany ( this gives a financial boost to Germany, jobs etc) they do not have that tottal control they were after.
As you say the world is changing and the once powerful pound is now a shadow of its former self. This has led to a drop in finances for Britain but at least the fight we put up gave our financial sector a chance to remodel and remain a major financial player in the world.
Thats how I see it any ways. I'm not really that much into politics though so it is only a laymans view.
