History

Origins of the Euro

The Euro was introduced to financial markets on January 1, 1999. Coins and banknotes entered circulation on January 1, 2002. After the Maastricht Treaty in 1992, most EU member states are obliged to adopt the Euro after meeting monetary and budgetary requirements. However the UK and Denmark negotiated exemptions, and Sweden rejected the Euro in a referendum. All new members of the European Union since 1993 have pledged to adopt the Euro. After the US financial crisis in 2008, fears rose over a sovereign debt crisis in the Eurozone, with Greece, Ireland and Portugal at particular risk.

Origins of the US Dollar

The US constitution provided the United States Congress with the power “to coin money.” The first dollar coins were issued by the United States mint in 1792, and were similar in size and composition to the Spanish dollar, and the Spanish dollar and Mexican dollar remained legal tender until 1857, as did the coins of various English colonies.

Administration and control of monetary policy

The Euro is managed and administrated by the European Central Bank (ECB) in Frankfurt. It is printed, minted and distributed in all member states by the Eurosystem, a network of the central banks of member countries.

The US dollar is managed by the Federal Reserve.

Countries

The Euro is the official currency of the Eurozone, which is made up of 17 of the 27 member states of the European Union. These countries are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain. It is the sole currency of these countries, and is used by 326 million people. It is also the sole currency of Montenegro and Kosovo, several micro states (Andorra, Monaco, San Marino, the Vatican City), and overseas territories of EU states: Mayotte, Saint Pierre and Miquelon, and Akrotiri and Dhekelia.

The US dollar is the official currency of the United States and its overseas territories. It is also used as the sole currency in Palua, Micronesia and the Marshall Islands, and is also used in Panama, Ecuador, El Salvador, East Timor, the British Virgin Islands, Turks and Caicos Islands, Bonaire, Sint Eustatius and Saba.

Here is the share of the Euro and the US Dollar in the worldwide foreign currency reserves held by sovereign governments:

Exchange Rates

This table shows how many Euros could be exchanged for 1 US dollar from 1999 to 2011. For much of the past decade, 1 Euro has always been worth more than 1 US dollar.

Amount of money in circulation

The Euro is the second largest reserve currency and the second most traded currency in the world. As of September 2012, there were more than €915 billion in circulation, making it the currency with the highest combination of banknotes and coins in circulation in the world.

The US government keeps over $800 billion in cash in circulation. It is the largest reserve currency and the most traded currency in the world.

The money supply is different from the amount of hard cash in circulation.

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References

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