History of the Euro
“The introduction of the euro will represent the most dramatic change in the international monetary system since President Nixon took the dollar off gold in 1971 [and when] the era of flexible exchange rates began…the euro is likely to challenge the position of the dollar [and hence] this may be the most important event in the history of the international monetary system since the dollar took over from the pound the role of dominant currency in World War I” (Mussa 2002).
The Euro evolved over a period of forty years. The European Economic Committee was established in 1958 with the intent to allow for free movement of labor and capital, abolition of trusts and cartels, development of joint and reciprocal policies on labor, and social welfare. The development of a common price level for agricultural products was accomplished along with the elimination of internal tariffs among member countries. The European Free Trade Association was a customs union and trading block formed in 1960. The goals of the EFTA were to establish free trade among members while seeking a broader economic union. In 1993 the European Union was formed. The European Union is responsible for cooperation on justice, and affairs dealing with home and abroad.
In 1967 there were three main treaty organizations: the European Coal and Steel Community, the European Economic Community and the European Atomic Energy Community, which formed one comprehensive governing body. This was then divided into four main branches: The European Commission, the Council of the European Union, the European Parliament and the Court of Auditors.
The evolution of the Euro came into being under the Marshall Plan. The ideology of a united Europe was basis for European strength and security while trying to prevent another European war. The Single European Act amended the European Committee’s treaties to strengthen them into a single internal market. The Treaty of the European Union, also known as the Maastricht Treaty, provided a central banking system. The treaty also provided a common currency to replace the national currencies, legal definition of the EU and framework for the political role.
In 1979 the European Monetary System was organized to stabilize foreign exchange and counter inflation among the European Union members. By the early 1990’s the system was strained by the differing economic policies and conditions of members. Britain also permanently withdrew from the system during this time.
The European Monetary Institute was created in 1994. The Institute created a stepping stone for the creation of the European Central Bank and a common currency. The European Central Bank is responsible for setting a single monetary policy and interest rates for adopting nations. The European Union member nations hope to curtail excessive public spending, reduce debt and make a strong attempt at taming inflation.
Adoption of the Euro began in 1999 by European Union...