Traders worldwide automatically associate the EU with the Euro. The currency stands as national in 20 countries in the Union, while seven other members haven’t adopted it yet.
Eurozone: Need To Know
In 1999, after a couple of years of preparation, the EU introduced the Euro. The currency initially replaced national ones in 11 of the 15 members. Over the past 25 years, its range has expanded, and now, 20 countries use the Euro as their national currency.
The main goal of the European Union is to integrate member countries in several areas, including the economy and monetary policy. The single currency reduces tariffs and makes trading between members easier. Conversely, some EU members indicate that the Union too heavily interferes with their internal affairs.
Euro And Denmark: Opt-Out
Denmark had been a member of the EEC before 1992 when the Community transformed into the European Union. Even though, in the referendum in 1992, Danes rejected four significant issues presented in the Maastricht Treaty. The most essential in terms of the European currency was the opt-out option. Danes decided to stay with the Danish Krone rather than adopt the Euro – the currency of the EU.
The most essential aftershock for traders is lower dependence on the Danish currency. The National Bank in Denmark determines its rate, unlike in the Eurozone, where the Euro depends on the decisions of the European Central Bank. Even so, Denmark still cooperates with the Union regarding several economic issues.
It does not impact the economy directly, but Danes voted to enter the European Common Security and Defence Policy in 2022, which indicates Danish trust in the EU’s actions in that area.
Members With Domestic Currencies
Except for Denmark, six countries haven’t adopted the Euro yet. Like the Danes, Sweden resigned from adopting the EU currency in the 1990s. Except for the Scandinavian country, for traders known as a home for companies such as Fingerprint Cards, five other countries have been introduced to the EU in 2004 or later. These are Bulgaria, Czechia, Hungary, Poland, and Romania. Great Britain didn’t adopt the Euro, so it wasn’t an issue during Brexit.
Read more about Brexit and its implications!
Theoretically, adopting the Euro is one of the conditions for becoming an EU member. The procedure before this process is highly complicated in those countries. That’s the main reason why they are currently keeping their national currencies. Moreover, some of them are not as keen to adopt the Euro as before due to the issues regarding the impact of leading countries of the Union.
Euro: The Currency’s Impact On The EU Monetary Policy
Some information about the member’s monetary policy may be confusing. Even if, for example, Germany or Italy come under the European Central Bank, they still have their own national banks. What do these collaborations look like?
The European Central Bank is based in Frankfurt, Germany. It defines the monetary policy not for each member country but for the whole Eurozone. National institutions take care of their internal affairs, additionally adjusting their actions to the ECB’s ideas and concepts.
