Euro 2012 3rd Place

[Octaviano Collars]

Of the Member States outside the euro area, Denmark has an 'opt-out' from joining laid down in a Protocol annexed to the Treaty, although it can join in the future if it so wishes. Sweden has not yet qualified to be part of the euro area.

Andorra, Monaco, San Marino and the Vatican City have adopted the euro as their national currency by virtue of specific monetary agreements with the EU, and may issue their own euro coins within certain limits. However, as they are not EU Member States, they are not part of the euro area.

The euro is the most tangible proof of European integration: around 341 million people use it every day, making it the second most-used currency worldwide. The benefits of the common currency are immediately obvious to anyone travelling abroad or shopping online on websites based in another EU country.

These are countries where the euro has still not been adopted, but who will join once they have met the necessary conditions. Mostly, it consists of countries of member states which acceded to the Union in 2004, 2007 and 2013, after the euro was launched in 2002.

Occasionally, member states can negotiate an opt-out from any of the European Union legislation or treaties, and agree to not participate in certain policy areas. Concerning the single currency, this is the case for Denmark. It kept its former currency after becoming member of the EU.

These binding economic and legal conditions were agreed in the Maastricht Treaty in 1992 and are also known as 'Maastricht criteria'. All EU Member States, except Denmark, are required to adopt the euro and join the euro area, once they are ready to fulfil them.

The European Commission and the European Central Bank jointly decide whether the conditions are met for euro area candidate countries to adopt the euro. After assessing the progress made against the convergence criteria, the two bodies publish their conclusions in respective reports. These are further ratified by the ECOFIN Council in consultation with the Parliament and Heads of State. If favourable, the adoption process can begin.

The seven non-eurozone members of the EU are Bulgaria, Czechia, Denmark, Hungary, Poland, Romania, and Sweden. They continue to use their own national currencies, although all but Denmark are obliged to join once they meet the euro convergence criteria.[9]

Among non-EU member states, Andorra, Monaco, San Marino, and Vatican City have formal agreements with the EU to use the euro as their official currency and issue their own coins.[10][11][12] In addition, Kosovo and Montenegro have adopted the euro unilaterally, relying on euros already in circulation rather than minting currencies of their own.[13] These six countries, however, have no representation in any eurozone institution.[14]

The Eurosystem is the monetary authority of the eurozone, the Eurogroup is an informal body of finance ministers that makes fiscal policy for the currency union, and the European System of Central Banks is responsible for fiscal and monetary cooperation between eurozone and non-eurozone EU members. The European Central Bank (ECB) makes monetary policy for the eurozone, sets its base interest rate, and issues euro banknotes and coins.

In 1998, eleven member states of the European Union had met the euro convergence criteria, and the eurozone came into existence with the official launch of the euro (alongside national currencies) on 1 January 1999 in those countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. Greece qualified in 2000 and was admitted on 1 January 2001.

These twelve founding members introduced physical euro banknotes and euro coins on 1 January 2002. After a short transition period, they took out of circulation and rendered invalid their pre-euro national coins and notes.

The euro is also used in countries outside the EU. Four states (Andorra, Monaco, San Marino, and Vatican City) have signed formal agreements with the EU to use the euro and issue their own coins.[28][29] Nevertheless, they are not considered part of the eurozone by the ECB and do not have a seat in the ECB or Euro Group.

Akrotiri and Dhekelia (located on the island of Cyprus) belong to the United Kingdom, but there are agreements between the UK and Cyprus[citation needed] and between UK and EU[citation needed] about their partial integration with Cyprus and partial adoption of Cypriot law, including the usage of euro in Akrotiri and Dhekelia.[citation needed]

Several currencies are pegged to the euro, some of them with a fluctuation band and others with an exact rate. The Bosnia and Herzegovina convertible mark was once pegged to the Deutsche mark at par, and continues to be pegged to the euro today at the Deutsche mark's old rate (1.95583 per euro). The Bulgarian lev was initially pegged to the Deutsche Mark at a rate of BGL 1000 to DEM 1 in 1997, and has been pegged at a rate of BGN 1.95583 to EUR 1 since the introduction of the euro and the redenomination of the lev in 1999. The West African and Central African CFA francs are pegged exactly at 655.957 CFA to 1 EUR. In 1998, in anticipation of Economic and Monetary Union of the European Union, the Council of the European Union addressed the monetary agreements France had with the CFA Zone and Comoros, and ruled that the ECB had no obligation towards the convertibility of the CFA and Comorian francs. The responsibility of the free convertibility remained in the French Treasury.

Kosovo and Montenegro unilaterally adopted the euro as their sole currency without an agreement and, therefore, have no issuing rights.[29] These states are not considered part of the eurozone by the ECB. However, sometimes the term eurozone is applied to all territories that have adopted the euro as their sole currency.[30][31][32] Further unilateral adoption of the euro (euroisation), by both non-euro EU and non-EU members, is opposed by the ECB and EU.[33]

All new EU members joining the bloc after the signing of the Maastricht Treaty in 1992 are obliged to adopt the euro under the terms of their accession treaties. However, the last of the five economic convergence criteria which need first to be complied with in order to qualify for euro adoption, is the exchange rate stability criterion, which requires having been an ERM-member for a minimum of two years without the presence of "severe tensions" for the currency exchange rate.

In September 2011, a diplomatic source close to the euro adoption preparation talks with the seven remaining new member states who had yet to adopt the euro at that time (Bulgaria, Czechia, Hungary, Latvia, Lithuania, Poland, and Romania), claimed that the monetary union (eurozone) they had thought they were going to join upon their signing of the accession treaty may very well end up being a very different union, entailing a much closer fiscal, economic, and political convergence than originally anticipated. This changed legal status of the eurozone could potentially cause them to conclude that the conditions for their promise to join were no longer valid, which "could force them to stage new referendums" on euro adoption.[34]

Before joining the eurozone, a state must spend at least two years in the European Exchange Rate Mechanism (ERM II). As of January 2023[update], the Danish central bank and the Bulgarian central bank participate in ERM II.

Denmark obtained a special opt-out in the original Maastricht Treaty, and thus is legally exempt from joining the eurozone unless its government decides otherwise, either by parliamentary vote or referendum. The United Kingdom likewise had an opt-out prior to withdrawing from the EU in 2020.

The remaining six countries are obliged to adopt the euro in future, although the EU has so far not tried to enforce any time plan. They should join as soon as they fulfill the convergence criteria, which include being part of ERM II for two years. Sweden, which joined the EU in 1995 after the Maastricht Treaty was signed, is required to join the eurozone. However, the Swedish people turned down euro adoption in a 2003 referendum and since then the country has intentionally avoided fulfilling the adoption requirements by not joining ERM II, which is voluntary.[35][36] Bulgaria joined ERM II on 10 July 2020.[37]

In the opinion of journalist Leigh Phillips and Locke Lord's Charles Proctor,[40][41] there is no provision in any European Union treaty for an exit from the eurozone. In fact, they argued, the Treaties make it clear that the process of monetary union was intended to be "irreversible" and "irrevocable".[41] However, in 2009, a European Central Bank legal study argued that, while voluntary withdrawal is legally not possible, expulsion remains "conceivable".[42] Although an explicit provision for an exit option does not exist, many experts and politicians in Europe have suggested an option to leave the eurozone should be included in the relevant treaties.[43]

On the issue of leaving the eurozone, the European Commission has stated that "[t]he irrevocability of membership in the euro area is an integral part of the Treaty framework and the Commission, as a guardian of the EU Treaties, intends to fully respect [that irrevocability]."[44] It added that it "does not intend to propose [any] amendment" to the relevant Treaties, the current status being "the best way going forward to increase the resilience of euro area Member States to potential economic and financial crises.[44] The European Central Bank, responding to a question by a Member of the European Parliament, has stated that an exit is not allowed under the Treaties.[45]

Likewise there is no provision for a state to be expelled from the euro.[46] Some, however, including the Dutch government, favour the creation of an expulsion provision for the case whereby a heavily indebted state in the eurozone refuses to comply with an EU economic reform policy.[47]

In a Texas law journal, University of Texas at Austin law professor Jens Dammann has argued that even now EU law contains an implicit right for member states to leave the eurozone if they no longer meet the criteria that they had to meet in order to join it.[48] Furthermore, he has suggested that, under narrow circumstances, the European Union can expel member states from the eurozone.[49]

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