Updated Tuesday, December 28, 2010 8:12 pm TWN, AFP
At US$ 12 Trillion, it is more than half the size of USA and greater than China and Japan combined.
The eurozone: economic giant, political pygmy?
BRUSSELS -- The eurozone, in its deepest crisis since the euro's birth in 1999 caused by a massive build-up of government debt, extends to 17 sovereign European Union states on Jan. 1, with the entry of Estonia.
The accession of the Baltic state adds another 1.3 million people to the 330 million living in EU for whom the euro is already the official currency.
The euro is also the formal means of exchange in European statelets Monaco, San Marino and Vatican City, who are surrounded by EU members; and it is the de facto currency of the small Balkan republic of Montenegro.
In addition, it is used in the far-flung French territories of Guadeloupe, French Guyana, Martinique and Reunion, and in the Portuguese island Madeira.
Crossing eurozone borders no longer requires individuals, companies or organizations to change money — although the job of eliminating fees for electronic transactions within the European Banking system remains unfinished.
The eurozone had a gross domestic product or combined annual economic output of nine trillion euros (US$ 12 trillion) in 2009, according to the EU's data agency.
That makes it a major global economic actor: behind the United States, the global leader, but still greater than China or Japan.
The currency was initially only used as an accounting tool from 1999, or for electronic transfers. Notes and coins entered circulation in 2002.
The original eurozone members in 1999 were: Austria, Belgium, Finland, France, Germany, Italy, Ireland, Luxembourg, the Netherlands, Portugal and Spain.
Greece wanted to join immediately but failed to meet the economic entry criteria until 2001, although it later emerged that some of the data used to support its application was inaccurate.
Next came a handful of the 2004 EU entrants: Slovenia in 2007, Cyprus and Malta in 2008 and Slovakia in 2009.
Nearly all 27 EU states are either in the eurozone or are supposed to develop harmonized economic policies to enable entry: all except for skeptics Britain and Denmark who obtained an opt-out.
Britain's Conservative-led coalition government in 2010 ruled out even considering joining for its five-year mandate. And in Denmark, a recent poll showed opposition hit an all-time high because of the crisis on international money markets.
Of the remaining EU members, Sweden won an authorization to delay adoption. The others, from the ex-communist bloc, have yet to meet all the criteria.
A key weakness of the eurozone, as experts warned when it was being set up, is that while the currency is controlled by the European Central Bank, it has no centralized eurozone authority dictating wider economic policy.
Tax and spending remains in the hands of national governments — though they undertake to adhere to commonly agreed rules on public finances known as the Stability and Growth Pact.
They also retain full responsibility for structural policies governing labor, pension and capital markets, but agree to coordinate them to achieve the common goals of stability, growth and employment.
Or at least that was the theory.
The members known as the peripheral states ran up huge debts, benefiting from lower interest rates than they would have had to pay under their own steam and forcing the bigger, more stable users, led by Germany, to commit to bailing out Greece and Ireland in 2010.
This ongoing crisis has led to a rethink of the rules.
The EU and the International Monetary Fund have already imposed painful reforms on the two bailed-out nations.
Portugal, which many observers believe is the most likely to need a similar bail-out in 2011, will likely have to make similar concessions.
Europe's political leaders have tried to tight the rules on national budgets covering annual deficits and overall debts, which were designed to control inflation and unemployment across the area.
They have introduced financial penalties for governments that repeatedly breach targets.
At US$ 12 Trillion, it is more than half the size of USA and greater than China and Japan combined.
The eurozone: economic giant, political pygmy?
BRUSSELS -- The eurozone, in its deepest crisis since the euro's birth in 1999 caused by a massive build-up of government debt, extends to 17 sovereign European Union states on Jan. 1, with the entry of Estonia.
The accession of the Baltic state adds another 1.3 million people to the 330 million living in EU for whom the euro is already the official currency.
The euro is also the formal means of exchange in European statelets Monaco, San Marino and Vatican City, who are surrounded by EU members; and it is the de facto currency of the small Balkan republic of Montenegro.
In addition, it is used in the far-flung French territories of Guadeloupe, French Guyana, Martinique and Reunion, and in the Portuguese island Madeira.
Crossing eurozone borders no longer requires individuals, companies or organizations to change money — although the job of eliminating fees for electronic transactions within the European Banking system remains unfinished.
The eurozone had a gross domestic product or combined annual economic output of nine trillion euros (US$ 12 trillion) in 2009, according to the EU's data agency.
That makes it a major global economic actor: behind the United States, the global leader, but still greater than China or Japan.
The currency was initially only used as an accounting tool from 1999, or for electronic transfers. Notes and coins entered circulation in 2002.
The original eurozone members in 1999 were: Austria, Belgium, Finland, France, Germany, Italy, Ireland, Luxembourg, the Netherlands, Portugal and Spain.
Greece wanted to join immediately but failed to meet the economic entry criteria until 2001, although it later emerged that some of the data used to support its application was inaccurate.
Next came a handful of the 2004 EU entrants: Slovenia in 2007, Cyprus and Malta in 2008 and Slovakia in 2009.
Nearly all 27 EU states are either in the eurozone or are supposed to develop harmonized economic policies to enable entry: all except for skeptics Britain and Denmark who obtained an opt-out.
Britain's Conservative-led coalition government in 2010 ruled out even considering joining for its five-year mandate. And in Denmark, a recent poll showed opposition hit an all-time high because of the crisis on international money markets.
Of the remaining EU members, Sweden won an authorization to delay adoption. The others, from the ex-communist bloc, have yet to meet all the criteria.
A key weakness of the eurozone, as experts warned when it was being set up, is that while the currency is controlled by the European Central Bank, it has no centralized eurozone authority dictating wider economic policy.
Tax and spending remains in the hands of national governments — though they undertake to adhere to commonly agreed rules on public finances known as the Stability and Growth Pact.
They also retain full responsibility for structural policies governing labor, pension and capital markets, but agree to coordinate them to achieve the common goals of stability, growth and employment.
Or at least that was the theory.
The members known as the peripheral states ran up huge debts, benefiting from lower interest rates than they would have had to pay under their own steam and forcing the bigger, more stable users, led by Germany, to commit to bailing out Greece and Ireland in 2010.
This ongoing crisis has led to a rethink of the rules.
The EU and the International Monetary Fund have already imposed painful reforms on the two bailed-out nations.
Portugal, which many observers believe is the most likely to need a similar bail-out in 2011, will likely have to make similar concessions.
Europe's political leaders have tried to tight the rules on national budgets covering annual deficits and overall debts, which were designed to control inflation and unemployment across the area.
They have introduced financial penalties for governments that repeatedly breach targets.
