Eurozone

The eurozone, officially called the euro area,[7] is a monetary union of 19 of the 28 European Union (EU) member states which have adopted the euro () as their common currency and sole legal tender. The monetary authority of the eurozone is the Eurosystem. The other nine members of the European Union continue to use their own national currencies, although most of them are obliged to adopt the euro in the future.

The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. Other EU states (except for Denmark and the United Kingdom) are obliged to join once they meet the criteria to do so.[8] No state has left, and there are no provisions to do so or to be expelled.[9] 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] Kosovo and Montenegro have adopted the euro unilaterally,[13] but these countries do not officially form part of the eurozone and do not have representation in the European Central Bank (ECB) or in the Eurogroup.[14]

The ECB, which is governed by a president and a board of the heads of national central banks, sets the monetary policy of the zone. The principal task of the ECB is to keep inflation under control. Though there is no common representation, governance or fiscal policy for the currency union, some co-operation does take place through the Eurogroup, which makes political decisions regarding the eurozone and the euro. The Eurogroup is composed of the finance ministers of eurozone states, but in emergencies, national leaders also form the Eurogroup.

Since the financial crisis of 2007–08, the eurozone has established and used provisions for granting emergency loans to member states in return for enacting economic reforms. The eurozone has also enacted some limited fiscal integration: for example, in peer review of each other's national budgets. The issue is political and in a state of flux in terms of what further provisions will be agreed for eurozone change.

Euro area
Policy of European Union
TypeMonetary union
CurrencyEuro
Established1 January 1999
Members
Governance
Political controlEurogroup
Group presidentMário Centeno
Issuing authorityEuropean Central Bank
ECB presidentMario Draghi
Statistics
Area2,753,828 km2
Population(2018)341,464,266 Increase[1]
Density124/km2
GDP (Nominal)(2018)Total: €11.6(~US$13.0) trillion
Per capita: €33,900 (~US$38,000)[2]
Interest rate0.00%[3]
Inflation0.2%[4]
Unemployment(2019)7.7%[5]
Trade balance€0.2 trillion trade surplus[6]

Territory

European Union member states

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. Greece qualified in 2000, and was admitted on 1 January 2001 before physical notes and coins were introduced on 1 January 2002, replacing all national currencies. Between 2007 and 2015, seven new states acceded.

State Adopted Population[15]
2016
Nominal GNI
2014
(USD,
millions)[16]
Relative GNI
of total, nominal
GNI per
capita
nominal,
2014 (USD)
[17]
Pre-euro
currency
Exceptions ISO
code
 Austria 1999-01-01[18] 8,712,137 423,906 3.18% 49,670 Schilling AT
 Belgium 1999-01-01[18] 11,358,379 530,558 4.18% 47,260 Franc BE
 Cyprus 2008-01-01[19] 1,170,125 22,519 0.18% 26,370 Pound  Northern Cyprus[a] CY
 Estonia 2011-01-01[20] 1,312,442 24,994 0.20% 19,030 Kroon EE
 Finland 1999-01-01[18] 5,503,132 264,554 2.08% 48,420 Markka FI
 France 1999-01-01[18] 64,720,690 2,844,284 22.39% 42,960 Franc  New Caledonia[b]
 French Polynesia[b]
 Wallis and Futuna[b]
FR
 Germany 1999-01-01[18] 81,914,672 3,853,623 30.34% 47,640 Mark DE
 Greece 2001-01-01[21] 11,183,716 250,095 1.97% 22,680 Drachma GR
 Ireland 1999-01-01[18] 4,726,078 214,711 1.69% 46,550 Pound IE
 Italy 1999-01-01[18] 59,429,938 2,147,247 16.91% 34,270 Lira Flag of Campione d'Italia.svg Campione d'Italia[c] IT
 Latvia 2014-01-01[22] 1,970,530 30,413 0.24% 15,280 Lats LV
 Lithuania 2015-01-01[23] 2,908,249 45,185 0.36% 15,430 Litas LT
 Luxembourg 1999-01-01[18] 575,747 42,256 0.33% 75,990 Franc LU
 Malta 2008-01-01[24] 429,362 8,889 0.07% 21,000 Lira MT
 Netherlands 1999-01-01[18] 16,987,330 874,590 6.89% 51,890 Guilder  Aruba[d]
Curaçao Curaçao[e]
Sint Maarten Sint Maarten[e]
Netherlands Caribbean Netherlands[f]
NL
 Portugal 1999-01-01[18] 10,371,627 222,126 1.75% 21,360 Escudo PT
 Slovakia 2009-01-01[25] 5,444,218 96,200 0.76% 17,750 Koruna SK
 Slovenia 2007-01-01[26] 2,077,862 48,625 0.38% 23,580 Tolar SI
 Spain 1999-01-01[18] 46,347,576 1,366,027 10.75% 29,440 Peseta ES
European Union Eurozone 337,143,810 13,265,378 100% 39,162 N/A N/A EZ[g]

The 2012 data above of eurozone states does not include Latvia and Lithuania as they were not yet a part of the eurozone.

Dependent territories of EU member states — outside EU

Five of the dependent territories of EU member states not part of the EU, have adopted the euro:

Non-member usage

Eurozone participation
Eurozone participation
European Union (EU) member states
  19 in the eurozone.
  7 not in ERM II, but obliged to join the eurozone on meeting convergence criteria (Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, and Sweden).
  1 in ERM II, with an opt-out (Denmark).
  1 not in ERM II with an opt-out (United Kingdom).
Non-EU member states
  4 using the euro with a monetary agreement (Andorra, Monaco, San Marino, and Vatican City).
  2 using the euro unilaterally (Kosovo[h] and Montenegro).

With formal agreement

The euro is also used in countries outside the EU. Four states – Andorra, Monaco, San Marino, and Vatican City —[10][13] have signed formal agreements with the EU to use the euro and issue their own coins. Nevertheless, they are not considered part of the eurozone by the ECB and do not have a seat in the ECB or Euro Group.

Other

Kosovo[i] and Montenegro officially adopted the euro as their sole currency without an agreement and, therefore, have no issuing rights.[13] 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.[27][28][29] Further unilateral adoption of the euro (euroisation), by both non-euro EU and non-EU members, is opposed by the ECB and EU.[30]

Historical eurozone enlargements and exchange-rate regimes for EU members

The chart below provides a full summary of all applying exchange-rate regimes for EU members, since the European Monetary System with its Exchange Rate Mechanism and the related new common currency ECU was born on 13 March 1979. The euro replaced the ECU 1:1 at the exchange rate markets, on 1 January 1999. During 1979-1999, the D-Mark functioned as a de facto anchor for the ECU, meaning there was only a minor difference between pegging a currency against ECU and pegging it against the D-mark.

Sources: EC convergence reports 1996-2014, Italian lira, Spanish peseta, Portuguese escudo, Finish markka, Greek drachma, UK pound

The eurozone was born with its first 11 member states on 1 January 1999. The first enlargement of the eurozone, to Greece, took place on 1 January 2001, one year before the euro had physically entered into circulation. The next enlargements were to states which joined the EU in 2004, and then joined the eurozone on 1 January in the year noted: Slovenia (2007), Cyprus (2008), Malta (2008), Slovakia (2009), Estonia (2011), Latvia (2014), and Lithuania (2015).

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 (Bulgaria, Czech Republic, 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 much closer fiscal, economic and political convergence. 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.[31]

Future enlargement

Council of EuropeSchengen AreaEuropean Free Trade AssociationEuropean Economic AreaEurozoneEuropean UnionEuropean Union Customs UnionAgreement with EU to mint eurosGUAMCentral European Free Trade AgreementNordic CouncilBaltic AssemblyBeneluxVisegrád GroupCommon Travel AreaOrganization of the Black Sea Economic CooperationUnion StateSwitzerlandIcelandNorwayLiechtensteinSwedenDenmarkFinlandPolandCzech RepublicHungarySlovakiaGreeceEstoniaLatviaLithuaniaBelgiumNetherlandsLuxembourgItalyFranceSpainAustriaGermanyPortugalSloveniaMaltaCyprusIrelandUnited KingdomCroatiaRomaniaBulgariaTurkeyMonacoAndorraSan MarinoVatican CityGeorgiaUkraineAzerbaijanMoldovaArmeniaRussiaBelarusSerbiaAlbaniaMontenegroNorth MacedoniaBosnia and HerzegovinaKosovo (UNMIK)
A clickable Euler diagram showing the relationships between various multinational European organisations and agreements.

Nine countries (Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, Sweden, and the United Kingdom) are EU members but do not use the euro. Before joining the eurozone, a state must spend two years in the European Exchange Rate Mechanism (ERM II). As of January 2017, only the National Central Bank (NCB) of Denmark participates in ERM II.

Denmark and the United Kingdom obtained special opt-outs in the original Maastricht Treaty. Both countries are legally exempt from joining the eurozone unless their governments decide otherwise, either by parliamentary vote or referendum.

The other seven 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.[32][33]

Interest in joining the eurozone increased in Denmark, and initially in Poland, as a result of the 2008 financial crisis. In Iceland, there was an increase in interest in joining the European Union, a pre-condition for adopting the euro.[34] However, by 2010 the debt crisis in the eurozone caused interest from Poland, as well as the Czech Republic, to cool.[35] Latvia adopted the Euro in 2014, followed by Lithuania in 2015.[36]

Expulsion and withdrawal

In the opinion of journalist Leigh Phillips and Locke Lord's Charles Proctor,[37][38] 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."[38] However, in 2009, a European Central Bank legal study argued that, while voluntary withdrawal is legally not possible, expulsion remains "conceivable."[39] 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.[40]

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]."[41] 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.[41] 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.[42]

Likewise there is no provision for a state to be expelled from the euro.[43] 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.[44]

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.[45] Furthermore, he has suggested that, under narrow circumstances, the European Union can expel member states from the eurozone.[46]

University of California, Berkeley professor of Economics and Political Science Barry Eichengreen, argued in 2007 that "Europe’s leap to monetary union was a mistake...compounded by...including [in the union] also...Italy, Spain, Portugal and Greece," and that "although a breakup was not impossible...it was unlikely," given the technical, political and above all economic obstacles. "On the first minute that word got out," Eisengreen argued, "that the [Greek] government was discussing the possibility [of a Grexit] investors would sell their Greek stocks and bonds" and there "would be a full-fledged financial panic... a full-out bank run."[47] In 2011, he still believed the probability of Grexit was "very low" and in case of any bank run "the Greek government would almost certainly receive support for its banks from its European Union partners and the European Central Bank, because, in his view, more financial crises in other European countries are... the last thing that German business wants." As he put it, "the German economic miracle of the last ten years can be summed up in one word: exports. And the country’s export competitiveness has been greatly enhanced by a euro exchange rate that has been kept down at reasonable levels by the fact that Germany shares the currency with other weaker economies."[47]

In Greece's case, one additional obstacle presented by analysts is that if Greece were to replace the euro with a new national currency, this would not be possible to achieve quickly enough. Paper banknotes must be printed and coins minted, which would take about "six months."[48] The changeover, according to a blogger in The Economist, would likely require bank deposits to be converted from euros to the new currency and this prospect could lead to money leaving the country as well as Greek residents withdrawing cash from the banks, causing a bank run and necessitating capital controls.[49]

Administration and representation

Mário Centeno, Informal ECOFIN, 2016-09-10
Eurogroup President Mário Centeno
Frankfurt EZB-Neubau.20130909
The European Central Bank (seat in Frankfurt depicted) is the supranational monetary authority of the eurozone.

The monetary policy of all countries in the eurozone is managed by the European Central Bank (ECB) and the Eurosystem which comprises the ECB and the central banks of the EU states who have joined the eurozone. Countries outside the eurozone are not represented in these institutions. Whereas all EU member states are part of the European System of Central Banks (ESCB), non EU member states have no say in all three institutions, even those with monetary agreements such as Monaco. The ECB is entitled to authorise the design and printing of euro banknotes and the volume of euro coins minted, and its president is currently Mario Draghi.

The eurozone is represented politically by its finance ministers, known collectively as the Eurogroup, and is presided over by a president, currently Mário Centeno. The finance ministers of the EU member states that use the euro meet a day before a meeting of the Economic and Financial Affairs Council (Ecofin) of the Council of the European Union. The Group is not an official Council formation but when the full EcoFin council votes on matters only affecting the eurozone, only Euro Group members are permitted to vote on it.[50][51][52]

Since the global financial crisis of 2007–08, the Euro Group has met irregularly not as finance ministers, but as heads of state and government (like the European Council). It is in this forum, the Euro summit, that many eurozone reforms have been decided upon. In 2011, former French President Nicolas Sarkozy pushed for these summits to become regular and twice a year in order for it to be a 'true economic government'.

Reform

In April 2008 in Brussels, European Commission President Jean-Claude Juncker suggested that the eurozone should be represented at the IMF as a bloc, rather than each member state separately: "It is absurd for those 15 countries not to agree to have a single representation at the IMF. It makes us look absolutely ridiculous. We are regarded as buffoons on the international scene".[53] In 2017 Juncker stated that he aims to have this agreed by the end of his mandate in 2019.[54] However, Finance Commissioner Joaquín Almunia stated that before there is common representation, a common political agenda should be agreed upon.[53]

Leading EU figures including the Commission and national governments have proposed a variety of reforms to the eurozone's architecture; notably the creation of a Finance Minister, a larger eurozone budget, and reform of the current bailout mechanisms into either a "European Monetary Fund" or a eurozone Treasury. While many have similar themes, details vary greatly.[55][56][57][58]

Economy

Eurozone. GNI PPP per capita, PPP (current international $) World bank 2017
Eurozone. GNI PPP per capita(current international $), World Bank 2017

Comparison table

Comparison of eurozone with other economies [59][60] [61]
Population
(billions)
(2018)
GDP PPPa
(trillions USD)
(2018)
Proportion
of world
GDP
at PPP

(2016)
Exports,
% of GDP
(2012)
Imports,
% of GDP
(2012)
Logo European Central Bank.svg Eurozone 0.34 15 11% 27% 25%
 European Union 0.51 22 17% 18% 17%
 United States 0.33 20 16% 14% 17%
 China 1.40 25 18% 26% 24%
 India 1.35 11 7% 24% 31%
 Japan 0.13 6 4% 15% 17%

^a GDP in PPP, exports/imports of goods and services excluding intra-EU trade.

Comparison of Economies
Economy
Nominal GDP (billions in USD) - Peak year as of 2018
(01)  United States (Peak in 2018)
20,494
(02) Logo European Central Bank.svg Eurozone (Peak in 2018)
13,670
(03)  China (Peak in 2018)
13,407
(04)  Japan (Peak in 2012)
6,203
(05)  United Kingdom (Peak in 2007)
3,076
(06)  India (Peak in 2018)
2,717
(07)  Brazil (Peak in 2011)
2,614
(08)  Russia (Peak in 2013)
2,297
(09)  Canada (Peak in 2013)
1,843
(10)  South Korea (Peak in 2018)
1,619
(11)  Australia (Peak in 2012)
1,567
(12)  Mexico (Peak in 2014)
1,314
(13)  Indonesia (Peak in 2017)
1,015
(14)  Turkey (Peak in 2013)
950
(15)  Saudi Arabia (Peak in 2018)
782
(16)   Switzerland (Peak in 2014)
710
(17)  Argentina (Peak in 2015)
642
(18)  Taiwan (Peak in 2018)
589
(19)  Poland (Peak in 2018)
586
(20)  Sweden (Peak in 2013)
579

The 20 largest economies in the world including Eurozone as a single entity, by Nominal GDP (2018) at their peak level of GDP in billions US$. The values for EU members that are not also eurozone members are listed both separately and as part of the EU.[62]

Inflation

HICP figures from the ECB, taken from May of each year:

  • 2000: 1.7%
  • 2001: 3.1%
  • 2002: 2.0%
  • 2003: 1.8%
  • 2004: 2.5%
  • 2005: 2.0%
  • 2006: 2.5%
  • 2007: 1.9%
  • 2008: 3.7%
  • 2009: 0.0%
  • 2010: 1.7%
  • 2011: 2.7%
  • 2012: 2.4%
  • 2013: 0.9%
  • 2014: -0,2%
  • 2015: 0.3%
  • 2016: -0.1%
  • 2017: 1.4%
  • 2018: N/A
  • 2019: N/A

Interest rates

Interest rates for the eurozone, set by the ECB since 1999. Levels are in percentages per annum. Between June 2000 and October 2008, the main refinancing operations were variable rate tenders, as opposed to fixed rate tenders. The figures indicated in the table from 2000 to 2008 refer to the minimum interest rate at which counterparties may place their bids.[3]

Eurozone interest rates

Eurozone interest rates
Date Deposit
facility
Main
refinancing
operations
Marginal
lending
facility
1999-01-01 2.00 3.00 4.50
1999-01-04[j] 2.75 3.00 3.25
1999-01-22 2.00 3.00 4.50
1999-04-09 1.50 2.50 3.50
1999-11-05 2.00 3.00 4.00
2000-02-04 2.25 3.25 4.25
2000-03-17 2.50 3.50 4.50
2000-04-28 2.75 3.75 4.75
2000-06-09 3.25 4.25 5.25
2000-06-28 3.25 4.25 5.25
2000-09-01 3.50 4.50 5.50
2000-10-06 3.75 4.75 5.75
2001-05-11 3.50 4.50 5.50
2001-08-31 3.25 4.25 5.25
2001-09-18 2.75 3.75 4.75
2001-11-09 2.25 3.25 4.25
2002-12-06 1.75 2.75 3.75
2003-03-07 1.50 2.50 3.50
2003-06-06 1.00 2.00 3.00
2005-12-06 1.25 2.25 3.25
2006-03-08 1.50 2.50 3.50
2006-06-15 1.75 2.75 3.75
2006-08-09 2.00 3.00 4.00
2006-10-11 2.25 3.25 4.25
2006-12-13 2.50 3.50 4.50
2007-03-14 2.75 3.75 4.75
2007-06-13 3.00 4.00 5.00
2008-07-09 3.25 4.25 5.25
2008-10-08 2.75 4.75
2008-10-09 3.25 4.25
2008-10-15 3.25 3.75 4.25
2008-11-12 2.75 3.25 3.75
2008-12-10 2.00 2.50 3.00
2009-01-21 1.00 2.00 3.00
2009-03-11 0.50 1.50 2.50
2009-04-08 0.25 1.25 2.25
2009-05-13 0.25 1.00 1.75
2011-04-13 0.50 1.25 2.00
2011-07-13 0.75 1.50 2.25
2011-11-09 0.50 1.25 2.00
2011-12-14 0.25 1.00 1.75
2012-07-11 0.00 0.75 1.50
2013-05-08 0.00 0.50 1.00
2013-11-13 0.00 0.25 0.75
2014-06-11 -0.10 0.15 0.40
2014-09-10 -0.20 0.05 0.30
2015-12-09 -0.30 0.05 0.30
2016-03-16 -0.40 0.00 0.25

Public debt

The following table states the ratio of public debt to GDP in percent for eurozone countries given by EuroStat[63]. The euro convergence criterion is 60%.

Country 2007 2009 2010 2011 2015 2016 2017
Eurozone 64.9 78.5 84.0 86.0 90.7 88.9 86.7
 Austria 64.7 79.7 82.4 82.2 86.2 83.6 78.4
 Belgium 87.0 99.6 99.7 102.3 106.0 105.7 103.1
 Cyprus 53.5 53.9 56.3 65.8 108.9 107.1 97.5
 Estonia 3.7 7.0 6.6 5.9 9.7 9.4 9.0
 Finland 34.0 41.7 47.1 48.5 63.1 63.1 61.4
 France 64.3 79.0 81.7 85.2 95.8 96.5 97.0
 Germany 63.7 72.4 81.0 78.3 71.2 68.1 64.1
 Greece 103.1 126.7 146.2 172.1 176.9 180.8 178.6
 Ireland 23.9 61.8 86.8 109.1 93.8 72.8 68.0
 Italy 99.8 112.5 115.4 116.5 132.7 132 131.8
 Latvia 8.0 36.6 47.5 42.8 36.4 40.6 40.1
 Lithuania 15.9 29.0 36.2 37.2 42.7 40.1 39.7
 Luxembourg 7.7 16.0 20.1 19.1 21.4 20.8 23.0
 Malta 62.3 67.8 67.6 69.9 63.9 57.6 50.8
 Netherlands 42.7 56.5 59.0 61.7 65.1 61.8 56.7
 Portugal 68.4 83.6 96.2 111.4 129.0 130.1 125.7
 Slovakia 30.1 41.0 43.3 43.3 52.9 51.8 50.9
 Slovenia 22.8 36.0 40.8 46.6 83.2 78.5 73.6
 Spain 35.6 52.7 60.1 69.5 99.2 99.0 98.3

Fiscal policies

Government surplus or deficit (EU-USA-UK)
Comparison of government surplus/deficit (2001-2012) of eurozone, United States and United Kingdom

The primary means for fiscal coordination within the EU lies in the Broad Economic Policy Guidelines which are written for every member state, but with particular reference to the 19 current members of the eurozone. These guidelines are not binding, but are intended to represent policy coordination among the EU member states, so as to take into account the linked structures of their economies.

For their mutual assurance and stability of the currency, members of the eurozone have to respect the Stability and Growth Pact, which sets agreed limits on deficits and national debt, with associated sanctions for deviation. The Pact originally set a limit of 3% of GDP for the yearly deficit of all eurozone member states; with fines for any state which exceeded this amount. In 2005, Portugal, Germany, and France had all exceeded this amount, but the Council of Ministers had not voted to fine those states. Subsequently, reforms were adopted to provide more flexibility and ensure that the deficit criteria took into account the economic conditions of the member states, and additional factors.

The Fiscal Compact[64][65] (formally, the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union),[66] is an intergovernmental treaty introduced as a new stricter version of the Stability and Growth Pact, signed on 2 March 2012 by all member states of the European Union (EU), except the Czech Republic, the United Kingdom,[67] and Croatia (subsequently acceding the EU in July 2013). The treaty entered into force on 1 January 2013 for the 16 states which completed ratification prior of this date.[68] As of 1 April 2014, it had been ratified and entered into force for all 25 signatories.

Olivier Blanchard suggests that a fiscal union in the EZ can mitigate devastating effects of the single currency on the EZ peripheral countries. But he adds that the currency bloc will not work perfectly even if a fiscal transfer system is built, because, he argues, the fundamental issue about competitiveness adjustment is not tackled. The problem is, since the EZ peripheral countries do not have their own currencies, they are forced to adjust their economies by decreasing their wages instead of devaluation.[69]

Bailout provisions

The financial crisis of 2007–08 prompted a number of reforms in the eurozone. One was a U-turn on the eurozone's bailout policy that led to the creation of a specific fund to assist eurozone states in trouble. The European Financial Stability Facility (EFSF) and the European Financial Stability Mechanism (EFSM) were created in 2010 to provide, alongside the International Monetary Fund (IMF), a system and fund to bail out members. However the EFSF and EFSM were temporary, small and lacked a basis in the EU treaties. Therefore, it was agreed in 2011 to establish a European Stability Mechanism (ESM) which would be much larger, funded only by eurozone states (not the EU as a whole as the EFSF/EFSM were) and would have a permanent treaty basis. As a result of that its creation involved agreeing an amendment to TEFU Article 136 allowing for the ESM and a new ESM treaty to detail how the ESM would operate. If both are successfully ratified according to schedule, the ESM would be operational by the time the EFSF/EFSM expire in mid-2013.

In February 2016, the UK secured further confirmation that countries that do not use the Euro would not be required to contribute to bailouts for Eurozone countries.[70]

Peer review

In June 2010, a broad agreement was finally reached on a controversial proposal for member states to peer review each other's budgets prior to their presentation to national parliaments. Although showing the entire budget to each other was opposed by Germany, Sweden and the UK, each government would present to their peers and the Commission their estimates for growth, inflation, revenue and expenditure levels six months before they go to national parliaments. If a country was to run a deficit, they would have to justify it to the rest of the EU while countries with a debt more than 60% of GDP would face greater scrutiny.[71]

The plans would apply to all EU members, not just the eurozone, and have to be approved by EU leaders along with proposals for states to face sanctions before they reach the 3% limit in the Stability and Growth Pact. Poland has criticised the idea of withholding regional funding for those who break the deficit limits, as that would only impact the poorer states.[71] In June 2010 France agreed to back Germany's plan for suspending the voting rights of members who breach the rules.[72] In March 2011 was initiated a new reform of the Stability and Growth Pact aiming at straightening the rules by adopting an automatic procedure for imposing of penalties in case of breaches of either the deficit or the debt rules.[73][74]

Criticism

Nobel prize-winning economist James Tobin thought that the euro project would not succeed without making drastic changes to European institutions, pointing out the difference between the US and the eurozone.[75] Concerning monetary policies, the US central bank FRB aims at both growth and reducing unemployment, while the ECB tends to give its first priority to price stability under Bundesbank's supervision. As the price level of the currency bloc is kept low, the unemployment level of the region has become higher than that of US since 1982.[75]

When it comes to fiscal policies, 12 percent of the US federal budget is used for transfers to states and local governments. Also, when a state has financial or economic difficulties, a fair amount of money is automatically transferred to the state. The US government does not impose restrictions on state budget policies. This is different from the fiscal policies of the eurozone, where Treaty of Maastricht requires each eurozone member country to run its budget deficit smaller than 3 percent of its GDP.[75]

In February 2019, a study from the Centre for European Policy concluded that while some countries had gained from adopting the euro, several countries were poorer than they would have been had they not adopted it, with France and Italy being particularly affected. The authors argued that this was down to its effect on competitiveness; usually countries would devalue their currencies to make their exports cheaper on the world market but this was not possible due to the common currency.[76]

Economic policemen

In 1997, Arnulf Baring expressed concern that the European Monetary Union would make Germans the most hated people in Europe. Baring suspected the possibility that the people in Mediterranean countries would regard Germans and the currency bloc as economic policemen.[77]

See also

Notes

  1. ^ The self-declared Turkish Republic of Northern Cyprus is not recognised by the EU and uses the Turkish lira. However the euro does circulate widely.
  2. ^ a b c French Pacific territories use the CFP franc, which is pegged to the euro.(1 franc = 0.00838 euro)
  3. ^ Uses the Swiss franc. However the euro is also accepted and circulates widely.
  4. ^ Aruba is part of the Kingdom of the Netherlands, but not the EU. It uses the Aruban florin, which is pegged to the US dollar.(1 dollar = 1.79 florins)
  5. ^ a b Currently uses the Netherlands Antillean guilder and had planned to introduce the Caribbean guilder in 2014, although the change has been delayed. "Archived copy". Archived from the original on 7 April 2014. Retrieved 16 May 2014.CS1 maint: Archived copy as title (link) both are pegged to the US dollar.(1 dollar = 1.79 guilder)
  6. ^ Uses the US Dollar.
  7. ^ EZ is not assigned, but is reserved for this purpose, in ISO-3166-1.
  8. ^ Kosovo is the subject of a territorial dispute between the Republic of Kosovo and the Republic of Serbia. The Republic of Kosovo unilaterally declared independence on 17 February 2008, but Serbia continues to claim it as part of its own sovereign territory. The two governments began to normalise relations in 2013, as part of the Brussels Agreement. Kosovo has been recognized as an independent state by 112 out of 193 United Nations member states, while 10 states have recognized Kosovo only to later withdraw their recognition.
  9. ^ Kosovo is the subject of a territorial dispute between the Republic of Kosovo and the Republic of Serbia. The Republic of Kosovo unilaterally declared independence on 17 February 2008, but Serbia continues to claim it as part of its own sovereign territory. The two governments began to normalise relations in 2013, as part of the Brussels Agreement. Kosovo has been recognized as an independent state by 112 out of 193 United Nations member states, while 10 states have recognized Kosovo only to later withdraw their recognition.
  10. ^ The ECB announced on 22 December 1998 that, between 4 and 21 January 1999, there would be a narrow corridor of 50 base points interest rates for the marginal lending facility and the deposit facility in order to help the transition to the ECB's interest regime.

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External links

Currencies of the European Union

There are eleven currencies of the European Union as of 2018 used officially by member states. The euro accounts for the majority of the member states with the remainder operating independent monetary policies. Those European Union states that have adopted it are known as the eurozone and share the European Central Bank (ECB). The ECB and the national central banks of all EU countries, including those who operate an independent currency, are part of the European System of Central Banks.

Economic and Monetary Union of the European Union

The Economic and Monetary Union (EMU) is an umbrella term for the group of policies aimed at converging the economies of member states of the European Union at three stages. The policies cover the 19 eurozone states, as well as non-euro European Union states.

Each stage of the EMU consists of progressively closer economic integration. Only once a state participates in the third stage it is permitted to adopt the euro as its official currency. As such, the third stage is largely synonymous with the eurozone. The euro convergence criteria are the set of requirements that needs to be fulfilled in order for a country to join the eurozone. An important element of this is participation for a minimum of two years in the European Exchange Rate Mechanism ("ERM II"), in which candidate currencies demonstrate economic convergence by maintaining limited deviation from their target rate against the euro.

Nineteen EU member states, including most recently Lithuania, have entered the third stage and have adopted the euro as their currency. All new EU member states must commit to participate in the third stage in their treaties of accession. Only Denmark and the United Kingdom, whose EU membership predates the introduction of the euro, have legal opt outs from the EU Treaties granting them an exemption from this obligation. The remaining seven non-euro member states are obliged to enter the third stage once they comply with all convergence criteria..

Economy of the European Union

The European Union is the second largest economy in the world in nominal terms (after the United States) and according to purchasing power parity or PPP (after China). The European Union's GDP was estimated to be $18.8 trillion (nominal) in 2018, representing ~22% of global economy (Nominal global GDP).

The euro, used by 19 of its 28 members, is the second largest reserve currency as well as the second most traded currency in the world after the United States dollar. The euro is the official currency in 25 countries, in the eurozone and in six other European countries, officially or de facto.

The European Union (EU) economy consists of an internal market of mixed economies based on free market and advanced social models. The GDP per capita (PPP) was $37,800 in 2017, compared to $59,495 in the United States, $42,695 Japan and $16,636 in China. There are significant disparities in GDP per capita (PPP) between member states ranging from $105,148 in Luxembourg to $21,678 in Bulgaria. With a low Gini coefficient of 31, the European Union has a more egalitarian repartition of incomes than the world average.Major economic hubs and financial centres where the large number of institutions, companies and banks is located are Amsterdam, Brussels, Bucharest, Dublin, Frankfurt, Göteborg, Helsinki, Lisbon, London, Madrid, Milan, Paris and Warsaw.

Euronext is the main stock exchange of the Eurozone and the 7th world largest by market capitalisation. Foreign investments made in the European Union total $5.1 trillion in 2012, while the EU's investments in foreign countries total $9.1 trillion, by far the highest domestic and foreign investments in the world.Since the beginning of the public debt crisis in 2009, opposite economic situations have emerged between Southern Europe on one hand, and Central and Northern Europe on the other hand: a higher unemployment rate and public debt in the Mediterranean countries with the exception of Malta, and a lower unemployment rate with higher GDP growth rate in the Eastern and in Northern member countries. In 2015, public debt in the European Union was 85% of GDP, with disparities between the lowest rate, Estonia with 9.7%, and the highest, Greece with 176%.The ten largest trading partners of the European Union are the United States, China, Switzerland, Russia, Turkey, Japan, Norway, South Korea and India (trade with all these countries crossed $110 billion mark in 2016). The EU is represented as a unified entity in the World Trade Organization (WTO), the G-20 and G7, alongside with the EU's member countries participating.

Enlargement of the eurozone

The enlargement of the eurozone is an ongoing process within the European Union (EU). All member states of the European Union, except Denmark and the United Kingdom which negotiated opt-outs from the provisions, are obliged to adopt the euro as their sole currency once they meet the criteria, which include: complying with the debt and deficit criteria outlined by the Stability and Growth Pact, keeping inflation and long-term governmental interest rates below certain reference values, stabilising their currency's exchange rate versus the euro by participating in the European Exchange Rate Mechanism (ERM II), and ensuring that their national laws comply with the ECB statute, ESCB statute and articles 130+131 of the Treaty on the Functioning of the European Union. The obligation for EU member states to adopt the euro was first outlined by article 109.1j of the Maastricht Treaty of 1992, which became binding on all new member states by the terms of their treaties of accession.

As of 2016, there are 19 EU member states in the eurozone, of which the first 11 (Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain) introduced the euro on 1 January 1999 when it was electronic only. Greece joined 1 January 2001, one year before the physical euro coins and notes replaced the old national currencies in the eurozone. Subsequently, the following seven countries also joined the eurozone on 1 January in the mentioned year: Slovenia (2007), Cyprus (2008), Malta (2008), Slovakia (2009), Estonia (2011), Latvia (2014) and Lithuania (2015).

Seven remaining states are on the enlargement agenda: Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania and Sweden. Denmark is not obliged to join, though should the country decide to do so it may join the eurozone with little difficulty as Denmark is already part of the ERM II. The United Kingdom voted to leave the EU in a referendum in June 2016 and so is unlikely to join the eurozone.

Euro

The euro (sign: €; code: EUR) is the official currency of 19 of the 28 member states of the European Union. This group of states is known as the eurozone or euro area, and counts about 343 million citizens as of 2019. The euro is the second largest and second most traded currency in the foreign exchange market after the United States dollar. The euro is divided into 100 cents.

The currency is also used officially by the institutions of the European Union, by four European microstates that are not EU members, as well as unilaterally by Montenegro and Kosovo. Outside Europe, a number of special territories of EU members also use the euro as their currency. Additionally, 240 million people worldwide as of 2018 use currencies pegged to the euro.The euro is the second largest reserve currency as well as the second most traded currency in the world after the United States dollar.

As of August 2018, with more than €1.2 trillion in circulation, the euro has one of the highest combined values of banknotes and coins in circulation in the world, having surpassed the U.S. dollar.The name euro was officially adopted on 16 December 1995 in Madrid. The euro was introduced to world financial markets as an accounting currency on 1 January 1999, replacing the former European Currency Unit (ECU) at a ratio of 1:1 (US$1.1743). Physical euro coins and banknotes entered into circulation on 1 January 2002, making it the day-to-day operating currency of its original members, and by March 2002 it had completely replaced the former currencies. While the euro dropped subsequently to US$0.83 within two years (26 October 2000), it has traded above the U.S. dollar since the end of 2002, peaking at US$1.60 on 18 July 2008. In late 2009, the euro became immersed in the European sovereign-debt crisis, which led to the creation of the European Financial Stability Facility as well as other reforms aimed at stabilising and strengthening the currency.

Euro calculator

A euro calculator is a very popular type of calculator in European countries (see eurozone) that adopted the euro as their official monetary unit. It functions like any other normal calculator, but it also includes a special function which allows one to convert a value expressed in the previously official unit (the peseta in Spain, for example) to the new value in euros, or vice versa. Its use became very popular within the population and commerce of these countries especially during the first few months after adopting the euro.

As so many were produced, they are also found outside the eurozone to help staff with conversions at airports or railway stations where the euro has a strong presence.

Euro coins

There are eight euro coin denominations, ranging from one cent to two euros (the euro is divided into a hundred cents). The coins first came into use in 2002. They have a common reverse, portraying a map of Europe, but each country in the eurozone has its own design on the obverse, which means that each coin has a variety of different designs in circulation at once. Four European microstates which use the euro as their currency also have the right to mint coins with their own designs on the obverse side.

The coins, and various commemorative coins, are minted at numerous national mints across the European Union to strict national quotas. Obverse designs are chosen nationally, while the reverse and the currency as a whole is managed by the European Central Bank (ECB).

Euro summit

The Euro summit (also referred to as the eurozone summit or euro area summit) is the meeting of the heads of state or government of the member states of the eurozone (those EU states which have adopted the euro). It is distinct from the EU summit held regularly by the European Council, the meeting of all EU leaders.

Eurobonds

Eurobonds or stability bonds were proposed government bonds to be issued in euros jointly by the 19 eurozone nations. The idea was first raised by the European Commission in 2011 during the 2009–2012 European sovereign debt crisis. Eurobonds would be debt investments whereby an investor loans a certain amount of money, for a certain amount of time, with a certain interest rate, to the eurozone bloc altogether, which then forwards the money to individual governments.

Eurobonds have been suggested as a way to tackle the 2009–2012 European debt crisis as the indebted states could borrow new funds at better conditions as they are supported by the rating of the non-crisis states. Because Eurobonds would allow already highly indebted states access to cheaper credit thanks to the strength of other eurozone economies, they are controversial, and may suffer from the free rider problem. The proposal was generally favored by indebted governments such as Portugal, Greece, and Ireland, but encountered strong opposition from Germany, the Eurozone's strongest economy. The plan ultimately never moved forward in face of German opposition; the crisis was ultimately resolved by the ECB's declaration in 2012 that it would do "whatever it takes" to stabilize the Euro, rendering the Eurobond proposal moot.

Eurogroup

The Eurogroup is the recognised collective term for informal meetings of the finance ministers of the eurozone—those member states of the European Union (EU) which have adopted the euro as their official currency. The group has 19 members. It exercises political control over the currency and related aspects of the EU's monetary union such as the Stability and Growth Pact. The current President of the Eurogroup is Mário Centeno, the Minister of Finance of Portugal.The ministers meet in camera a day before a meeting of the Economic and Financial Affairs Council (ECOFIN) of the Council of the European Union. They communicate their decisions via press and document releases. The group is related to the Council of the European Union (only Eurogroup member states vote on issues relating to the euro in the ECOFIN) and was formalised under the Treaty of Lisbon.

Europa coin programme

The Europa Coin Programme, also known as the European Silver Programme, or the Eurostar Programme, is an initiative dedicated to the issuance of collector-oriented legal tender coins in precious metals to celebrate European identity. The issuing authorities of EU member countries voluntarily contribute coins to the Europa Coin Programme. Multiple countries have participated in the programme, beginning in 2004. Some coins are denominated in euro, others are denominated in other currencies. Europa coins are legal tender.

European Central Bank

The European Central Bank (ECB) is the central bank for the euro and administers monetary policy within the Eurozone, which comprises 19 member states of the European Union and is one of the largest monetary areas in the world. Established by the Treaty of Amsterdam, the ECB is one of the world's most important central banks and serves as one of seven institutions of the European Union, being enshrined in the Treaty on European Union (TEU). The bank's capital stock is owned by all 28 central banks of each EU member state. The current President of the ECB is Mario Draghi. Headquartered in Frankfurt, Germany, the bank formerly occupied the Eurotower prior to the construction of its new seat.

The primary objective of the ECB, mandated in Article 2 of the Statute of the ECB, is to maintain price stability within the Eurozone. Its basic tasks, set out in Article 3 of the Statute, are to set and implement the monetary policy for the Eurozone, to conduct foreign exchange operations, to take care of the foreign reserves of the European System of Central Banks and operation of the financial market infrastructure under the TARGET2 payments system and the technical platform (currently being developed) for settlement of securities in Europe (TARGET2 Securities). The ECB has, under Article 16 of its Statute, the exclusive right to authorise the issuance of euro banknotes. Member states can issue euro coins, but the amount must be authorised by the ECB beforehand.

The ECB is governed by European law directly, but its set-up resembles that of a corporation in the sense that the ECB has shareholders and stock capital. Its capital is €11 billion held by the national central banks of the member states as shareholders. The initial capital allocation key was determined in 1998 on the basis of the states' population and GDP, but the capital key has been adjusted. Shares in the ECB are not transferable and cannot be used as collateral.

European Currency Unit

The European Currency Unit (₠ or ECU) was a basket of the currencies of the European Community member states, used as the unit of account of the European Community before being replaced by the euro on 1 January 1999, at parity. The ECU itself replaced the European Unit of Account, also at parity, on 13 March 1979. The European Exchange Rate Mechanism attempted to minimize fluctuations between member state currencies and the ECU. The ECU was also used in some international financial transactions, where its advantage was that securities denominated in ECUs provided investors with the opportunity for foreign diversification without reliance on the currency of a single country.The ECU was conceived on 13 March 1979 as an internal accounting unit. It had the ISO 4217 currency code XEU.

European Exchange Rate Mechanism

The European Exchange Rate Mechanism (ERM) was a system introduced by the European Economic Community on 13 March 1979, as part of the European Monetary System (EMS), to reduce exchange rate variability and achieve monetary stability in Europe, in preparation for Economic and Monetary Union and the introduction of a single currency, the euro, which took place on 1 January 1999.

After the adoption of the euro, policy changed to linking currencies of EU countries outside the eurozone to the euro (having the common currency as a central point). The goal was to improve the stability of those currencies, as well as to gain an evaluation mechanism for potential eurozone members. This mechanism is known as ERM II and has superseded ERM. Currently there is just one currency in the ERM II, the Danish krone.

European Financial Stability Facility

The European Financial Stability Facility (EFSF) is a special purpose vehicle financed by members of the eurozone to address the European sovereign-debt crisis. It was agreed by the Council of the European Union on 9 May 2010, with the objective of preserving financial stability in Europe by providing financial assistance to eurozone states in economic difficulty. The Facility's headquarters are in Luxembourg City, as are those of the European Stability Mechanism. Treasury management services and administrative support are provided to the Facility by the European Investment Bank through a service level contract. Since the establishment of the European Stability Mechanism, the activities of the EFSF are carried out by the ESM.The EFSF is authorised to borrow up to €440 billion, of which €250 billion remained available after the Irish and Portuguese bailout. A separate entity, the European Financial Stabilisation Mechanism (EFSM), a programme reliant upon funds raised on the financial markets and guaranteed by the European Commission using the budget of the European Union as collateral, has the authority to raise up to €60 billion.

European debt crisis

The European debt crisis (often also referred to as the eurozone crisis or the European sovereign debt crisis) is a multi-year debt crisis that has been taking place in the European Union since the end of 2009. Several eurozone member states (Greece, Portugal, Ireland, Spain and Cyprus) were unable to repay or refinance their government debt or to bail out over-indebted banks under their national supervision without the assistance of third parties like other eurozone countries, the European Central Bank (ECB), or the International Monetary Fund (IMF).

The detailed causes of the debt crisis varied. In several countries, private debts arising from a property bubble were transferred to sovereign debt as a result of banking system bailouts and government responses to slowing economies post-bubble. The structure of the eurozone as a currency union (i.e., one currency) without fiscal union (e.g., different tax and public pension rules) contributed to the crisis and limited the ability of European leaders to respond. European banks own a significant amount of sovereign debt, such that concerns regarding the solvency of banking systems or sovereigns are negatively reinforcing.As concerns intensified in early 2010 and thereafter, leading European nations implemented a series of financial support measures such as the European Financial Stability Facility (EFSF) and European Stability Mechanism (ESM). The ECB also contributed to solve the crisis by lowering interest rates and providing cheap loans of more than one trillion euro in order to maintain money flows between European banks. On 6 September 2012, the ECB calmed financial markets by announcing free unlimited support for all eurozone countries involved in a sovereign state bailout/precautionary programme from EFSF/ESM, through some yield lowering Outright Monetary Transactions (OMT).Return to economic growth and improved structural deficits enabled Ireland and Portugal to exit their bailout programmes in July 2014. Greece and Cyprus both managed to partly regain market access in 2014. Spain never officially received a bailout programme. Its rescue package from the ESM was earmarked for a bank recapitalisation fund and did not include financial support for the government itself.

The crisis has had significant adverse economic effects and labour market effects, with unemployment rates in Greece and Spain reaching 27%, and was blamed for subdued economic growth, not only for the entire eurozone, but for the entire European Union. As such, it can be argued to have had a major political impact on the ruling governments in 10 out of 19 eurozone countries, contributing to power shifts in Greece, Ireland, France, Italy, Portugal, Spain, Slovenia, Slovakia, Belgium and the Netherlands, as well as outside of the eurozone, in the United Kingdom.

Eurosystem

The Eurosystem is the monetary authority of the eurozone, the collective of European Union member states that have adopted the euro as their sole official currency. The ECB has, under Article 16 of its Statute, the exclusive right to authorise the issuance of euro banknotes. Member states can issue euro coins, but the amount must be authorised by the ECB beforehand.

The Eurosystem consists of the European Central Bank and the national central banks (NCB) of the 19 member states that are part of the eurozone. The national central banks apply the monetary policy of the ECB. The primary objective of the Eurosystem is price stability. Secondary objectives are financial stability and financial integration. The mission statement of the Eurosystem says that the ECB and the national central banks jointly contribute to achieving the objectives.The Eurosystem is independent. When performing Eurosystem-related tasks, neither the ECB, nor an NCB, nor any member of their decision-making bodies may seek or take instructions from any external body. The Community institutions and bodies and the governments of the member states may not seek to influence the members of the decision-making bodies of the ECB or of the NCBs in the performance of their tasks.

The Eurosystem is distinct from the European System of Central Banks (ESCB), which comprises the ECB and the central banks of all 28 European Union member states, including those that are not part of the eurozone.

Greek withdrawal from the eurozone

A Greek withdrawal from the eurozone is a hypothetical scenario in which Greece withdraws from the Eurozone, likely to allow for the country to deal with its government-debt crisis. As of March 2019, no such withdrawal has occurred, nor is one in prospect. This conjecture has been referred to as "Grexit", a portmanteau combining the English words "Greek" and "exit", and which has been expressed in Greek as ελλέξοδος, (from Ελλάς + έξοδος). The term "Graccident" (accidental Grexit) was coined for the case that Greece exited the EU and the euro unintentionally. These terms first came into use in 2012 and have been revitalised at each of the bailouts made available to Greece since then.

Proponents of the proposal argue that leaving the euro and reintroducing the drachma would dramatically boost exports and tourism and while discouraging expensive imports and thereby give the Greek economy the possibility to recover and stand on its own feet.

Opponents argue that the proposal would impose excessive hardship on the Greek people, as the short-term effects would be a significant consumption and wealth reduction for the Greek population. This may cause civil unrest in Greece and harm the reputation of the eurozone. Additionally, it could cause Greece to align more with non-EU states.

Italian government debt

The Italian government debt is the public debt owed by the government of Italy to all public and private lenders. This excludes unfunded state pensions owed to the public. As of January 2014, the Italian government debt stands at €2.1 trillion (131.1% of GDP). However, Italy has the lowest share of public debt held by non-residents of all eurozone countries and the country's national wealth is four times larger than its public debt.

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