By Paschal Donohoe, Constantinos Petrides and Ministers of Finance, members of Eurogroup
Twenty years ago today, around 300 million Europeans held a brand new currency in their hands, the euro. From Lisbon to Helsinki to Athens, citizens were able to withdraw euro banknotes in their local ATMs, buy their groceries with euro coins and travel abroad without exchanging currency.
The changeover from 12 national currencies to the euro was a one of a kind operation in history: the European Central Bank printed more than 15 billion euro banknotes and some 52 billion coins were minted ahead of 1 January 2002.
Building on the expansion of the Single Market, the euro became one of the most tangible achievements of European integration, together with the free movement of people, the Erasmus student exchange programme or the lifting of roaming charges within the EU.
On a deeper level, the euro is reflective of a common European identity, symbolic of integration as a guarantor for stability and prosperity in Europe.
As the finance ministers and members of the European Commission steering euro area economic policy, we take a collective look back at the past 20 years and identify some priorities for the future of our common currency.
Coming of age
It is fair to say that the euro has had an eventful first two decades.
From the great enthusiasm of its beginnings, the euro has grown to become the world’s second most widely used currency. Our shared currency remains highly popular – about 80% of citizens think the euro is good for the EU – and the euro area has continued to expand, from the 11 initial members, to 19 countries today, and more on the path to joining in the coming years.
This progress was made in the face of severe challenges. Some were sceptical about the project already at its infancy.
When it reached its teens, there was a wider realisation among the member states and institutions that the architecture of the euro was not originally designed to respond to the seismic shock of the global financial and subsequent sovereign debt crises.
This prompted the reform of the euro area’s governance framework, the establishment of a joint support mechanism for countries in financial distress, and a common supervisory system for European banks: a recognition that the solution had to be found in greater coordination and deeper integration.
These early crises enabled the euro to mature and strengthen its international role. We have also learned valuable lessons that have stood us in good stead in the current pandemic: its borderless nature revealed both the depth of our inter-dependence and the strength of our unity.
When the scale of the COVID-19 crisis became evident, it was met with much swifter, more decisive and more coordinated policy action, in contrast to previous shocks. While existing tax and welfare systems worked to cushion the economic impact, the EU took unprecedented decisions to further protect lives and livelihoods, complementing the ECB’s supportive monetary policies.
Our collective response included the SURE financial assistance scheme that has contributed to protecting about 31 million jobs, as well as the ground-breaking recovery plan for Europe – Next Generation EU.
Our coordinated policy response, coupled with the roll-out of COVID-19 vaccines, helped the euro area to quickly rebound from the economic effects of the pandemic. Moreover, the financial and liquidity supports provided were designed to limit the risks of long-term damage so that our economies could rapidly recover lost ground.
The next 20 years
We have achieved a lot in the first 20 years of the euro, but there is more to be done.
We need to keep pace with innovation and promote the international role of the euro. The euro itself must be fit for the digital age. That is why we support and contribute to the ongoing work of the European Central Bank on a digital form of our currency.
At the same time, the euro area needs to be further reinforced. While we have set strong foundations to our European banking system, we have more work to do to strengthen our banking union and unlock new opportunities for economic recovery and growth.
The same applies to our capital markets: we must take decisive action to improve the way private investments and savings flow across the Single Market to provide much-needed financing to companies, including our SMEs, and in turn create new job opportunities.
Investment levels have been too low for too long: we must invest heavily and sustainably in our people, infrastructure and institutions. Coupled with responsible budgetary policies and the contribution of the private sector, Next Generation EU will play a key role in delivering many necessary reforms and investments. This is the best route we have to boost our growth potential, improve our living standards and tackle the critical challenges facing humanity.
We must also ensure fiscal sustainability as our population is ageing. In the context of the review of our common budgetary rules, we need to guarantee that euro area fiscal and economic policies are fit for purpose in a changed environment and responsive to future challenges.
Our common currency is an unprecedented collective endeavour, and a testament to the unity that underpins our Union.
As the world recovers from the pandemic, we must now combine our efforts and resources to reap the benefits of a rapidly digitalising world and to tackle the climate emergency. None of these issues can be addressed by countries acting alone. The euro is proof of what we can achieve when we work together – looking ahead to the next 20 years, let’s make it a symbol of our commitment to secure a prosperous, sustainable and inclusive future for coming generations.
This article was co-signed by Magnus Brunner, Minister of Finance of Austria, Nadia Calviño, First Vice President and Minister for Economy and Digitalisation of Spain, Clyde Caruana, Minister for Finance and Employment of Malta, Valdis Dombrovskis, Executive Vice President of the European Commission for An Economy that Works for People, Paschal Donohoe, President of the Eurogroup and Minister of Finance of Ireland, Daniele Franco, Minister of Economy and Finance of Italy, Paolo Gentiloni, EU Commissioner for the Economy, Pierre Gramegna, Minister of Finance of Luxembourg, Wopke Hoekstra, Minister of Finance of the Netherlands, João Leão, Minister of State for Finance of Portugal, Bruno Le Maire, Minister of the Economy, Finance and Recovery of France, Christian Lindner, Minister of Finance of Germany, Mairead McGuinness, EU Commissioner for financial services, financial stability and Capital Markets Union, Igor Matovič, Minister of Finance and Deputy Prime Minister of Slovakia, Keit Pentus-Rosimannus, Minister of Finance of Estonia, Constantinos Petrides, Minister of Finance of Cyprus, Jānis Reirs, Minister of finance of Latvia, Annika Saarikko, Minister of Finance of Finland, Andrej Šircelj, Minister of Finance of Slovenia, Gintarė Skaistė, Minister of Finance of Lithuania, Christos Staikouras, Minister of Finance of Greece, Vincent Van Peteghem, Minister of Finance of Belgium.