Fact File: The Eurozone

 

Officially introduced in 1999, the euro was the realisation of a dream first mooted in 1929.

Intended to enable the free movement of capital and promote peace in Europe, the monetary union has become a source of political instability in its own right. 

In the wake of the 2008 financial crisis, the steps of the bailout tango have become familiar. A nation struggling with debt denies it will need a loan, a loan is eventually granted by the EU and IMF, on the condition austerity measures are adopted; a further loan is sought and further loans are granted.

What happens next is harder to predict. No provisions were made for countries to leave the monetary union and there is no precedent to fall back on.

Across Europe election defeats for pro-bailout parties have been interpreted as a rejection of the austerity economics championed by German Chancellor Angela Merkel and British Prime Minister David Cameron. The struggling nations protest the human cost of austerity, while more stable economies resent footing the bill, and, in an irony Europhiles will find particularly cutting, press coverage often resorts to the kind of jingoistic name-calling last seen during World War II.

The Numbers

60% of GDP – The eurozone government debt limit. In December 2009 Greece’s debt reached 113% of GDP. Source: European Union

17 – Member states of the EU that have adopted the euro as their currency. Source: European Union

40% - Rise in Greece’s suicide rate in the first half of 2010. Prior to the financial crisis Greece had one of the lowest suicide rates in the world. Source: Huffington Post

10.9% - The eurozone's unemployment rate as of May 2012. This is the highest figure since it was formed in 1999. Source: BBC News

Further Reading

Blame the Greeks. They invented democracy, Matthew Norman, the Independent, 2012

As Merkel says euro meltdown could endanger peace, a historian’s imagination runs riot...Dominic Sandbrook, the Daily Mail, 2011

It’s the Economy, Dummkopf! Michael Lewis, Vanity Fair, 2011

New Documents Shine Light on Euro Birth Defects, Sven Boll, Christian Reiermann, Michael Sauga and Klaus Wiegrefe, Der Spiegel, 2012

Timeline

1929 – German politician Gustav Stresemann proposes a single European currency in an address to the League of Nations

1969 – At a summit in The Hague, European leaders define a new objective: Economic and Monetary Union (EMU)

1992 – The eurozone is established in Maastricht by the European Union. The UK negotiates an opt-out clause.

1999 – The euro currency is officially introduced in the original 11 countries of the eurozone (coins and banknotes follow in 2002)

April 2009 – The EU orders France, Spain, the Republic of Ireland and Greece to reduce their budget deficits

May 2010 – Eurozone countries and the IMF agree a €110bn bailout package for Greece. Bailouts for the Republic of Ireland and Portugal follow in November 2010 and May 2011

Feb 2011 – The European Stability Mechanism, a permanent bailout fund worth €500bn is set up

Jan 2012 – Credit rating agency Standard & Poor downgrades France, Austria, Italy and six other eurozone countries, blaming a lack of progress on the debt crisis

May 2012 – Pro-bailout parties are ousted from government in Greece and France

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