The euro is preparing to celebrate its second decade in circulation on January 2, pending a facelift with the redesign of banknotes planned for 2024 by the European Central Bank (ECB) and without losing sight of a new digital era. To that end, the issuing institute expects to have a prototype of the digital euro ready in 2023, as well as the expected adoption of the currency by new EU countries, the first of which could be Bulgaria within two years.
Despite the ups and downs experienced in its first twenty years in the pockets of its citizens, the euro has established itself as the second most used currency in the world, although at a considerable distance from the dollar, which maintains its hegemony as a currency without question. global reserve, except in the emerging segment of green bond issuance, where euro-denominated issues lead the market.
Reflecting the confidence of the markets, the price of the euro with the dollar, which remains slightly above 1.13 dollars, has experienced a revaluation of close to 27 percent since its launch, although, as of 2021, it has accumulated depreciation of close to 6 percent to the “greenback” because of the opposite positions of the ECB, which has promised not to raise rates in 2022, and the US Federal Reserve, which could raise them to three times next year.
On January 2, 2002, the euro entered circulation at $0.8892, three years after its launch as a virtual currency, reaching a maximum of $0.9066 on that day and closing the session at 0.932 dollars, with an intraday revaluation of 4.8 percent.
Since it was put into circulation, the price of the euro in the foreign exchange markets undertook a marked upward trend that, after the initial hesitations that brought its price to a minimum of $0.856 on February 1, 2002, allowed the currency to reach and exceed parity against the dollar on July 15 of that same year.
Specifically, the euro and the greenback reached parity at 1:15 p.m. on July 15, 2002, after having started the session that day at $0.9941, to finally culminate that same day at $1.025, it’s first closing. above the “green ticket”.
Thus, the progressive strengthening of the European currency against the United States marked a new milestone on July 15, although this time in 2008, amid the financial crisis and just a couple of months before the collapse of Lehman Brothers, when it established its intraday exchange rate. higher compared to the “green bill” when it reached $1.6038, a revaluation of 80.4 percent since it was put into circulation.
In this sense, in parallel to the contagion of financial difficulties in the US “subprime” mortgage market to the entire financial system of that country and the rest of the world, the euro gradually lost force and on September 15, 2008, the date of the Lehman bankruptcy, closed at $1.4264.
The euro’s value has been gradually eroded by the weakening of European economies in the years following the Great Recession, including the threat of “Grexit” during the eurozone sovereign debt crisis and the introduction of quantitative easing policies by the ECB, then led by Mario Draghi, as well as the ultimate impact of the COVID-19 pandemic over nearly two years, with the euro currently trading at just above $1.13, down 29 percent. In the summer of 2008, the best crossing against the “green ticket” was made.
DIGITAL EURO AND NEW TICKETS
In the coming years, the euro will undergo a “facelift” with the redesign of the banknotes that the ECB plans to carry out by 2024 with the collaboration of European citizens.
This process of redesigning euro banknotes will be one of the biggest changes in eurozone money since the ECB decided to end the issuance of 500 euro banknotes from 2018.
Beyond this update to the design of the euro, the ECB has started a much more ambitious process to launch a digital euro in the coming years, for which the institution wants to have a prototype ready in 2023.
THOUSANDS OF MILLIONS LOST IN OLD NATIONAL CURRENCIES
Despite the success of the euro in its first two decades of life, citizens of the 19 eurozone countries still keep billions of euros in their pockets or under their mattresses in coins and banknotes of their respective pre-euro currencies, including 1,575 million euros in the old Spanish pesetas.
However, it is the Germans who are most attached to their old framework, within which they still have 12,350 million euros in coins and banknotes unchanged, perhaps because the Bundesbank keeps the exchange window open indefinitely, as is the case with central banks. Banknotes: Austria, Luxembourg, Belgium (in the case of banknotes), or the Netherlands for some denominations.
On the other hand, in countries like France, francs were left unchanged for an amount equivalent to about 726 million euros. After February 2012, they will cease to be exchanged, while in Italy, the process was closed in 2019. In Portugal, it has been used to exchange shield coins, and after February 2022, the notes will no longer be exchanged.
In the case of Greece, where the exchange period for drachma notes ended in March 2012 (in 2004 in the case of coins), an estimated 478 million euros in drachmas remained unchanged, while in Cyprus and Malta, countries that joined the euro zone in 2008, citizens have not exchanged their previous currency since 2017 and since 2018, respectively.
In Slovakia, a country that adopted the euro in 2009, citizens can still exchange their old crowns for the common currency for an indefinite period, while in Estonia, which joined the eurozone in 2011, the central bank has not set a deadline. The same has happened in the case of Latvia, in the euro since 2014, as well as in Lithuania, the last country to join the euro zone (2015).
The vice president of the European Central Bank (ECB), Luis de Guindos, has expressed his confidence that, in the future, all of the European Union’s countries, with the exception of Denmark and the United Kingdom, will adopt the euro, noting that new members joining the eurozone “is a matter of time.”
In this regard, Bulgaria appears to be the most likely candidate for euro zone expansion, as it plans to adopt the common European currency in January 2024, bringing the total number of euro zone members to 20.