Euro Glossary

Cent - 100th of a euro, sometimes called euro-cent

Central Bank Governors - Governors of central banks in EU countries currently meet under the auspices of the European Monetary Institute to coordinate monetary policy at the European level. Since June 1998, when the European Central Bank was formed, central bank governors from those countries in the euro zone also sit on the ECB's Governing Council. Governors from outside the euro zone sit on the General Council of all European central bank governors

Consumer Testing of Coin Designs - The winning design was the clear favourite of an opinion poll organised by the European Commission among both the general public and a wide range of currency users' organisations, including consumers and representatives of the blind and the visually impaired, and also with the European Parliament

Continuity of contracts - The introduction of the euro did not have the effect of changing or modifying contracts and does not provide a legal excuse for trying to do so. Any financial amounts expressed in national currency units in mortgage, insurance or any other contracts should be automatically changed into euros at the fixed conversion rate

Conversion rate - The irrevocably fixed rates used for conversion between each of the twelve national currencies and the euro. These rates were determined on 31 December 1998 for 11 national currencies (31 December 2000 for the Greek drachma) by dividing the market value of the euro by the market values of the individual participating currencies

Convergence criteria - The rules defined in the Maastricht Treaty which set out economic tests which a country must pass before being allowed to join the euro (often referred to as the Maastricht criteria): low inflation, sound public finances, stable exchange rates and low and stable interest rates.

• Annual government deficit must not exceed 3 per cent of GDP
• Total outstanding government debt must not exceed 60 per cent of GDP
• Rate of inflation within 1.5 percentage points of the three EU countries with the lowest rate
• Average nominal long-term interest rate must be within 2 percentage points of the average rate of the three countries with the lowest inflation rates
• Exchange rate stability, meaning that for at least two years the currency has kept within the "normal" fluctuation margins of European Exchange Rate Mechanism (ERM)

Cross-border payments in euro - Payments in euro made in a different EU Member State to that in which the customer's bank account is held, for example withdrawals from a cash machine or payment by debit card. Banks should charge the same fee for such transactions as the equivalent domestic payment, in practice this means these payments are either free or made for a nominal charge. From 1 July 2003 this definition also applied to cross-border bank transfers in euro

Dual circulation - The use of both national currencies and euros from January 1 up to March 1 2002. The last date that national currencies can be used as legal tender varies from country to country. Also known as dual cash period

Dual display - The inclusion (for information only) of the approximate euro equivalent of the former currency value. During the run-up to the launch of euro notes and coins, many prices were being displayed in both national currency units and euros in shops, on bank statements and, by many companies, on wages and salaries slips. In all Member States except Austria, this was a voluntary process without any legal obligation.

Dual pricing - The pricing of goods and services in both the euro and the former currencies by those prepared to accept payment in either

Duisenberg, Wim - First President of the European Central Bank, formerly head of the Dutch Central Bank

E-day - The date on which euro notes and coins are launched and from which date all non-cash business is to be transacted in euro and not the national currency denomination. For the first wave countries this was 1 January 2002

Ecofin - The European Council of Economics and Finance Ministers, Ecofin handles EU legislation on tax harmonisation, financial liberalisation and economic policy. Ecofin has the final say on many aspects of Emu. From Januar 1, 1999, Ecofin is also be responsible for the euro zone's external exchange-rate policy.

Economic and financial committee - The Committee reports to Finance ministers and to the European Commission on the economic and financial situation of all EU member states as well as the EU itself, and on financial relations with third countries and international institutions. It prepares Ecofin meetings and is composed of national treasury officials, central bankers and two members of the European Commission

Economic and Monetary Union (EMU) - The single currency area within the European Union, created by the Maastricht Treaty and started in 1999 through the launch of the single currency. There were three stages involved in establishing EMU:

• July 1990 - December 31 1993: following the conclusions of the Madrid European Council, the first stage was notably characterised by a closer co-ordination of Member States' economic policies and the progressive dismantling of all internal barriers to the free movement of capital within the EU (a few Member States were allowed to maintain some specific restrictions for transitional periods)
• January 1, 1994 - December 31, 1998: The second stage covered the liberalisation of capital movements and payments vis-a-vis third countries in general, the prohibition of monetary financing of the public sector by the central banks, the prohibition of privileged access to financial institutions by the public sector, the avoidance of excessive government deficits and the establishment of the European Monetary Institute (EMI) as the forerunner to the European Central Bank (ECB)
• January 1, 1999 onwards: The third stagestarted with the introduction of the euro and the transfer of monetary competence to the ESCB. Eleven Member States adopted the euro on this date (Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland). Greece adopted the euro on 1 January 2001

Ecosoc - The Economic and Social Committee lets interest groups put their opinions to the EU institutions

Euro - European single currency, established in 1999 after years of preparation and negotiations. National notes and coins were replaced by euro notes and coins in January 2002

Euro Area - The euro area encompasses those Member States of the European Union in which the euro has been adopted as the single currency in accordance with the Treaty and in which a single monetary policy is conducted under the responsibility of the decision-making bodies of the ECB (European Central Bank). The euro area currently comprises Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland. Also known as the eurozone, or colloquially as Euroland

Euro banknotes - Banknotes denominated in euro, circulating in the euro area 1 January 2002. The seven designs (€5, €10, €20, €50, €100, €200 and €500) are common to all euro area members, where they are the only notes with legal tender

Euro circulation coins (normal and commemorative) - There are currently eight denominations of euro coins in circulation: the 1, 2, 5, 10, 20 and 50 cents and the €1 and €2. The denominations and technical specifications of the coins are harmonised and they have legal tender status throughout the euro area since 1 January 2002. However, each Member State issues coins with its own national design on one side of each denomination, whilst the other side features a common European motif. In addition to the euro area Member States, Monaco, San Marino and the Vatican City are also entitled to issue limited quantities of euro circulation coins through agreements with the Community

Euro Coin Designs - The common face of the euro coins was chosen after a design competition limited to three themes : architectural, abstract and European personalities. National selections were made by all Member States, except Denmark, and a European jury of independent experts chose the nine best series out of a total of 36 in March 1997. A final decision on the design was taken by the European Council meeting in Amsterdam in June 1997

Euro collector coins - Euro collector coins are not intended for circulation and must differ from regular euro coins, therefore:

• Their face value is different;
• They do not use images which are similar to the common and national sides of the circulation coins;
• Colour, diameter and weight differ significantly from the coins intended for circulation in at least two of these three characteristics
• The legal tender status of these coins is also limited to the country of issue

Euro commemorative coins - These are commemorative variations of euro circulation coins, in the sense that they have a different national side from the standard one, and commemorate a specific event or personality. They comply with the denominations and with the technical specifications of euro circulation coins and have legal tender status throughout the euro area. As these coins must bear one of the common sides, the commemorative feature must appear on the national side so that the common side remains unaffected. The volume of coins and/or the production period of this coin variation are limited. It has been agreed between Member States and the Commission that all commemorative coin issues would be limited to a single coin denomination (€2)

Euro compliant software - Software which meets:

• the European Union legislative requirements on conversion between former national currency units and the euro
• The requirements of its users during and after changeover from the former national currency to euro

Euro symbol (€) - The graphic symbol for the euro, €, looks like an E with two clearly marked, horizontal parallel lines across it. It was inspired by the Greek letter epsilon, in reference to the cradle of European civilisation and to the first letter of the word 'Europe'. The parallel lines represent the stability of the euro. The official abbreviation for the euro is 'EUR'. It has been registered with the International Standards Organisation (ISO), and will be used for all business, financial and commercial purposes

Eurocreep - Colloquial term for the infiltration of the euro into countries that have not joined

Eurogroup - Key co-ordination group bringing together finance ministers representing member states from the eurozone. The group meets the day before the Ecofin meeting to informally discuss economic issues notably budgetary consolidation and the stability programs of the member states. The Eurogroup also addresses practical issues about the euro including measures to protect the euro against counterfeit and changeover plans. It also discusses external issues concerning the euro including representation of the eurozone (e.g. at G7, IMF meetings) and contacts with applicant states for EMU

Euroland - Unofficial collective noun for the countries that have joined the single currency. Also referred to as eurozone

Eurosystem - The Eurosystem comprises the European Central Bank (ECB) and the national central banks of the Member States which have adopted the euro in accordance with the Treaty. There are currently 12 national central banks in the Eurosystem. The Eurosystem is governed by the Governing Council and the Executive Board of the ECB and has assumed the task of conducting the single monetary policy for the euro area since 1 January 1999. Its primary objective is to maintain price stability

European Central Bank (ECB) - Frankfurt-based central bank established on June 1, 1998. It is responsible for deciding the monetary policy for the euro-zone, conducting foreign exchange operations, holding and managing the official foreign reserves of the Member States and overseeing all phases of the euro introduction. Its primary objective is maintaining price stability

European Commission - The body responsible for initiating legislation and administering the day-to-day running of EU policy, made up of 20 commissioners (two nationals from Germany, Spain, France, Italy and the UK and one representative from the other member states) and about 27,000 subsidiary staff organised into directorates-general and specialised departments. In the area of economic policy, the commission recommends broad guidelines for economic policies in the Community to the European Council. It also monitors member states' performance, and if necessary draws attention to any slippage from economic targets. The commission also analyses member states' convergence programmes, prepares recommendations, including possible fines

European Council - Is the EU's main decision-making body and brings together the heads of state or government of the member states and the president of the European Commission

European Court of Auditors The court is the "financial conscience" of the European Union, tracking the management of EU money

European Currency Unit (ECU) ECU was the precursor of the euro and together with the Exchange Rate Mechanism it formed the European Monetary System in 1979. The ECU was the official accounting unit of the European Union until the end of 1998, and was notably used for the establishment of the EU budget, as the numeraire of the ERM and as a reserve asset for central banks. It was a basket currency made up of the sum of fixed amounts of the 12 national currencies of the Member States of the European Union at the time of the signature of the Maastricht Treaty in February 1992. With the introduction of the euro on 1 January 1999, the ECU ceased to exist, while the initial value of the euro (for example against other currencies, such as the dollar) was defined as being equal to the value of the ECU on 31 December 1998. The final composition of the ECU was frozen on 8 November 1993 following the entry into force of the Treaty of Maastricht, and consisted of the following monetary amounts fixed on 20 September 1989, based on weightings established by the Ecofin Council on 19 September 1989:

Currency	ISO Code	Weighting in %	Fixed amount
Belgian franc	BEF	7.6	3.301
Danish kroner	DKK	2.45	0.1976
German mark	DEM	30.1	0.6242
Greek drachma	GRD	0.8	1.440
Spanish peseta	ESP	5.3	6.8851
French franc	FRF	19.0	1.332
Irish pound	IEP	1.1	0.008552
Italian lira	ITL	10.15	151.8
Luxembourg franc	LUF	0.3	0.130
Dutch guilder	NLG	9.4	0.2198
Portuguese escudo	PTE	0.8	1.393
British pound	GBP	13.0	0.08784

European Economic Community (EEC) - Old name for the European Community

European Parliament - Is the assembly of 626 representatives (MEPs), elected every five years by the European Union's 375 million citizens. Parliament has steadily acquired greater influence and power through a series of treaties. These treaties, particularly the 1992 Maastricht Treaty and the 1997 Amsterdam Treaty, have transformed the European Parliament from a purely consultative assembly into a legislative parliament, exercising powers similar to those of the national parliaments. It has three key powers:

• the power to legislate - normally through co-decision with the European Council. Although on some sensitive issues such as taxation, it can only give an opinion
• the power of the purse - shares budgetary approval for the European Union with the European Council
• the power to supervise the executive - exercises democratic supervision over all Community activities Parliament also oversees the commission and approves commissioners

MEPs have debated the recommendations of the European Commission on which countries qualify for EMU. They also grilled the nominees to the executive board of the Central Bank. Maastricht also requires the ECB president to present the bank's annual report to Parliament which can hold a general debate. Parliament is split between Brussels, Luxembourg and Strasbourg

European Monetary Institute (EMI) - Temporary body established at the start of Stage Two of EMU on 1 January 1994. The two main tasks of the EMI were to strengthen central bank co-operation and monetary policy co-ordination and to make the preparations required for the establishment of the ESCB, for the conduct of the single monetary policy and for the creation of the single currency in Stage Three. It went into liquidation following the establishment of the ECB on 1 June 1998

European Monetary System (EMS) - The system was created on 5 December 1978 by the European Council in Brussels and its operating procedures were laid down by the agreement of 13 March 1979 between the central banks of the Member States of the European Economic Community. The objective was to create closer monetary policy co-operation between Community countries, leading to a zone of monetary stability in Europe. The main components of the EMS were the ECU, the exchange rate and intervention mechanism (ERM) and various credit mechanisms. It ceased to exist on 1 January 1999, when the euro was introduced, and was replaced by ERM-II

European System of Central Banks (ESCB) - Is composed of the European Central Bank (ECB) and the national central banks (NCBs) of all 15 EU Member states. The NCBs of Member States that have not adopted the euro are allowed to conduct national monetary policies but not to take part in deciding and implementing monetary policy for the euro area

European Union - The framework for political and economic co-operation and integration between 15 European member states. It has five key objectives:

• to promote economic and social progress (the single market was established in 1993; the single currency was launched in 1999)
• to assert the identity of the European Union on the international scene (through European humanitarian aid to non-EU countries, common foreign and security policy, action in international crises; common positions within international organisations)
• to introduce European citizenship (which does not replace national citizenship but complements it and confers a number of civil and politic rights on European citizens)
• to develop an area of freedom, security and justice (linked to the operation of the internal market and more particularly the freedom of movement of persons)
• to maintain and build on established EU law (all the legislation adopted by the European institutions, together with the founding treaties)

The Maastricht Treaty established three central pillars for the EU:

• European Community - Union citizenship, Community policies, Economic and Monetary Union, etc. Common foreign and security policy
• Police and judicial co-operation in criminal matters

Eurostat - The EU's statistical office situated in Luxembourg, responsible for the publication of EU economic and social statistics, such as consumer price inflation, unemployment and industrial production. These statistics include series for the eurozone as an entity as well as for each of the EU member states. Its eurozone consumer price inflation index is closely watched by the ECB and the financial markets

Eurosystem - Refers to the ECB and the euro-zone national central banks

Eurozone Candidates - There are a number of other countries which are thinking about the advantages of joining the E.U., and probably the Eurozone. These include Czech Republic, Slovakia, Bulgaria, Hungary, Poland, Malta and Cyprus

Exchange Rate Mechanism (ERM) - Exchange rate and intervention mechanism of the European Monetary System (EMS), which defined the exchange rates of the currencies participating in terms of central rates against the ECU. These central rates were used to establish a table of bilateral central rates between participating currencies. Exchange rates were allowed to fluctuate within a band around the bilateral central rates, with the normal fluctuation margins corresponding to +/- 2.25% (these margins were temporarily widened to +/- 15% in August 1993 in order to counter speculative pressures). The central rates could be adjusted, subject to mutual agreement between all countries participating in the ERM. The framework, launched in 1979 was jeopardised in 1992 when a number of currencies (UK sterling, Italian lira and Spanish peseta) were unable to maintain these rates. The system was relaunched in a looser form allowing greater fluctuations in 1993. A steady exchange rate is one of the requirements for joining the euro. The ERM ceased to exist with the introduction of the euro on 1 January 1999, when ERM-II came into operation.

Exchange Rate Mechanism II (ERM-II) - Successor to the Exchange Rate Mechanism of the European Monetary System, which came into existence on 1 January 1999. The principles of the system were agreed at the Amsterdam European Council in June 1997, and notably provide for bilateral links between the euro and each participating currency. The standard fluctuation band amounts to ±15% around the central rate, while narrower bands may be agreed on a case-by-case basis. Standard and narrow bands shall not prejudice the interpretation of Art. 121.1 EC. Membership of the mechanism is voluntary, although Member States with a derogation are expected to join it. Denmark and Greece participated from 1 January 1999, with the kroner subject to a narrow band of +/-2.25%. Since Greece joined the euro, Denmark is now the only member.

Five economic tests - The conditions that the British government wants to see fulfilled before Britain joins the single currency. They apply in addition to the convergence criteria.

• Whether there can be sustainable convergence between Britain and the economies of a single currency
• Whether there is sufficient flexibility to cope with economic change
• The effect on investment
• The impact on the financial services industry
• Whether it is good for employment

Frontloading - A term given to describe the issue to retailers, banks and possibly citizens of euro notes and coins prior to their official introduction on E-day

Label of Consumer Confidence - The label indicates that some or all prices are being displayed in euros as well as national currency units, and that the legal exchange rate and rounding rules are being used. Use of the label is a product of an agreement, sponsored by the European Commission, between European-level representatives of consumers and those of the trade, tourism and craft trade sectors. It is a line drawing of a smiling face and the words "Payments in euros accepted"

Maastricht Treaty - The agreement that set out the framework of the euro, and gives it legal status

Member states - 15 countries that make up the European Union: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, UK

Migration - The phenomenon whereby notes and coins issued in one euro area country flow across the borders of other euro area countries. Migration results from citizens travelling in the euro area and the redistribution of notes and coins between central banks, commercial banks and retailers

Monetary Law - Lex Monetae - Lex monetae is a universally accepted principle of law, whose basic assumption is that each state exercises sovereign power over its own currency and would not try to legislate over another country's money. It follows from this that the European Union's laws establishing the legal status of the euro are universally recognised and that its provisions governing the conversion from national currency units to the euro and the continuity of contracts are respected in the main financial centres of the world

National Currency Denomination - These are legally defined as non-decimal denominations of the euro. During the transitional period, the currency unit (the euro) will have multiple denominations: NCDs and euro units. An NCD will have the value specified by its conversion rate; a euro unit will equal one euro. Examples of NCDs: French Franc, Deutsche Mark, Spanish Peseta, Italian Lira

No Compulsion, no prohibition - The legal agreement that, during the transition period, no one can be forced to pay or be paid in euro. It does not, however, prevent parties to a transaction from using the euro if all are in agreement. One exception to the principle is that payment in euros can be made through a bank account and the creditor's bank is obliged to convert the payment into the currency in which the creditor's account is held

Opt-out - The Treaty of Maastricht protocol that give Denmark and the UK the right not to participate in the single currency even if they meet the conversion criteria. Sweden did not negotiate such a right, but decided not to join anyway

Pre-In Countries - Commonly used term to designate those members of the European Union which do not belong to the euro area. Legally speaking, the pre-ins can be classified into two categories: those countries which benefit from a special "opt-out" clause allowing them to remain outside the euro area until they decide to join, and the remaining countries, which will join as soon as they meet the necessary conditions. These were the four Member States that did not participate in adopting the euro and a single monetary policy on 1 January 1999: Denmark, the UK, Sweden and Greece. Greece adopted the euro on 1 January 2001. Denmark held a referendum on the issue in September 2000, voting against joining, Sweden also held a referendum in 2002, voting no, and the UK has an "opt out" and will have a referendum on the euro before adopting it

Price stability - Maintaining price stability has been established as the ECB's key monetary policy objective. The ECB's governing council has said that inflation must be kept below 2 per cent year-on-year. Harmonised Index of Consumer Prices (HICP) is the official indicator for inflation in the euro-zone

Price transparency - The ability to make easy comparison of prices for goods and services in different euro zone countries

Retail Transition - The period when full scale retail euro payment and transaction processing Infrastructure would be available from the financial services industry

Rounding rules - The conversion of national currency units into euros was governed by precise legal rules so as to guarantee clarity and fairness. Although the conversion of prices was completed during the changeover some ongoing contracts are still denominated in former national currencies. Each conversion rate to one euro is expressed as six significant figures (e.g. €1 = 40.3399 BEF) and these six figures should always be used when making conversions. They cannot be rounded or shortened. If, after conversion into euros, the number at the third decimal place is less than 5, then the euro figure must be rounded down e.g. 34.874 becomes €34.87. If the third decimal number is five or above, then it can be rounded up e.g. 34.875 becomes €34.88

Scriptural Currency - The euro has been a legal scriptural (written) currency in the 12 Member States of the euro area since its launch on 1 January 1999. This means it can be used for all non-cash transactions via such instruments as cheques, bank transfers, credit cards and electronic purses, providing both sides to the transaction agree

Single Currency - The third stage of EMU entails adoption of a single currency (euro)

Small and Medium Size Enterprises (SME) - Companies and businesses of all sizes need to be able to operate in euros from 1 January 2002 when the introduction of euro notes and coins completes the transition to the single currency. Before December 31 2001, SMEs need to make sure that their Information Technology systems can handle the euro, and that their accounting systems, marketing, pricing and payroll activities have all been adapted for the new currency. This means starting preparations no later than the beginning of 2001. Very small businesses may need less preparation, but all exchanges with public authorities involving money must be in euros from 1 January 2002. This means VAT, social security and accounting declarations must be made in the new currency from that date.

Spelling - The spelling of the words euro and cent in the plural and singular, as used in official documents such as EU legislation, are set out in the following table. However, more general usage of these terms may differ in some languages, such as English, where it is natural practice to refer to the currency in the plural form as 'euros' instead of the official form 'euro'. This is the same practice as used with most currencies in English, as in the plural form 'dollars'

Stability Pact - Short for Stability and Growth Pact. German-inspired agreement set up to enforce budgetary discipline in the eurozone. The pact imposes penalties, including fines, against countries running excessive budget defecits. This is to ensure that high government borrowing in one member state does not adversely affect the others. The pact has been criticised by, among others, the IMF for being too inflexible in times of economic downturn - i.e. governments can run a relaxed fiscal policy in good times but when the economy weakens the pact places too much weight on achieving fiscal savings. Critics argue that the need to tighten rather than loosen fiscal policy could risk prolonging the downturn

Synthetic Euro - Is a theoretical calculation of the euro exchange rate, to show the broad trend of the Euro's value against other currencies in the period between the announcement of the bilateral conversion rates between particpating Emu currencies and the launch of the euro on 1 January 1999

T-day - The date when the UK if it decides to do so, joins the single currency and adopts the euro as its national currency. Also known as UK entry day

TARGET - Trans-European Automated Real-time Gross settlement Express Transfer system. It is the Eurosystem inter-bank funds transfer system, which is designed to support the Eurosystem's objectives of defining and implementing the monetary policy of the euro area and promoting the smooth operation of payment systems, thus contributing to the integration and stability of the euro area money market. The system has been designed in such a way that it is able to process cross-border payments denominated in euro as smoothly as if they were domestic payments

Transition Period - The period from T day to E Day. In the first wave, the Transition period was from 1st January 1999 to 31st December 2001, when the euro became the EU's single currency, until midnight on 31 December 2001, when euro notes and coins are released and national currency starts to be withdrawn from circulation. The transition period was needed to allow time to print the 13 billion bank notes and 52 billion euro coins that will go into circulation

Treaty of Rome - Signed in 1957 creating what was then called the European Economic Community. It has since been amended by the Single European Act, the Maastricht treaty, the Amsterdam treaty but much is still applicable