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Banknotes of the euro, the currency of the Eurozone, have been in circulation since the first series was issued in 2002. They are issued by the national central banks of the Eurosystem or the European Central Bank.  In 1999 the euro was introduced virtually, and in 2002 notes and coins began to circulate. The euro rapidly took over from the former national currencies and slowly expanded around the European Union.

Denominations of the notes range from €5 to €500 and, unlike euro coins, the design is identical across the whole of the Eurozone, although they are issued and printed in various member states. The euro banknotes are pure cotton fibre, which improves their durability as well as giving the banknotes a distinctive feel. They measure from 120 x to 160 x and have a variety of colour schemes. The euro notes contain many complex security features such as watermarks, invisible ink, holograms and microprinting that document their authenticity. While euro coins have a national side indicating the country of issue (although not necessarily of minting), euro notes lack this. Instead, this information is shown by the first character of each note's serial number.

According to European Central Bank estimates, in December 2012, there were approximately 15,687,189,000 banknotes in circulation around the Eurozone, worth  approximately €912,593,020,200.

On 8 November 2012, the European Central Bank announced that the first series of notes would be replaced, starting with the 5 euro note on 2 May 2013. Europa will feature in the new series.

History 

The euro came into existence on 1 January 1999. The euro's creation had been a goal of the European Union (EU) and its predecessors since the 1960s. The Maastricht Treaty entered into force in 1993 with the goal of creating economic and monetary union by 1999 for all EU states except the UK and Denmark (though Denmark has a fixed exchange rate policy with the euro). 

In 1999 the currency was born virtually,  and in 2002 notes and coins began to circulate. It rapidly took over from the former national currencies and slowly expanded around the rest of the EU. In 2009 the Lisbon Treaty formalised the Euro's political authority, the Euro Group, alongside the European Central Bank. 

Slovenia joined the Eurozone in 2007,  Cyprus and Malta in 2008,  Slovakia in 2009,  Estonia in 2011,  Latvia in 2014  and Lithuania in 2015. 

Specification 

There are seven different denominations of the euro banknotes — €5, €10, €20, €50, €100, €200 and €500 — each having a distinctive colour and size. The designs for each of them have a common theme of European architecture in various artistic eras. The obverse of the banknote features windows or gateways while the reverse bears different types of bridges. The architectural examples are stylised illustrations, not representations of existing monuments. 

All the notes of the initial series of euro notes bear the EU Flag, a map of Europe on the reverse, the name "euro" in both Latin and Greek script (EURO / ΕΥΡΩ) and the signature of a president of the ECB, depending on when the banknote was printed. The 12 stars from the EU Flag are also incorporated into every note.

The notes also carry the initials of the European Central Bank in five linguistic variants, covering all official languages of the EU in 2002 (the time of the banknote introduction), and now 19 out of 24 official languages of the EU28, in the following order:

*BCE (Spanish: Banco Central Europeo,  French: Banque centrale européenne,  Italian: Banca centrale europea,  Portuguese: Banco Central Europeu,  Irish: Banc Ceannais Eorpach;  Romanian: Banca Centrală Europeană )
*ECB (English: European Central Bank,  Danish: Europæiske Centralbank,  Dutch: Europese Centrale Bank,  Swedish: Europeiska centralbanken;  Czech: Evropská centrální banka,  Lithuanian: Europos Centrinis Bankas,  Latvian: Eiropas Centrālā banka,  Slovak: Európska centrálna banka,  Slovene: Evropska centralna banka )
*EZB (German: Europäische Zentralbank )
*ΕΚΤ (Greek: Ευρωπαϊκή Κεντρική Τράπεζα )
*EKP (Finnish: Euroopan keskuspankki;  Estonian: Euroopa Keskpank )

The euro banknote initial designs were chosen from 44 proposals in a design competition, launched by the Council of the European Monetary Institute (EMI) on 12 February 1996.  The winning entry, created by Robert Kalina from the Oesterreichische Nationalbank, was selected on 3 December 1996.

The euro banknotes are pure cotton fibre, which improves their durability as well as giving the banknotes a distinctive feel. 

In the first series, the Azores, French Guiana, Guadeloupe, Madeira, Martinique, Réunion, and the Canary Islands, overseas territories of the eurozone member states, are under the map on the banknotes in separate boxes because they use the euro. Cyprus and Malta were not shown on the first series because they were not in the EU in 2002, when the banknotes were issued, even though they joined the Eurozone in 2008 and because the map did not stretch that far east for Cyprus and Malta was too small to be depicted, the minimum size for depiction being 400 km2.  However, both Cyprus and Malta are depicted on the 2013 series note. 

The Europa series banknote, similarly to the first series, bears the EU Flag, a map of Europe on the reverse and the signature of Mario Draghi, current president of the ECB and the 12 stars from the EU Flag are also incorporated into the note. On May 4, 2016, the European Central Bank decided not to issue a 500 euro banknote for the Europa series. 
 
The banknote also has the name "euro", but in three scripts, in Latin, Greek and Cyrillic script (EURO / ΕΥΡΩ / ЕВРО).

The note also carries the initials of the European Central Bank in nine linguistic variants, covering all official languages of the EU in the beginning of 2013 (the time of the banknote introduction), and now 23 out of 24 official languages of the EU28, in the following order (see above for details on the initials used already in the 2002 series): BCE, ECB, ЕЦБ (Bulgarian: Европейска централна банка ), EZB, EKP, ΕΚΤ, EKB (Hungarian: Európai Központi Bank ), BĊE (Maltese: Bank Ċentrali Ewropew ), EBC (Polish: Europejski Bank Centralny ). For the 5 euro, 10 euro and 20 euro banknote of the Europa series, Croatian, which became an official language in July 2013, is not covered by the initials (the ECB name in Croatian is Europska središnja banka,  abbreviated ESB). However, the initials ESB are included in the 50 euro, 100 euro and 200 euro banknotes of the new series.

The notes of the Europa series do not show the same year. The year shown is the year the note is issued.

The Europa series euro banknotes are supposedly more durable than the first series banknotes.

Reinhold Gerstetter, an independent banknote designer, was chosen by the European Central Bank to redesign the euro notes.

Design

Bridges

Due to the great number of historic bridges, arches, and gateways throughout the European continent, all the structures represented on the notes are entirely stylised illustrations of the relevant architectural styles, designed to evoke the landmarks within the European Union,  representing various European ages and styles. For example, the 5 euro note has a generic rendition of Classical architecture, the 10 euro note of Romanesque architecture, the 20 euro note of Gothic architecture, the 50 euro note of the Renaissance, the 100 euro note of Baroque and Rococo, the 200 euro note of Art Nouveau and the 500 euro note of modern architecture. The initial designs by Robert Kalina were of actual bridges, including the Rialto Bridge in Venice and the Pont de Neuilly in Paris, and were subsequently rendered more generic.  In 2011, Dutch artist Robin Stam and the town of Spijkenisse in the Netherlands built seven bridges of colored concrete after the designs on the seven euro banknotes.  

Signature

The euro banknotes have to bear the signature of the president of the European Central Bank.

In the first series, banknotes printed after March 2012 bear the signature of the third, and incumbent ECB President, Mario Draghi. Notes printed between November 2003 and March 2012 show the signature of Jean Claude Trichet, the second President of the ECB,  replacing that of the first president, Wim Duisenberg, who was the ECB president when the first euro banknotes and coins were issued, till 2003.

Only the signature of the third, incumbent ECB President, Mario Draghi features on the Europa series note.

Security features

The European Central Bank has described some of the basic security features of the euro notes that allow the general public to recognise the authenticity of their currency at a glance: 
* For the first series: the firm and crisp paper, the raised print, the watermark, the security thread, the see-through number, the hologram, the  micro-perforations, the glossy stripe for €20 and below, the color-changing number for €50 and above, UV light, infrared and the microprint. 
* For the Europa series: the firm and crisp paper, the raised print, the portrait watermark, the security thread, the emerald number, the portrait hologram, UV and UV-C, infrared and the microprint.  and 
However, in the interest of advanced security of the euro notes, the full list of these features is a closely guarded secret of the European Central Bank and the National Central Banks of the Eurosystem.

Still, between the official descriptions and independent discoveries made by observant users, it is thought that the euro notes have at least eleven different security features, which are:
* Holograms – The lower value notes carry a holographic band to the right of the obverse. This band contains the denomination, the euro sign, the stars of the EU flag and perforations in the shape of the euro sign. In the Europa series €5 banknote, there is Europa, a gate, 'EURO' and the euro sign, the number 5 and perforations in the shape of a euro sign.  The higher-value notes include a holographic decal containing the denomination, the obverse illustration, microprinting, and perforations in the shape of the euro sign.
* Variable colour ink – This appears on the lower right-hand side corner of the reverse of the higher-value notes. When observed from different angles, the colour will change from purple to olive green or brown. This special ink is also on the left bottom on the Europa series notes.
* Checksum – Each note has a unique serial number. The remainder from dividing the serial number by 9 gives checksum corresponding to the initial letter indicated on the note.  Using a variation of the divisibility rule shortcut, the remainder from division by 9 can easily be found by adding the constituent digits and, if the sum still does not make the remainder obvious, adding the digits of the sum. Alternatively, substituting the letter with its ASCII value makes the resulting number exactly divisible by 9. Taking the same example, Z10708476264, the ASCII code for Z is 90, so the resulting number is 9010708476264. Dividing by 9 yields a remainder of 0. Using the divisibility rule again, the result can be checked speedily since the addition of all digits gives 54; 5 + 4 
 9—so the number is divisible by 9, or 9010708476264 modulo 9 is 0.

* EURion constellation  – Euro banknotes contain a pattern known as the EURion constellation that can be used to detect their identity as banknotes to prevent copying and counterfeiting. Some photocopiers are programmed to reject images containing this pattern.
* Watermarks – There are possibly four watermarks on the euro notes. They are:
** Standard watermark – Each denomination is printed on uniquely watermarked paper. This may be observed by holding the note up to the light. In the first series, the standard watermark is a gate/window that is depicted on the note and the denomination, for the €5 of the Europa series, it is the face of Europa and the denomination as well.
** Digital watermark – Like the EURion constellation, a Digimarc digital watermark is embedded in the banknotes' designs. Recent versions of image editors, such as Adobe Photoshop or Paint Shop Pro refuse to process banknotes.  This system is called Counterfeit Deterrence System (CDS) and was developed by the Central Bank Counterfeit Deterrence Group.
** Infrared and ultraviolet watermarks – When seen in the near infrared, the banknotes will show darker areas in different zones depending on the denomination. Ultraviolet light will make the EURion constellation show in sharper contrast, and also some fluorescent threads stand out.

* Security thread – A black magnetic thread in the centre of the note is only seen when held up to the light. It features the denomination of the note, along with the word "euro" in the Latin alphabet and the Greek alphabet.
* Magnetic ink – Some areas of the euro notes feature magnetic ink. For example, the rightmost church window on the €20 note is magnetic, as well as the large zero above it.

* Microprinting – The texture lines to the bottom, like those aligned to the right of ΕΥΡΩ mark on the €5 note, consist of the sequence "EURO ΕΥΡΩ" in microprinting.
* Matted surface – The euro sign and the denomination are printed on a vertical band that is only visible when illuminated at an angle of 45°. This only exists for the lower-value notes.
* Raised print – On every banknote, the initials of the ECB are in raised print. In the first series, every banknote has a bar with raised print lines. On the €200 note of the first series, there are lines at the bottom which are raised to allow blind people to identify the note. On the €500 note of the first series, these lines are on the right-hand side. On the Europa series, there are lines on both sides of the banknote.
* Bar code – When held up to the light, dark bars can be seen to the right of the watermark. The number and width of these bars indicates the denomination of the note. When scanned, these bars are converted to Manchester code. 

(looked at from the reverse, a dark bar is 1, a bright bar 0)

Europa series

The European Central Bank intends to redesign the notes every seven or eight years. A new series, called "the Europa series", is being released from 2013; the first notes entered circulation on 2 May 2013. The new series include slight changes, notably the inclusion of the face of the mythological princess Europa in the watermark and in the hologram stripe. 
New production and anti-counterfeiting techniques are employed on the new notes, but the design shares the colours of the current series and the theme of bridges and arches. The new notes are nonetheless recognisable as a new series. 

The new notes also reflect the expansion of the European Union, every member of the EU is depicted on it. The initial series do not include the recent members Cyprus and Malta (Cyprus was off the map to the east and Malta was too small to be depicted.).

It will be the first time when the Bulgarian Cyrillic alphabet is to feature on the banknotes as a result of Bulgaria joining the European Union in 2007. Therefore, the new series of Euro banknotes will include "", which is the Bulgarian spelling for EURO as well as the abbreviation "" (short for ' in Bulgarian).  The new banknotes will also feature the Maltese abbreviation BĊE ('), the Hungarian abbreviation EKB (') and the Polish abbreviation EBC ('). The modified 5 euro note features the initials of the European Central Bank in each of the contemporary EU member languages in a column on the left-hand side of the obverse. The word "euro" in Latin, Greek, and Cyrillic lettering has also been moved to a more central position.

The full design of the Europa series 5 euro banknote was revealed on 10 January 2013.  The new note entered circulation on 2 May 2013. The full design of the Europa series 10 euro note was revealed on 13 January 2014 and entered circulation on 23 September 2014.  The full design of the Europa series 20 euro banknote was revealed on 24 February 2015 
   and launched on 25 November 2015. The old series will gradually be withdrawn. The ECB will announce in due course when the old notes will lose their legal tender status. However, they will not lose their value and it will be possible to exchange them for new notes at Eurosystem central banks indefinitely.

On 4 May 2016, it was announced by the European Central Bank that 500 euro banknote from the Europa series will not be released amid fears of "facilitating the criminal activity".  

All the denominations of banknotes (except for €500) of Europa series should start to be released by the end of 2018, the date when all the first series banknotes will be no more released.

The full design of the Europa series 50 euro banknote was revealed on 5 July 2016 and launches in April 2017. 

Security features 

* Watermark: When the note is held under a normal light source, a portrait of Europa and an electrotype denomination appear on either side.  
* Portrait Hologram: When the note is tilted, the silver-coloured holographic stripe reveals the portrait of Europa – the same one as in the watermark. The stripe also reveals a window and the value of the banknote.
* Colour changing ink: When the note is tilted, the number on the note displays an effect of light that moves up and down. The number also changes colour from emerald green to deep blue.
* Raised Printing: On the front of the note, there is a series of short raised lines on the left and right edges. The main edge, the lettering and the large value numeral also feel thicker.
* Security Thread: When the note is held against the light, the security thread appears as a dark line. The Euro symbol (€) and the value of the banknote can be seen in tiny white lettering in the thread.
* Microprinting: Tiny letters which can be read with a magnifying glass. The letters should be sharp, not blurred.
* Ultraviolet ink: Some parts of the banknote shine when under UV or UV-C light. These are the stars in the flag, the small circles, the large stars and several other areas on the front. On the back, a quarter of a circle in the centre as well as several other areas glow green. The horizontal serial number and a stripe appear in red.
* Infrared light: Under infrared light, the emerald number, the right side of the main image and the silvery stripe are visible on the obverse of the banknote, while on the reverse, only the denomination and the horizontal serial number are visible.

Features for people with impaired sight 

"A good design for the blind and partially sighted is a good design for everybody" was the principle behind the cooperation of the European Central Bank and the European Blind Union during the design phase of the first series banknotes in the 1990s. As a result, the design of the first euro banknotes include several characteristics which aid both the blind and partially sighted to confidently use the notes. 

Features for the blind and visually impaired include:
* Different sizes of the banknotes – the bigger the value, the larger the note.
* The banknotes have clearly contrasting, striking colours. The €5 note is grey, the €10 note red, the €20 note blue, the €50 note orange, the €100 note green, the €200 note yellow and the €500 note is purple.
* Large denominations on the notes.
* Raised print.
* Tactile marks on the €200 and €500 of the first series and on all the notes of the Europa series.

As in the design process of the first series of euro notes, visually impaired users were consulted during the design phase of the Europa series, and their requirements were included in the final designs.

Circulation 

The European Central Bank closely monitors the circulation and stock of the euro coins and banknotes. It is a task of the Eurosystem to ensure an efficient and smooth supply of euro notes and to maintain their integrity throughout the Eurozone.

Statistics 

As of June 2013, there were approximately 15,497,240,200 banknotes in circulation around the Eurozone.  That is approximately €911,008,762,200 worth of banknotes. As of June 2013, there were:

* Approximately 1,599,681,000 €5 notes in circulation around the Eurozone. That is approximately €7,998,405,200 worth of banknotes.
* Approximately 2,047,418,500 €10 notes in circulation around the Eurozone. That is approximately €20,474,184,700 worth of banknotes.
* Approximately 2,881,374,400 €20 notes in circulation around the Eurozone. That is approximately €57,627,487,300 worth of banknotes.
* Approximately 6,461,256,100 €50 notes in circulation around the Eurozone. That makes it the most used banknote of the Eurozone. That is approximately €323,062,804,000 worth of banknotes.
* Approximately 1,738,341,700 €100 notes in circulation around the Eurozone. That is approximately €173,834,174,200 worth of banknotes.
* Approximately 188,575,200 €200 notes in circulation around the Eurozone. That makes it the least used banknote of the Eurozone. That is approximately €37,715,031,400 worth of banknotes.
* Approximately 580,593,400 €500 notes in circulation around the Eurozone. That is approximately €290,296,675,500 worth of banknotes.

Counterfeiting 

The European Central Bank publishes information on the amount of counterfeit banknotes removed from circulation every 6 months.  It reported that 531,000 banknotes were removed from circulation in all of 2012,  compared to 606,000 in the previous year. The ECB also said that, when compared to the amount of genuine banknotes, the proportion of fake euro notes remains low. The amount of counterfeits taken out of circulation in 2012 is 3.18 times that of 2002 (167,118).  

In July 2013, the European Central Bank said that it removed 317,000 counterfeit euro banknotes from circulation in the first half of 2013, which is an increase of 26.3% from the first half of 2012.  However, the Bundesbank, in July 2013, stated that the amount of counterfeit euro notes fell by 13.6% in Germany in the first half of the year.  On the other hand, De Nederlandsche Bank said it withdrew around 19,400 counterfeit banknotes in the same period, which is an increase of 49% in comparison to the first half of 2012.  The Central Banks also stated that most were fake €20 and €50 notes.

According to the central banks, the ratio of counterfeited bank notes is about 10 in one million of real bank notes for the Swiss franc, of 50 in one million for the Euro, of 100 in one million for United States dollar and of 300 in one million for Pound sterling. 

Legal information 

Legally, both the European Central Bank and the national central banks (NCBs) of the Eurozone countries have the right to issue the 7 different euro banknotes. In practice, only the NCBs of the zone physically issue and withdraw euro notes. The European Central Bank does not have a cash office and is not involved in any cash operations. However, the European Central Bank is responsible for overseeing the activities of national central banks in order to harmonise cash services in the Eurozone.

Issuance and printing 

The ECB has the exclusive right to authorise the issue of notes within the Eurozone, but most notes are actually issued by the National Central Banks (NCBs) of the Eurozone. As of 2004, 8% of banknotes were issued by the European Central Bank and 92% were issued by Eurozone NCBs. The issuing central bank can be seen from the serial number. Each NCB is now responsible for the production of certain denominations, as assigned by the ECB.

1st series 

Since 2002, euro notes have been printed by the National Central Banks of the Eurozone, with each Central Bank being responsible for and bearing the cost of producing a proportion of the notes. The production of notes needs to be sufficient to meet expected and unexpected surges in demand and to replace unfit notes. Production volumes are forecast jointly by the National Central Banks and the European Central Bank, and it needs to be approved by the Governing Council of the ECB. 

Production statistics 

The European Central Bank publishes details about euro notes produced every year.

Printing works 

There is a six-character printing code on every banknote which states the printer of the banknote. These printing codes have an initial letter, followed by three digits, then by a single letter, and ending in a digit, for example, "R001A1".

The initial letter identifies the printing facility. (the facilities are described below)  "R" for example would be Bundesdruckerei, a printer in Berlin, Germany. The three digits state sequential printing plates. "001", for example, would be the first printing plate created by the printer. The fifth character, a letter and sixth character, a number, represent the row and column, respectively, of the particular banknote on the particular plate. So "A" would be the first row and "1" would indicate the first column. 

Banknotes are printed in sheets. Different printers use different sheet sizes and sheets of higher denominations, which are larger in size, would have fewer notes printed per sheet. For example, two German printers print €5 banknotes in sheets of 60 (10 rows, designated "A" to "J" and six columns), the sheets of €10 notes have 54 banknotes (nine rows, six columns), and €20 banknotes are printed in sheets of 45 banknotes (nine rows, five columns).

The printer code does not need to be the same as the country code, i.e. notes issued by a particular country may have been printed in another country. The printers used to print euro banknotes include commercial printers as well as national printers, some of which have been privatised, some previously produced national notes before the adoption of the euro. There is one former or current national printer in each of the countries which issue euro notes, with the exception of Germany, where the former East German and West German printers now produce euro notes. There are also two printers identified in France, F. C. Oberthur, a private printer, and the Bank of France printing works, and also two in the United Kingdom: Thomas De La Rue, a major private printer, and the Bank of England printing house, which does not produce euro banknotes.

* The A, C and S codes have been reserved for the British, Swedish and Danish printers not printing euro banknotes.
* Where a printer is listed as producing banknotes for a particular country, this may apply to a single denomination, or as many as all seven denominations. Some NCBs source different denominations from different printers, and some source even a single denomination from multiple printers. NCBs that issue banknotes are free to source from any authorized printers, and do so in varying quantities.

Serial number 

Unlike euro coins, euro notes do not have a national side indicating which country issued them. The country that issued them is not necessarily where they were printed. The information about the issuing country is encoded within the first character of each note's serial number instead.

The first character of the serial number is a letter which uniquely identifies the country that issues the note. The remaining 11 characters are numbers which, when their digital root is calculated, give a checksum also particular to that country. 

The W, K and J codes have been reserved for the three EU member states that did not adopt the euro in 1999, while the R prefix is reserved for Luxembourg, which, at present, does not issue euro banknotes. The first series of uncirculated notes from Luxembourg use the prefix belonging to the country where they were printed.

(1) checksum of the 11 digits without the letter
(2) Denmark, the United Kingdom and Sweden presently do not use the Euro, but had these serial number prefixes reserved for the first series of notes.

Although the Slovenian letter had been reserved since the eurozone enlargement in January 2007, the country initially used previously issued banknotes issued from other member states. The first banknotes bearing the "H" letter, produced in France specifically on behalf of Slovenia, were witnessed no sooner than April 2008.[http://www.eurobilltrackerforum.com/viewtopic.php?t=10994 EuroBillTracker:: View topic – Slovenian notes, serial number H] The 'Cypriot banknotes' (G) appeared in circulation in November 2009, whereas, those from Malta (F) appeared 3 months later (February 2010).  Slovakian notes (E) first appeared in October 2010.

2nd series 

In the new series, there are two codes, like in the first series. They are the printer code in the top right hand corner and the serial number.  Part of the serial number is horizontal and part of it is vertical.  The serial number begins with a letter indicating the printer, which is broadly similar to the first series (Z for Belgium, Y for Greece, etc.). The second letter of the new serial numbers is part of the serial number itself, and has no further significance.

However, as the code indicates the printer, rather than the issuing NCB, certain letters have been reassigned from NCBs which do not maintain their own printing facilities. In the first series, H denoted Slovenia. As there is no Slovene printer of euro banknotes, H represents De La Rue (Loughton) in the second series.  Several of the printers which replaced what were NCB codes maintain their printing code from the first series (De La Rue, mentioned, and Bundesdruckerei, which replaced Luxembourg as R, its previous printing code).

Tracking 

There are several communities of people at European level, an example of which is EuroBillTracker,  that as a hobby keep track of the euro notes that pass through their hands to keep track and know where they travel or have travelled. The aim is to record as many notes as possible in order to know details about their spread, from where and to where they travel in general and follow it up, like where a specific note has been seen in particular and generate statistics and rankings, for example, in which countries there are more notes. EuroBillTracker has registered over 122.47 million notes as of 14 September 2013,  worth more than €2.32 billion.

€1 and €2 notes

The ECB has stated that "printing a €1 note is more expensive (and less durable) than minting a €1 coin". On 18 November 2004 the ECB decided definitively that there was insufficient demand across the Eurozone for very-low-denomination banknotes. On 25 October 2005, however, more than half of the MEPs supported a motion calling on the European Commission and the European Central Bank to recognise the definite need for the introduction of €1 and €2 banknotes.  However, the European Central Bank is not directly answerable to the Parliament or the Commission, and has ignored the motion. The one hundred euro note (€100) is one of the higher value euro banknotes and has been used since the introduction of the euro (in its cash form) in 2002.  
The note is used daily by some 332 million Europeans and in the 23 countries which have it as their sole currency (with 22 legally adopting it).
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It is the third largest note measuring 147 mm × 82 mm and has a green colour scheme. The hundred euro notes depict bridges and arches/doorways in the Baroque and Rococo style (between the 17th and 18th century).

The hundred euro note contains several complex security features such as watermarks, invisible ink, holograms and microprinting that document its authenticity. In May 2012, there were approximately 1,652,287,100 hundred euro banknotes in circulation in the eurozone.

History 

The euro was founded on 1 January 1999, when it became the currency of over 300 million people in Europe. For the first three years of its existence it was an invisible currency, only used in accountancy. Euro cash was not introduced until 1 January 2002, when it replaced the national banknotes and coins of the countries in eurozone 12, such as the French franc and the Spanish peseta.

Slovenia joined the Eurozone in 2007,  Cyprus and Malta in 2008,  Slovakia in 2009,  Estonia in 2011  and Latvia joined on 1 January 2014. 

The changeover period 

The changeover period during which the former currencies' notes and coins were exchanged for those of the euro lasted about two months, going from 1 January 2002 until 28 February 2002. The official date on which the national currencies ceased to be legal tender varied from member state to member state. The earliest date was in Germany, where the mark officially ceased to be legal tender on 31 December 2001, though the exchange period lasted for two months more. Even after the old currencies ceased to be legal tender, they continued to be accepted by national central banks for periods ranging from ten years to forever. 

Changes 

Notes printed before November 2003 bear the signature of the first president of the European Central Bank, Wim Duisenberg, who was replaced on 1 November 2003 by Jean-Claude Trichet, whose signature appears on issues from November 2003 to March 2012. Notes issued after March 2012 bear the signature of the third president of the European Central Bank, incumbent Mario Draghi.

Until now there has been only one series of euro notes, however a new series, similar to the current one, is planned to be released.  The European Central Bank will, in due time, announce when banknotes from the first series lose legal tender status.

As of June 2012, current issues do not reflect the expansion of the European Union, as Cyprus is not depicted on current notes as the map does not extend far enough east and Malta is also missing as it does not meet the current series' minimum size for depiction.  Since the European Central Bank plans to redesign the notes every seven or eight years after each issue, a second series of banknotes is already in preparation. New production and anti-counterfeiting techniques will be employed on the new notes, but the design will be of the same theme and colours identical of the current series; bridges and arches. However, they would still be recognisable as a new series. 

Design 

The hundred euro note measures at 147 mm × 82 mm and has a green colour scheme. All bank notes depict bridges and arches/doorways in a different historical European style; the hundred euro note shows the Baroque and Rococo style (between the 17th and 18th century). Although Robert Kalina's original designs were intended to show real monuments, for political reasons the bridge and art are merely hypothetical examples of the architectural era. 

Like all euro notes, it contains the denomination, the EU flag, the signature of the president of the ECB and the initials of said bank in different EU languages, a depiction of EU territories overseas, the stars from the EU flag and twelve security features as listed below.

Security features 

The hundred euro note is protected by:
* Colour changing ink  used on the numeral located on the back of the note, that appears to change colour from purple to brown, when the note is tilted.
* A see through number printed in the top corner of the note, on both sides, appear combine perfectly to form the value numeral when held against the light.
* A glossy stripe, situated at the back of the note, showing the value numeral and the euro symbol.
* A hologram, used on the note which appears to see the hologram image change between the value and a window or doorway, but in the background, it appears to be rainbow-coloured concentric circles of micro-letters moving from the centre to the edges of the patch. 
* A EURion constellation; the EURion constellation is a pattern of symbols found on a number of banknote designs worldwide since about 1996. It is added to help software detect the presence of a banknote in a digital image.
* Watermarks, which appear when held up to the light.
* Raised printing in the main image, the lettering and the value numerals on the front of the banknotes will be raised. 
* Ultraviolet ink; the paper itself does not glow, fibres embedded in the paper do appear, and be coloured red, blue and green, the EU flag is green and has orange stars, the ECB President's, currently Mario Draghi's, signature turns green, the large stars and small circles on the front glow and the European map, a bridge and the value numeral on the back appear in yellow. 
* Microprinting, on various areas of the banknotes there is microprinting, for example, inside the "EYPΩ" (EURO in Greek characters) on the front. The micro-text is sharp, but not blurred.
* A security thread, embedded in the banknote paper. The thread will appear as a dark stripe when held up to the light. The word "EURO" and the value is embedded in tiny letters on the thread. 
* Perforations in the hologram which will form the euro symbol. There are also small numbers showing the value.
* A matted surface; the note paper is made out of pure cotton, which feels crisp and firm, but not limp or waxy.
* Barcodes,
* A serial number.

The 100 euro notes are made of pure cotton fibre, which improves their durability as well as making the banknotes have a distinctive feel. The printer code is positioned at the right of 9 o'clock star. 

Circulation 

As of May 2013, there are approximately 1,721,763,600 €100 banknotes in circulation around the Eurozone.  That is approximately €172,176,363,800 worth of €100 banknotes.  The European Central Bank is closely monitoring the circulation and stock of the euro coins and banknotes. It is a task of the Eurosystem to ensure an efficient and smooth supply of euro notes and to maintain their integrity throughout the euro area.

Legal information 

Legally, both the European Central Bank and the central banks of the eurozone countries have the right to issue the 7 different euro banknotes. In practice, only the national central banks of the zone physically issue and withdraw euro banknotes. The European Central Bank does not have a cash office and is not involved in any cash operations.

Tracking 

There are several communities of people at European level, most of which is EuroBillTracker,  that, as a hobby, it keeps track of the euro banknotes that pass through their hands, to keep track and know where they travel or have traveled. The aim is to record as many notes as possible in order to know details about its spread, like from where and to where they travel in general, follow it up, like where a ticket has been seen in particular, and generate statistics and rankings, for example, in which countries there are more tickets. EuroBillTracker has registered over 155 million notes as of May 2016,  worth more than €2.897 billion. The euro (sign: €; code: EUR) is the official currency of the eurozone, which consists of 19 of the  member states of the European Union: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.   The currency is also officially used by the institutions of the European Union and four other European countries, as well as unilaterally by two others, and is consequently used daily by some 337 million Europeans .  Outside of Europe, a number of overseas territories of EU members also use the euro as their currency.

Additionally, 210 million people worldwide  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.   
, with more than €995,000,000,000 in circulation, the euro has the highest combined value of banknotes and coins in circulation in the world, having surpassed the U.S. dollar.:
Total EUR currency (coins and banknotes) in circulation 771.5 (banknotes) + 21.032 (coins) 792.53 billion EUR * 1.48 (exchange rate) 
 1,080 billion USD 
Total USD currency (coins and banknotes) in circulation 859 billion USD
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Based on International Monetary Fund estimates of 2008 GDP and purchasing power parity among the various currencies, the eurozone is the second largest economy in the world. 

The name euro was officially adopted on 16 December 1995.  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 May 2002 had completely replaced the former currencies.  While the euro dropped subsequently to US$0.8252 within two years (26 October 2000), it has traded above the U.S. dollar since the end of 2002, peaking at US$1.6038 on 18 July 2008.  Since late 2009, the euro has been immersed in the European sovereign-debt crisis which has led to the creation of the European Financial Stability Facility as well as other reforms aimed at stabilising the currency. In July 2012, the euro fell below US$1.21 for the first time in two years, following concerns raised over Greek debt and Spain's troubled banking sector.  , the euro–dollar exchange rate stands at ~ US$1.1137. 

Administration

The euro is managed and administered by the Frankfurt-based European Central Bank (ECB) and the Eurosystem (composed of the central banks of the eurozone countries). As an independent central bank, the ECB has sole authority to set monetary policy. The Eurosystem participates in the printing, minting and distribution of notes and coins in all member states, and the operation of the eurozone payment systems.

The 1992 Maastricht Treaty obliges most EU member states to adopt the euro upon meeting certain monetary and budgetary convergence criteria, although not all states have done so. The United Kingdom and Denmark negotiated exemptions,  while Sweden (which joined the EU in 1995, after the Maastricht Treaty was signed) turned down the euro in a 2003 referendum, and has circumvented the obligation to adopt the euro by not meeting the monetary and budgetary requirements. All nations that have joined the EU since 1993 have pledged to adopt the euro in due course.

Issuing modalities for banknotes

Since 5 January 2002, the national central banks (NCBs) and the ECB have issued euro banknotes on a joint basis.  Euro banknotes do not show which central bank issued them. Eurosystem NCBs are required to accept euro banknotes put into circulation by other Eurosystem members and these banknotes are not repatriated. The ECB issues 8% of the total value of banknotes issued by the Eurosystem. In practice, the ECB's banknotes are put into circulation by the NCBs, thereby incurring matching liabilities vis-à-vis the ECB. These liabilities carry interest at the main refinancing rate of the ECB. The other 92% of the euro banknotes are issued by the NCBs in proportion to their respective shares in the capital key of the ECB, calculated using national share of European Union population and national share of European Union GDP, equally weighted. 

Characteristics

Coins and banknotes

The euro is divided into 100 cents (sometimes referred to as euro cents, especially when distinguishing them from other currencies, and referred to as such on the common side of all cent coins). In Community legislative acts the plural forms of euro and cent are spelled without the s, notwithstanding normal English usage.  Otherwise, normal English plurals are sometimes used,  with many local variations such as centime in France.

All circulating coins have a common side showing the denomination or value, and a map in the background. Due to the linguistic plurality of Europe, the Latin alphabet version of euro is used (as opposed to the less common Greek or Cyrillic) and Arabic numerals (other text is used on national sides in national languages, but other text on the common side is avoided). For the denominations except the 1-, 2- and 5-cent coins, the map only showed the 15 member states which were members when the euro was introduced. Beginning in 2007 or 2008 (depending on the country) the old map is being replaced by a map of Europe also showing countries outside the Union like Norway. The 1-, 2- and 5-cent coins, however, keep their old design, showing a geographical map of Europe with the 15 member states of 2002 raised somewhat above the rest of the map. All common sides were designed by Luc Luycx. The coins also have a national side showing an image specifically chosen by the country that issued the coin. Euro coins from any member state may be freely used in any nation that has adopted the euro.

The coins are issued in €2, €1, 50c, 20c, 10c, 5c, 2c, and 1c denominations. To avoid the use of the two smallest coins, some cash transactions are rounded to the nearest five cents in the Netherlands and Ireland   (by voluntary agreement) and in Finland (by law).  This practice is discouraged by the Commission, as is the practice of certain shops to refuse to accept high value euro notes. 

Commemorative coins with €2 face value have been issued with changes to the design of the national side of the coin. These include both commonly issued coins, such as the €2 commemorative coin for the fiftieth anniversary of the signing of the Treaty of Rome, and nationally issued coins, such as the coin to commemorate the 2004 Summer Olympics issued by Greece. These coins are legal tender throughout the eurozone. Collector coins with various other denominations have been issued as well, but these are not intended for general circulation, and they are legal tender only in the member state that issued them. 

The design for the euro banknotes has common designs on both sides. The design was created by the Austrian designer Robert Kalina.  Notes are issued in €500, €200, €100, €50, €20, €10, €5. Each banknote has its own colour and is dedicated to an artistic period of European architecture. The front of the note features windows or gateways while the back has bridges, symbolising links between countries and with the future. While the designs are supposed to be devoid of any identifiable characteristics, the initial designs by Robert Kalina were of specific bridges, including the Rialto  and the Pont de Neuilly, and were subsequently rendered more generic; the final designs still bear very close similarities to their specific prototypes; thus they are not truly generic. The monuments looked similar enough to different national monuments to please everyone. 

Payments clearing, electronic funds transfer

Capital within the EU may be transferred in any amount from one country to another. All intra-EU transfers in euro are treated as domestic transactions and bear the corresponding domestic transfer costs.  This includes all member states of the EU, even those outside the eurozone providing the transactions are carried out in euro.  Credit/debit card charging and ATM withdrawals within the eurozone are also treated as domestic transactions; however paper-based payment orders, like cheques, have not been standardised so these are still domestic-based. The ECB has also set up a clearing system, TARGET, for large euro transactions. 

Currency sign

A special euro currency sign (€) was designed after a public survey had narrowed the original ten proposals down to two. The European Commission then chose the design created by the Belgian Alain Billiet.

The European Commission also specified a euro logo with exact proportions and foreground and background colour tones.  While the Commission intended the logo to be a prescribed glyph shape, font designers made it clear that they intended to design their own variants instead.  Typewriters lacking the euro sign can create it by typing a capital 'C', backspacing and overstriking it with the equal ('=') sign. Placement of the currency sign relative to the numeric amount varies from nation to nation, but for texts in English the symbol (or the ISO-standard "EUR") should precede the amount. 

There is no official symbol for the cent.

History

Introduction

The euro was established by the provisions in the 1992 Maastricht Treaty. To participate in the currency, member states are meant to meet strict criteria, such as a budget deficit of less than three percent of their GDP, a debt ratio of less than sixty percent of GDP (both of which were ultimately widely flouted after introduction), low inflation, and interest rates close to the EU average. In the Maastricht Treaty, the United Kingdom and Denmark were granted exemptions per their request from moving to the stage of monetary union which would result in the introduction of the euro.

Economists who helped create or contributed to the euro include Fred Arditti, Neil Dowling, Wim Duisenberg, Robert Mundell, Tommaso Padoa-Schioppa and Robert Tollison. (For macroeconomic theory, see below.)

The name "euro" was officially adopted in Madrid on 16 December 1995. Belgian Esperantist Germain Pirlot, a former teacher of French and history is credited with naming the new currency by sending a letter to then President of the European Commission, Jacques Santer, suggesting the name "euro" on 4 August 1995. 

Due to differences in national conventions for rounding and significant digits, all conversion between the national currencies had to be carried out using the process of triangulation via the euro. The definitive values of one euro in terms of the exchange rates at which the currency entered the euro are shown on the right.

The rates were determined by the Council of the European Union,by means of Council Regulation 2866/98 (EC) of 31 December 1998. based on a recommendation from the European Commission based on the market rates on 31 December 1998. They were set so that one European Currency Unit (ECU) would equal one euro. The European Currency Unit was an accounting unit used by the EU, based on the currencies of the member states; it was not a currency in its own right. They could not be set earlier, because the ECU depended on the closing exchange rate of the non-euro currencies (principally the pound sterling) that day.

The procedure used to fix the conversion rate between the Greek drachma and the euro was different, since the euro by then was already two years old. While the conversion rates for the initial eleven currencies were determined only hours before the euro was introduced, the conversion rate for the Greek drachma was fixed several months beforehand.by Council Regulation 1478/2000 (EC) of 19 June 2000

The currency was introduced in non-physical form (traveller's cheques, electronic transfers, banking, etc.) at midnight on 1 January 1999, when the national currencies of participating countries (the eurozone) ceased to exist independently. Their exchange rates were locked at fixed rates against each other. The euro thus became the successor to the European Currency Unit (ECU). The notes and coins for the old currencies, however, continued to be used as legal tender until new euro notes and coins were introduced on 1 January 2002.

The changeover period during which the former currencies' notes and coins were exchanged for those of the euro lasted about two months, until 28 February 2002. The official date on which the national currencies ceased to be legal tender varied from member state to member state. The earliest date was in Germany, where the mark officially ceased to be legal tender on 31 December 2001, though the exchange period lasted for two months more. Even after the old currencies ceased to be legal tender, they continued to be accepted by national central banks for periods ranging from several years to forever (the latter in Austria, Germany, Ireland, Estonia and Latvia for banknotes and coins; also, Belgium, Luxembourg, Slovenia and Slovakia will accept banknotes forever, but not coins). The earliest coins to become non-convertible were the Portuguese escudos, which ceased to have monetary value after 31 December 2002, although banknotes remain exchangeable until 2022.

Eurozone crisis

Following the U.S. financial crisis in 2008, fears of a sovereign debt crisis developed in 2009 among fiscally conservative investors concerning some European states, with the situation becoming particularly tense in early 2010.   This included eurozone members Greece, Ireland and Portugal and also some EU countries outside the area.  Iceland, the country which experienced the largest crisis in 2008 when its entire international banking system collapsed, has emerged less affected by the sovereign-debt crisis as the government was unable to bail the banks out. In the EU, especially in countries where sovereign debts have increased sharply due to bank bailouts,  a crisis of confidence has emerged with the widening of bond yield spreads and risk insurance on credit default swaps between these countries and other EU members, most importantly Germany.   To be included in the eurozone, the countries had to fulfil certain convergence criteria, but the meaningfulness of such criteria was diminished by the fact it was not enforced with the same degree of strictness from country to country. 

According to the Economist Intelligence Unit in 2011, "[I]f the [euro area] is treated as a single entity, its [economic and fiscal] position looks no worse and in some respects, rather better than that of the US or the UK" and the budget deficit for the euro area as a whole is much lower and the euro area's government debt/GDP ratio of 86% in 2010 was about the same level as that of the United States. "Moreover", they write, "private-sector indebtedness across the euro area as a whole is markedly lower than in the highly leveraged Anglo-Saxon economies". The authors conclude that the crisis "is as much political as economic" and the result of the fact that the euro area lacks the support of "institutional paraphernalia (and mutual bonds of solidarity) of a state". 

The crisis continued with S&P downgrading nine euro-area countries, including France, then downgrading the entire European Financial Stability Facility (EFSF) fund.

In May 2012, socialist François Hollande was elected as president of France and a month later the French socialist legislative position was strengthened, while German leader Angela Merkel "has appeared to be floundering and been badly let down by her advisers in recent months", one commentator said. As such, "serious discord between French and German monetary decision-makers was [comparable to that of] ... 1992–93, at the height of the crisis over the European Monetary System, the forerunner to EMU" (European Monetary Union). "[H]itherto relatively dormant signs of euro skepticism in German public opinion and throughout industry have been multiplying in recent months, making Hollande's proposals increasingly unpalatable to a broad swathe of German opinion. Although considerable controversy will continue to swirl over Greece and Spain, the real battle lines over the future of the euro will be drawn up between Germany and France", the commentary concluded.  Another historical parallel – to 1931 when Germany was burdened with debt, unemployment and austerity while France and the United States were relatively strong creditors – gained attention in summer 2012  even as Germany received a debt-rating warning of its own.  

Direct and indirect usage

Direct usage

The euro is the sole currency of 19 EU member states: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. These countries constitute the "eurozone", some 332 million people in total . 

With all but two of the remaining EU members obliged to join, together with future members of the EU, the enlargement of the eurozone is set to continue. Outside the EU, the euro is also the sole currency of Montenegro and Kosovo and several European microstates (Andorra, Monaco, San Marino and the Vatican City) as well as in four overseas territories of EU members that are not themselves part of the EU (Saint Barthélemy, Saint Pierre and Miquelon, the French Southern and Antarctic Lands and Akrotiri and Dhekelia). Together this direct usage of the euro outside the EU affects nearly 3 million people.

The Euro has been used as a trading currency in Cuba since 1998,  and Syria since 2006.  There are also various currencies pegged to the euro (see below). In 2009, Zimbabwe abandoned its local currency and used major currencies instead, including the euro and the United States dollar. 

Use as reserve currency

Since its introduction, the euro has been the second most widely held international reserve currency after the U.S. dollar. The share of the euro as a reserve currency has increased from 18% in 1999 to 27% in 2008. Over this period the share of the U.S. dollar fell from 71% to 64% and the Yen fell from 6.4% to 3.3%. The euro inherited and built on the status of the Deutsche Mark as the second most important reserve currency. The euro remains underweight as a reserve currency in advanced economies while overweight in emerging and developing economies: according to the International Monetary Fund  the total of euro held as a reserve in the world at the end of 2008 was equal to $1.1 trillion or €850 billion, with a share of 22% of all currency reserves in advanced economies, but a total of 31% of all currency reserves in emerging and developing economies.

The possibility of the euro becoming the first international reserve currency is now widely debated among economists.  Former US Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is "absolutely conceivable that the euro will replace the US dollar as reserve currency, or will be traded as an equally important reserve currency".  In contrast to Greenspan's 2007 assessment, the euro's increase in the share of the worldwide currency reserve basket has slowed considerably since 2007 and since the beginning of the worldwide credit crunch related recession and European sovereign-debt crisis.

Currencies pegged to the euro

Outside the eurozone, a total of 22 countries and territories that do not belong to the EU have currencies that are directly pegged to the euro including 13 countries in mainland Africa (CFA franc), two African island countries (Comorian franc and Cape Verdean escudo), three French Pacific territories (CFP franc) and three Balkan countries, Bosnia and Herzegovina (Bosnia and Herzegovina convertible mark), Bulgaria (Bulgarian lev) and Macedonia (Macedonian denar).   On 28 July 2009, São Tomé and Príncipe signed an agreement with Portugal which will eventually tie its currency to the euro.  Additionally, the Moroccan dirham is tied to a basket of currencies, including the Euro and the US dollar, with the Euro given the highest weighting.

With the exception of Bosnia, Bulgaria, Macedonia (which had pegged their currencies against the Deutsche Mark) and Cape Verde (formerly pegged to the Portuguese escudo), all of these non-EU countries had a currency peg to the French Franc before pegging their currencies to the euro. Pegging a country's currency to a major currency is regarded as a safety measure, especially for currencies of areas with weak economies, as the euro is seen as a stable currency, prevents runaway inflation and encourages foreign investment due to its stability.

Within the EU several currencies have a peg to the euro, in most instances as a precondition to joining the eurozone. The Bulgarian lev was formerly pegged to the Deutsche Mark; one other EU member state has a direct peg due to ERM II: the Danish krone.

In total, , 182 million people in Africa use a currency pegged to the euro, 27 million people outside the eurozone in Europe, and another 545,000 people on Pacific islands.

Since 2005, stamps issued by the Sovereign Military Order of Malta have been denominated in euros, although the Order's official currency remains the Maltese scudo.http://www.orderofmalta.int/catalogue/stamps/35675/associate-countries/?lang
en Retrieved 3 October 2011. The Maltese scudo itself is pegged to the euro and is only recognised as legal tender within the Order. 

Economics

Optimal currency area

In economics, an optimum currency area, or region (OCA or OCR), is a geographical region in which it would maximise economic efficiency to have the entire region share a single currency. There are two models, both proposed by Robert Mundell: the stationary expectations model and the international risk sharing model. Mundell himself advocates the international risk sharing model and thus concludes in favour of the euro.  However, even before the creation of the single currency, there were concerns over diverging economies. Before the late-2000s recession the chances of a state leaving the euro, or the chances that the whole zone would collapse, were considered extremely slim.  However the Greek government-debt crisis led to former British Foreign Secretary Jack Straw claiming the eurozone could not last in its current form.  Part of the problem seems to be the rules that were created when the euro was set up. John Lanchester, writing for The New Yorker, explains it thus:

The guiding principle of the currency, which opened for business in 1999, were supposed to be a set of rules to limit a country's annual deficit to three per cent of gross domestic product, and the total accumulated debt to sixty per cent of G.D.P. It was a nice idea, but by 2004 the two biggest economies in the euro zone, Germany and France, had broken the rules for three years in a row.  

Transaction costs and risks

The most obvious benefit of adopting a single currency is to remove the cost of exchanging currency, theoretically allowing businesses and individuals to consummate previously unprofitable trades. For consumers, banks in the eurozone must charge the same for intra-member cross-border transactions as purely domestic transactions for electronic payments (e.g., credit cards, debit cards and cash machine withdrawals).

The absence of distinct currencies also theoretically removes exchange rate risks, although the imposition of transfer restrictions in 2012–13 Cypriot financial crisis means that the situation is not quite so simple. The risk of unanticipated exchange rate movement has always added an additional risk or uncertainty for companies or individuals that invest or trade outside their own currency zones. Companies that hedge against this risk will no longer need to shoulder this additional cost. This is particularly important for countries whose currencies had traditionally fluctuated a great deal, particularly the Mediterranean nations.

Financial markets on the continent are expected to be far more liquid and flexible than they were in the past. The reduction in cross-border transaction costs will allow larger banking firms to provide a wider array of banking services that can compete across and beyond the eurozone. However, although transaction costs were reduced, some studies have shown that risk aversion has increased during the last 40 years in the Eurozone. 

Price parity

Another effect of the common European currency is that differences in prices—in particular in price levels—should decrease because of the law of one price. Differences in prices can trigger arbitrage, i.e., speculative trade in a commodity across borders purely to exploit the price differential. Therefore, prices on commonly traded goods are likely to converge, causing inflation in some regions and deflation in others during the transition. Some evidence of this has been observed in specific eurozone markets. 

Macroeconomic stability

Low levels of inflation are the hallmark of stable and modern economies. Because a high level of inflation acts as a tax (seigniorage) and theoretically discourages investment, it is generally viewed as undesirable. In spite of the downside, many countries have been unable or unwilling to deal with serious inflationary pressures. Some countries have successfully contained them by establishing largely independent central banks. One such bank was the Bundesbank in Germany; as the European Central Bank is modelled on the Bundesbank,  it is independent of the pressures of national governments and has a mandate to keep inflation low. Member countries that join the euro hope to enjoy the macroeconomic stability associated with low levels of inflation. The ECB (unlike the Federal Reserve in the United States of America) does not have a second objective to sustain growth and employment.

Many national and corporate bonds denominated in euro are significantly more liquid and have lower interest rates than was historically the case when denominated in national currencies. While increased liquidity may lower the nominal interest rate on the bond, denominating the bond in a currency with low levels of inflation arguably plays a much larger role. A credible commitment to low levels of inflation and a stable debt reduces the risk that the value of the debt will be eroded by higher levels of inflation or default in the future, allowing debt to be issued at a lower nominal interest rate.

Unfortunately, there is also a cost in structurally keeping inflation lower than in the United States, UK, and China. The result is that seen from those countries, the euro has become expensive, making European products increasingly expensive for its largest importers. Hence export from the euro zone becomes more difficult. This is one of the main reasons why economic growth inside the euro zone now lags behind growth in other large economies. This effect is strongest in European countries with a weak economy.

In general, those in Europe who own large amounts of euros are served by high stability and low inflation. Those who now need to earn euros, including those countries who need to pay interest on large debts, are likely better served with a slightly less strong euro leading to more export. Because with a lower euro, investors would see better chances for (companies in) southern European countries to grow themselves out of the crisis. As a result, investing there would become less risky, and that would push interest rates for southern countries more in line with the European average.

The contradiction here is that high macroeconomic stability in the form of ongoing historically low inflation over time leads to economic problems, creating higher interest rates and political and economic instability for the weaker partners.

Trade

A 2009 consensus from the studies of the introduction of the euro concluded that it has increased trade within the eurozone by 5% to 10%,  although one study suggested an increase of only 3%  while another estimated 9 to 14%.  However, a meta-analysis of all available studies suggests that the prevalence of positive estimates is caused by publication bias and that the underlying effect may be negligible.  Furthermore, studies accounting for time trend reflecting general cohesion policies in Europe that started before, and continue after implementing the common currency find no effect on trade.   These results suggest that other policies aimed at European integration might be the source of observed increase in trade.

Investment

Physical investment seems to have increased by 5% in the eurozone due to the introduction.  Regarding foreign direct investment, a study found that the intra-eurozone FDI stocks have increased by about 20% during the first four years of the EMU.  Concerning the effect on corporate investment, there is evidence that the introduction of the euro has resulted in an increase in investment rates and that it has made it easier for firms to access financing in Europe. The euro has most specifically stimulated investment in companies that come from countries that previously had weak currencies. A study found that the introduction of the euro accounts for 22% of the investment rate after 1998 in countries that previously had a weak currency. 

Inflation

The introduction of the euro has led to extensive discussion about its possible effect on inflation. In the short term, there was a widespread impression in the population of the eurozone that the introduction of the euro had led to an increase in prices, but this impression was not confirmed by general indices of inflation and other studies.   A study of this paradox found that this was due to an asymmetric effect of the introduction of the euro on prices: while it had no effect on most goods, it had an effect on cheap goods which have seen their price round up after the introduction of the euro. The study found that consumers based their beliefs on inflation of those cheap goods which are frequently purchased.  It has also been suggested that the jump in small prices may be because prior to the introduction, retailers made fewer upward adjustments and waited for the introduction of the euro to do so. 

Exchange rate risk

One of the advantages of the adoption of a common currency is the reduction of the risk associated with changes in currency exchange rates. It has been found that the introduction of the euro created "significant reductions in market risk exposures for nonfinancial firms both in and outside of Europe".  These reductions in market risk "were concentrated in firms domiciled in the eurozone and in non-Euro firms with a high fraction of foreign sales or assets in Europe".

Financial integration

The introduction of the euro seems to have had a strong effect on European financial integration. According to a study on this question, it has "significantly reshaped the European financial system, especially with respect to the securities markets [...] However, the real and policy barriers to integration in the retail and corporate banking sectors remain significant, even if the wholesale end of banking has been largely integrated."  Specifically, the euro has significantly decreased the cost of trade in bonds, equity, and banking assets within the eurozone.  On a global level, there is evidence that the introduction of the euro has led to an integration in terms of investment in bond portfolios, with eurozone countries lending and borrowing more between each other than with other countries. 

Effect on interest rates

As of January 2014, and since the introduction of the euro, interest rates of most members countries (particularly those with a weak currency), have decreased. The countries whose interest rates fell most as a result of the adoption of the euro are Greece, Ireland, Portugal, Spain, and Italy. These very countries have had the most serious sovereign financing problems.

The effect of declining interest rates, combined with excess liquidity continually provided by the ECB, made it easier for banks within the countries in which interest rates fell the most, and their linked sovereigns, to borrow significant amounts (above the 3% of GDP budget deficit imposed on the eurozone initially) and significantly inflate their public and private debt levels.  Following the late-2000s financial crisis, governments in these countries found it necessary to bail out or nationalise their privately held banks to prevent systemic failure of the banking system when underlying hard or financial asset values were found to be grossly inflated and sometimes so near worthless there was no liquid market for them.  This further increased the already high levels of public debt to a level the markets began to consider unsustainable, via increasing government bond interest rates, producing the ongoing European sovereign-debt crisis.

Price convergence

The evidence on the convergence of prices in the eurozone with the introduction of the euro is mixed. Several studies failed to find any evidence of convergence following the introduction of the euro after a phase of convergence in the early 1990s.   Other studies have found evidence of price convergence,   in particular for cars.  A possible reason for the divergence between the different studies is that the processes of convergence may not have been linear, slowing down substantially between 2000 and 2003, and resurfacing after 2003 as suggested by a recent study (2009). 

Tourism

A study suggests that the introduction of the euro has had a positive effect on the amount of tourist travel within the EMU, with an increase of 6.5%. 

Exchange rates

Flexible exchange rates

The ECB targets interest rates rather than exchange rates and in general does not intervene on the foreign exchange rate markets. This is because of the implications of the Mundell–Fleming model, which implies a central bank cannot (without capital controls) maintain interest rate and exchange rate targets simultaneously, because increasing the money supply results in a depreciation of the currency. In the years following the Single European Act, the EU has liberalised its capital markets, and as the ECB has chosen monetary autonomy, the exchange-rate regime of the euro is flexible, or floating. The result of the ECB maintaining historically low interest rates and restricting money supply has been that over the last decade the euro has become expensive relative to the currency of Europe's main trading partners. However, in 2010, the euro started on a sharp decline. Starting at U.S$1.60 in 2008, and dropping to US$1.04 in 2015. The Canadian Dollar despite seeing a decline in value against the USD, has seen a growth in EURO -> [CAD].

Against other major currencies

The euro is the second-most widely held reserve currency after the U.S. dollar. After its introduction on 4 January 1999 its exchange rate against the other major currencies fell reaching its lowest exchange rates in 2000 (25 October vs the U.S. dollar, 26 October vs Japanese Yen, 3 May vs Pound Sterling). Afterwards it regained and its exchange rate reached its historical highest point in 2008 (15 July vs U.S. dollar, 23 July vs Japanese Yen, 29 December vs Pound Sterling). With the advent of the global financial crisis the euro initially fell, only to regain later. Despite pressure due to the European sovereign-debt crisis the euro remained stable.  In November 2011 the euro's exchange rate index – measured against currencies of the bloc's major trading partners – was trading almost two percent higher on the year, approximately at the same level as it was before the crisis kicked off in 2007. 
*Current and historical exchange rates against 29 other currencies (European Central Bank) 
*Current dollar/euro exchange rates (BBC) 
*Historical exchange rate from 1971 until now 

Linguistic issues

The formal titles of the currency are euro for the major unit and cent for the minor (one hundredth) unit and for official use in most eurozone languages; according to the ECB, all languages should use the same spelling for the nominative singular.  This may contradict normal rules for word formation in some languages, e.g., those where there is no eu diphthong. Bulgaria has negotiated an exception; euro in the Bulgarian Cyrillic alphabet is spelled as eвро (evro) and not eуро (euro) in all official documents.  In the Greek script the term ευρώ (evró) is used; the Greek "cent" coins are denominated in λεπτό/ά (leptó/á). Official practice for English-language EU legislation is to use the words euro and cent as both singular and plural,  although the European Commission's Directorate-General for Translation states that the plural forms euros and cents should be used in English. 

Criticism

Unemployment

Nobel memorial prize-winning economist James Meade thought that a central bank should not make price stability the objective of aggregate demand management. When prices are likely to be pushed up due to increase of indirect taxes or adverse terms-of-trade shocks, the surge in prices must be cancelled out by decline in domestic money wage costs, as long as such a price stability policy is adopted.J. Meade, The Economic Journal, vol 88, No 351, (1978) There would be unemployment in the all industrial sectors under a price stabilisation policy, suggesting that in the short run the elasticity of demand for labour is low.

Under the ECB's price stabilisation policy, many people in the eurozone have difficulty finding a job. The unemployment rate of Spain is around 25 percent in 2014, and an economic forecast says that the figure will not decrease below 20 percent until 2017. 

ELSTAT, the statistics agency of Greece, shows that Greece's unemployment rate was 27 percent in June 2014.  OECD forecasts that Greece's unemployment rate will remain around 27 percent until 2016. Due to long-term unemployment, skills of jobless persons have been depreciated and their motivation of finding jobs has been lost, which causes the country's level of unemployment to remain high. 

Spain's youth unemployment rate is 53.8 percent in July 2014, and this is the highest figure in the eurozone.[http://www.finfacts.ie/irishfinancenews/article_1028130.shtml Eurozone unemployment unchanged at 11.5% in July] Finfacts Ireland, EU economy, 29 Aug 2014 This figure is comparable to 53.1 percent of the Greek youth unemployment in May 2014.

In July 2014, the averaged unemployment rate of the eurozone is 11.7 percent, slight decrease from 11.9 percent in 2013.

Likewise, Paul Krugman argued that the existence of a single shared currency across the entire eurozone, in combination with tight money policies of the ECB (motivated by insistence of Germany on low inflation), placed much of the Southern Europe in a state of permanent high unemployment. According to Krugman, during the period between the creation of the euro and the 2008 financial crisis, countries of Southern Europe experienced abnormally high rates of wage growth due to high influx of investor money. Between 2000 and 2008, unit labor costs actually declined slightly in Germany, but rose by 30% in Spain and Greece.  This created an imbalance that put these countries at competitive disadvantage relative to Northern Europe. Returning to full employment at this point requires that the labor costs gap is somehow cancelled. If Spain and Greece had their own currencies, this would have easily happened through exchange rate adjustment. Since they don't, it can either happen through a decrease in nominal wages in Spain and Greece, also known as "internal devaluation", (an extremely difficult and slow process, since nominal wages, in general, exhibit downward rigidity), or through an equal increase in nominal wages (i.e. inflation) in Northern Europe, which does not happen because of active resistance from Germany.
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