The European Union has united almost three dozen European countries, becoming a unique entity that combines the characteristics of a state and an international organization. One of the tasks of this association is the formation of a common economic zone, where a single European currency will circulate. To date, the composition of the European Union does not coincide with the composition of the zone where the euro is used.
It is customary to call the eurozone a group of countries that have adopted the single European currency, called the euro, as a legal tender on their territory. As of January 1999, there were eleven such countries: Germany, Austria, France, Belgium, Finland, Italy, Ireland, Portugal, Spain, the Netherlands and Luxembourg. A little later, the euro area expanded due to the accession to it of Slovenia, Greece, Malta, Slovakia, Cyprus and Estonia.
The so-called expanded euro area includes several other states, where the single European currency is also used. So, agreements with the European Union were concluded by San Marino, the Vatican and Monaco. Without the conclusion of an agreement, the euro is used in settlements in Andorra, Montenegro and Kosovo.
The formation of a common monetary and economic policy in European countries took place in three stages. The single European currency has become the only legal means of payment in the eurozone since March 2002.
The introduction of a common currency has become the most daring economic experiment of recent times. Until now, experts argue about whether the transition to a single currency was expedient. The issues of distribution of benefits and possible costs from the creation of a monetary union between individual states and sectors of the economy have not yet been resolved. Most likely, the result of the experiment will affect not only Europe, but also many other states that maintain economic relations with this region.
Any EU country formally has every right to enter the euro area. And yet, candidates for joining the euro area must meet certain criteria that apply to their monetary policy. First of all, the budget deficit of the candidate country should be within 3% of GDP, and the debt of the government sector should be close to 60% of GDP.
In addition, a state wishing to enter the euro area must ensure a stable exchange rate of its currency in relation to the European currency. The degree of independence of the Central Bank of the country and the level of coherence of its financial policy with the policy of the countries of the eurozone are also taken into account.
When assessing potential new members of the euro area, the European Central Bank and the European Commission take into account the results of mutual integration of markets, the development of the balance of payments, labor costs, and the level of price indices. After gaining membership in the monetary union, the new member of the eurozone will be obliged to fulfill the stability criteria established for the financial sector.
When joining the zone of the single European currency, the new members of the Union transfer all powers in the field of monetary and credit policy to the European Central Bank, which now decides issues related to setting the level of interest rates and determining the volume of issue of banknotes.
For each new EU member, joining the euro area is a natural step leading to the full and comprehensive integration of the state into the European Union.