monetary unit consisting of 100 cents, adopted as a common currency for all transactions by 12 members of the European Union (EU) in January 2002. A 13th EU nation, Slovenia, adopted the euro in January 2007. Together, all 27 member of the EU (including those that have not adopted the euro as currency) constitute a market of about 300 million people and wield economic power comparable to that of the U.S.

The first step in the design of the monetary unification of Europe was taken by the historic Maastricht Treaty in 1991. Of the 15 EU countries at the time, 11 were declared eligible in May 1998 to adopt the euro: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. Greece became eligible later. Three other EU members—Denmark, Sweden, and Great Britain—had elected not to join the currency union at that time. In a September 2000 referendum, Danes voted to remain outside the currency union; Swedes voted the same way three years later. As of early 2007, Great Britain had not held a referendum on the issue.

Fixed conversion rates between the euro and the currencies of the euro countries were established on Dec. 31, 1998, when 1 euro had a value of U.S.$1.17. The euro was formally adopted on Jan. 1, 1999, and euro trading on major world currency markets began three days later. By mid-2000, the euro was trading at less than 75 percent of its original value.

During a transitional period, the euro was used chiefly on stock and currency exchanges and for various interbank transactions, including credit cards. National currencies, such as the French franc, German mark, Italian lira, Portuguese escudo, and the like, continued to be used for ordinary cash transactions, but retailers displayed prices in both the national currency and the euro.

On Jan. 1, 2002, euro notes (in 7 denominations of 500, 200, 100, 50, 20, 10, and 5 euros) and coins (in 8 denominations of 2 and 1 euros, then 50, 20, 10, 5, 2, and 1 euro cents) were introduced throughout the euro zone. By the end of February 2002 all countries using euros had phased out use of their national currencies, thereby making the euro the sole legal tender.

The euro rose substantially from early 2001 to May 2003, when it surpassed its original value; it went higher, dropped down, and in 2006 again rose. As of January 2007 a euro was worth about $1.30. Economists note that a surging euro presents as many problems as a weak one, since, among other issues, it makes European goods more expensive for American consumers and shaves off a percentage of European companies' profits.

See also European Central Bank.