Direct usage
The euro is the sole currency of 16 EU Member States: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain. These countries comprise the "Eurozone" or "Euro Area", some 326 million people in total. Estonia is expected to join in 2011, subject to approval from the Council.[26]
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 further. Outside the EU, the euro is also the sole currency of Montenegro and Kosovo and several European micro states (Andorra, Monaco, San Marino and Vatican City) as well as in three overseas territories of EU states that are not themselves part of the EU (Mayotte, Saint Pierre and Miquelon and Akrotiri and Dhekelia). Together this direct usage of the euro outside the EU affects over 3 million people.
It is also gaining increasing international usage as a trading currency, in Cuba,[27] North Korea and Syria.[28] There are also various currencies pegged to the euro (see below). In 2009 Zimbabwe announced to abandon its local currency and use major currencies instead including the euro and the United States dollar.[29]
Usage 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 17.9% in 1999 to 26.5% in 2008, at the expense of the U.S. dollar (its share fell from 70.9% to 64.0% in the same timeframe) and the Yen (it fell from 6.4% to 3.3%). The euro inherited the status of the second most important reserve currency from the German mark.
The euro remains underweight as a reserve currency in advanced economies while overweight in emerging and developing economies: according to the IMF[30] the total of euros held as a reserve in the world at the end of 2008 was equal to USD 1.1 trillion, 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.[31] Former Federal Reserve Chairman Alan Greenspan gave his opinion in September 2007 that it is "absolutely conceivable that the euro will replace the dollar as reserve currency, or will be traded as an equally important reserve currency."[32] In contrast to Greenspan's 2007 assessment the euro's increase in the share of the worldwide currency reserve basket has slowed considerably since the year 2007 and since the beginning of the worldwide credit crunch related recession.[30] The status of the Euro as a potential currency reserve has been under question since February 2010, because concerns over the solvency of Greece prompted fears that the monetary union may end.[33]
[edit] Currencies pegged to the euro
Outside the Eurozone, a total of 23 countries and territories which do not belong to the EU have currencies that are directly pegged to the euro including 14 countries in mainland Africa (CFA franc and Moroccan dirham), two African island countries (Comorian franc and Cape Verdean escudo), three French Pacific territories (CFP franc) and another Balkan country, Bosnia and HerzegovinaBosnia and Herzegovina convertible mark). On 28 July 2009, São Tomé and Príncipe signed an agreement with Portugal which will eventually tie its currency to the euro.[34] (
With the exception of Bosnia and Herzegovina (which pegged their currency against the German 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 and the Estonian kroonDanish krone, the Lithuanian litas and the Latvian lats. were formerly pegged to the German mark, other EU memberstates have a direct peg due to ERM II: the
In total, over 150 million people in Africa use a currency pegged to the euro, 25 million people outside the Eurozone in Europe and another 500,000 people on Pacific islands.
