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Euro already in common usage in many places outside enlarging 13-member eurozone

Euro already in common usage in many places outside enlarging 13-member eurozone

On Monday, the nation of Slovenia converts to the euro, officially becoming the 13th member of the eurozone. But at least half a dozen other European ministates and territories have undergone "unilateral euroization" by adopting the currency as legal tender without approval from the European Central Bank.
The currency, introduced to provide economic cohesion among Europe's states, also is in widespread use in dozens of countries and overseas dependencies ranging from the North Atlantic to the Pacific.
In Europe, the nations of Montenegro, Vatican City and San Marino, and the principalities of Andorra and Monaco, have used the euro since it was first introduced five years ago. And in Kosovo _ technically still part of Serbia but in fact a U.N. protectorate _ the euro circulates together with the Serbian dinar.
The European Central Bank has so far not opposed euro use by microstates which have historically been linked to the French franc, Spanish peseta or German mark as legal tender.
But the inclusion of Kosovo _ whose population of two million exactly matches Slovenia's _ has sparked worries about further adoption of Europe's currency.
"The ECB does not either encourage nor deter third countries from using the euro," ECB President Jean-Claude Trichet recently declared.
It is not uncommon for small countries around the world in Africa, Latin America and Asia to use the currency of a major nation. Until recently this has mainly meant the U.S. dollar.
When newly independent East Timor adopted the dollar after its secession from Indonesia in 1999, the U.S. Treasury dispatched planeloads of paper money and tons of coins to the impoverished Pacific nation.
But since then the rise of the euro has made inroads into the dollar's international dominance.
"The adoption of the euro creates the right conditions for economic prosperity by providing low inflation and low interest rates," said Joaquin Almunia, the EU economic and monetary affairs commissioner.
Montenegro, for example, advanced to the euro after adopting the German mark in the 1990s. At the time Montenegro was still part of the rump Yugoslavia, a two-state federation with much larger Serbia, but opposed the hardline policies of former Serbian strongman Slobodan Milosevic and feared that he would use his control over the Yugoslav currency to economically destabilize the small state of 600,000 people.
With Western help, the mark was introduced to replace the dinar. When the German mark disappeared five years ago, Montenegro switched to the euro at the same time as Germany.
Nikola Fabris, chief economist at Montenegro's Central Bank, says the country _ which is not even close to becoming an EU member _ now relies only on euros already in circulation.
"Montenegro does not have any special deal with the ECB," Fabris said.
Kosovo, not yet an independent country, is a so-called passive member of the eurozone.
"The euro allowed Kosovo to have a stable currency and almost zero percent inflation, and made foreign trade easier," said Mechthild Henneke, a U.N. spokeswoman.
Representation on the ECB is restricted to official EU members, which are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain _ and now Slovenia.
Fourteen West African nations who are also tied to the euro through the CFA franc, a joint currency set up by France after independence in the 1960s, are excluded from ECB representation.
Some European overseas territories are represented in the ECB decision-making process through their mother countries. These include the French departments of Guadeloupe, French Guyana, Martinique and Reunion, as well as Portugal's Madeira and Azores islands and Spain's Canary Islands.
Dozens of other entities, including overseas territories like the French islands of St. Pierre and Miquelon, Mayotte, and French Polynesia, New Caledonia and Wallis and Futuna, are linked to the euro via peg arrangements or managed floating rates.


Updated : 2020-12-05 04:29 GMT+08:00