Euro, the common currency of European Union,was launched by 11 of the 15 members of the union , on January 1, 1999. The exchange rates for the Euro determined at the time of the Euro launch were about US $1.17; British pound 0.70, India 49, China yen 133; and German mark 1.96.
At the time of the launch of Euro,its conversion ratio against other currencies internal and external were also decided. Internal conversion rates are the rates at which participating currencies would be converted into Euro during the transition period i.e. until the euro would completely replace the national currencies of the Euroland,while the external exchange rates are the exchange rates against currencies outside the Euroland. A key distinction was that the internal rates were irrevocably fixed while external values of the euro will be market determined.
The Maastricht treaty of 1991, which set the stage for the Monetary Union had laid down certain eligibility criteria for member countries to join the EMU, such as maintaining budget deficit, public debt, inflation, long-term interest rates and exchange rate within defined limits. Greece could not join the Euro launch as Greece could not satisfy these criteria. Britain, Denmark and Sweden opted out, although they satisfied the eligibility criteria, due to domestic political reasons. The parties to the Euro at the beginning were, thus , Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and spain. Greece joined the Euro in january 1, 1999.The national currencies of the Euroland nations continued in circulation until July,2002,the deadline for the withdrawal of national currencies and coins.
The monetary policy decisions for the Euro area are made by the European central bank(ECB), which along with the national central banks(NCBs) of all EU members, comprises the European System of central banks(ESCB). The ECB is controlled by a governing council consisting of an Executive board. In the Executive board there were six members appointed by the heads of State or governments of countries in the Euro area and the governors of the NCBs of the Euroland. In designing the EMU, the architects laid great emphasis both on the independence of the ECB and on the simplicity and severity of its anti inflation objective. The Maastricht Treaty directs the ECB to support the general economic policies of the community, but critically , without prejudice to the objective of price stability.