Euro Currency vs Eurocurrency
Euro Currency
Euro Currency (two words) refers to the official currency of the Euro Area (also called as Euro Zone), which is a part of the European Economic and Monetary Union (EMU). All members of the EMU are also part of the European Union (EU). Currently, the EU consists of 27 countries
(earlier it was 28 before Brexit), out of which only 19 countries came together to replace their sovereign and national currencies with the single currency - the Euro.
The Euro is the second most used currency in the world after the US dollar. The following countries are members of the Eurozone using the Euro currency.
- Austria
- Belgium
- Cyprus
- Estonia
- Finland
- France
- Germany
- Greece
- Ireland
- Italy
- Latvia
- Lithuania
- Luxembourg
- Malta
- The Netherlands
- Portugal
- Slovakia
- Slovenia
- Spain
The following table shows all EU countries and the countries of the EU which adopted Euro as their currency.
| Sl No |
EU Member |
Adopted Euro
(Yes / No) |
| 1 |
Austria |
Yes |
| 2 |
Belgium |
Yes |
| 3 |
Cyprus |
Yes |
| 4 |
Estonia |
Yes |
| 5 |
Finland |
Yes |
| 6 |
France |
Yes |
| 7 |
Germany |
Yes |
| 8 |
Greece |
Yes |
| 9 |
Ireland |
Yes |
| 10 |
Italy |
Yes |
| 11 |
Latvia |
Yes |
| 12 |
Lithuania |
Yes |
| 13 |
Luxembourg |
Yes |
| 14 |
Malta |
Yes |
| 15 |
The Netherlands |
Yes |
| 16 |
Portugal |
Yes |
| 17 |
Slovakia |
Yes |
| 18 |
Slovenia |
Yes |
| 19 |
Spain |
Yes |
| 20 |
Bulgaria |
No |
| 21 |
Croatia |
No |
| 22 |
Czechia |
No |
| 23 |
Denmark |
No |
| 24 |
Hungary |
No |
| 25 |
Poland |
No |
| 26 |
Romania |
No |
| 27 |
Sweden |
No |
The Euro is governed by the European Central Bank (ECB).
Eurocurrency
The Eurocurrency (single word) refers to the currency held by individuals, companies or governments outside of their home country or market. For example, a deposit of Indian Rupees held in a bank in London is a Eurocurrency. The following are some additional examples of Eurcurrency.
- Yen deposit held in London
- GBP deposit held in Tokyo
- Dollar deposit held in Zurich
- CHF deposit held in Singapore
- Euro deposit held in New York
- South Korean Won held in Bombay
Note: In the above examples, I mentioned the name of the city but it could be anywhere in a country. For example, Yen can be held in bank deposit in Portsmouth or Manchester instead of London.
The prefix "Euro" neither refers the currency nor the destination. The word "Euro" was initially added as a prefix because the first such deposits were made in Europe. During and after the World War II, large deposits of US dollars were made in many countries in Europe (mostly in London) mainly as a result of the following three reasons.
- Before and after the World War II due to the prevalant exchange rate regime that allowed many companies and governments to keep stock of US dollars as US dollar became the reserve currency, and also because their local currencies was pegged to the USD dollar under the exchange regime.
- After the World War II, due to a large inflows of US dollars into Germany and other European countries as a result of US government's Marshall Plan, which was executed for rebuilding Europe after the war; and
- After the World War II and upto the end of the Cold War, due to large shifting of US dollars by China and Soviet Union from banks in US into banks in Europe (particularly London) to avoid their deposits getting frozen by US government.
These deposits stayed bank mostly in London and helped it become the international financial capital of the world. Nowadays, these deposits can be held anywhere, not necessarily in London, as the Eurocurrency market expanded. However, London still holds the most of these deposits.
Even though, currently, none of the conditions mentioned above exist, these deposits continue to exist because they are not subject to reserve requirements and other restrictions imposed by the central banks. We can think of these deposits as outside the control of the central banks. For example, the Yen deposits held in London do not have to follow the rules and regulations imposed by the Bank of Japan as it is outside its jurisdiction. Thus, borrowing and lending in these deposits can easily take place without any restrictions.
The popular benchmark LIBOR is a product of the Eurocurrency market. It is due to the Eurocurrency market in London that we are able to get the LIBOR rates for GBP, USD, CHF, JPY and Euro in the London market.
END OF MY NOTES