Twenty years since the introduction of the euro

U januaru 1999. godine evro je uveden kao zajednička valuta zemalja članica evrozone, koju danas koristi više od 340 miliona Evropljana. Uvođenjem zajedničke valute stvorena je monetarna unija koja je tokom dvadeset godina postojanja imala svoje uspone i padove. Najveći dosadašnji izazov svakako predstavlja svetska finansijska kriza 2008. godine sa kojom se najveći broj zemalja evrozone uspešno izborio. Od svog uvođenja evro je postao druga najznačajnija valuta, posle američkog dolara, u strukturi međunarodnih rezervi doprineo je sniženju transakcionih troškova, u trgovinskoj razmeni stvaranjem jedinstvenog tržišta, ali je i omogućio konvergenciju monetarnih politika zemalja članica evrozone. U prvih dvadeset godina svog postojanja evro se pokazao kao relativno stabilna valuta u koju njeni imaoci imaju poverenja. Evropska centralna banka, zajedno sa centralnim bankama zemalja članica evrozone, stvorila je monetarni sistem u kojem postoji poverenje u zajedničku valutu kroz očuvanje njene vrednosti i nastavka rada na postizanju i obezbeđivanju finansijske i cenovne stabilnosti evrozone.


Introduction
The name of the single currency of the eurozone was adopted in Madrid on December 16, 1995, and the one who named the euro was the Belgian French Language and History Professor and Esperantist, Germain Pirlot, who in August 1995 sent a letter to the former President of the European Commission, Jacques Santer, with the proposal regarding the name of the common currency. The exchange rates for the conversion of the national currencies of the member countries of the eurozone were determined by the Council of the European Union on the basis of the recommendation of the European Commission and these values were fixed on the basis of the value of the inter-currency relations that were in force on December 31, 1998. The former unit of account ECU (European Currency Unit) was worth one euro. When introducing the euro, it was present in non-physical form, as for an example in the form of electronic transfers and non-cash payments. Banknotes and coins of national currencies of member states continued to be used as a legal tender until the introduction of euro banknotes and coins, introduced on January 1, 2002. The inspiration for the euro sign (€) was found in the Greek alphabet, in the letter epsilon (Є), but also in the first letter of Europe, crossed by two parallel lines to indicate the stability of the common currency.

Share of the Euro in International Foreign Exchange Reserves
The share of the pound in the official foreign exchange reserves of the official institutions in 1899 was more than double the share of the franc and the Deutsche Mark, and much more than the dollar's share (Chinn and Frankel, 2008, 2). After the British pound lost its dominant role among international currency after the two world wars, the dollar took its place as the dominant currency for international use, including foreign exchange reserves, trade invoicing, denomination of insurance and for spot trading and the derivatives market. However, with the creation of the euro in 1999 and the first euro banknotes that emerged in 2000, there has been an increase in interest in whether the dollar's dominance can be compromised (Bobba et al., 2007, 4).
The use of the currency of a particular country in international foreign exchange reserves is determined by the size and openness of the economy and financial markets, as well as the manner of conducting macroeconomic policy. The low inflation environment promotes a high level of economic growth and affects the stability of the currency (Pollard, 1998, 32).
The advantages of having a currency with an international status are confidence for residents of the country, a greater volume of business activities for banks and other financial institutions in that country, income from seigniorage, as well as political power and prestige. On the other hand, it should be noted that there are drawbacks to possessing currency that has an international status, which are the higher oscillations in demand for that currency, as well as a high level of responsibility for monetary authorities to preserve the value of that currency (Chinn and Frankel, 2005, 5-6).
The data on the currency structure of international foreign exchange reserves is published by the International Monetary Fund (IMF) in its Currency Composition of Official Foreign Exchange Reserve (COFER). These data are published on the last working day of each quarter, with a delay of one quarter in the publication. Currently, the following currencies are represented in the reporting: US Dollar, Euro, Chinese Yuan, Japanese Yen, British Pound, Australian Dollar, Canadian Dollar and Swiss franc. Before the introduction of the euro in 1999, the following currencies were included in the COFER report: ECU, Deutsche Mark, French franc and Dutch guilder. The definition of foreign currency reserves of COFER is the same as for the International Financial Statistics of the IMF. The total amount of foreign exchange reserves in reporting COFER is divided as follows: At the end of the first quarter of 1999, the euro's share in international foreign exchange reserves was 18.12% and the US dollar was 71.19%. Then, in addition to the euro and the US dollar, the Japanese yen (6.03%), British pound (2.74%), Swiss franc (0.29%) and other currencies (1.62%) also had a share. The Australian and Canadian dollars were first shown in the currency structure of international foreign exchange reserves in the fourth quarter of 2012, and the Chinese yuan in the fourth quarter of 2016. Over time, the euro's share in international foreign exchange reserves increased so that, at the end of the first quarter of 2019, its share was 20.24%, and the US dollar was at 61.82%. The largest share of the euro was recorded at the end of the third quarter of 2009 (28.03%). It is important to point out the increase in the share of other currencies whose total share increased from 10.69% at the end of the first quarter of 1999 to 17.94% at the end of the first quarter of 2019. This indicates a currency diversification when it comes to the structure of foreign currency reserves investment from the aspect of the currency structure.
The challenge for further dollar participation in international reserves can be explained by the words of former Secretary of the Treasury, John Connally, who said: "The dollar is our currency, but your problem." The statement of the former member of the Governing Board of the Central Bank of Austria, Josef Christl, who said "The euro is our currency, but everyone's assets" (EU Monitor 46, 2007, 3) can now be opposed to that statement. If, in the next few decades, the dollar is replaced in its global role, this will probably and unfortunaltelly be in favor of global monetary fragmentation and will represent a failure of the US policy, rather than the strengthening of the euro based on pure economic development (Posen, 2008, 76).

The Role of the Euro in the Global Foreign Exchange Market
Starting from 1986, the Bank for International Settlements has been publishing a report on trading in the foreign exchange market and trade in derivatives in OTC market, every three years. That report contains information on the type of instruments that are the subject of trading, the currency of trading, the turnover by country, and the level of turnover. According to the latest published report from December 2016, the average daily trading volume in foreign exchange markets in April 2016 amounted to $5.1 trillion, which is a decrease from the April

Uloga evra na međunarodnom tržištu dužničkih hartija od vrednosti
Bitno je analizirati učešće evra na međunarodnom tržištu dužničkih hartija od vrednosti, ali i napraviti komparaciju sa drugim valutama. Statistika Banke za međunarodna poravnanja daje mogućnost da se sagleda učešće evra prema tipu emitenta dužničkih hartija od vrednosti i prikazani podaci u Tabeli 3 ukazuju da je evro, posle lokalne valute i američkog dolara, najzastupljenija valuta. Opravdanost velikog učešća emisija dužničkih hartija od vrednosti u domaćoj valuti treba tražiti u nastojanju da se eliminiše valutni rizik. Bitno je ukazati i da je manji deo neodospelih emisija dužničkih hartija od vrednosti ročnosti do jedne godine, uključujući jednu godinu, što ukazuje da je reč o hartijama koje su emitovane na duži rok. Based on the data presented in Table 2, we can conclude that the euro, after the US dollar, is the most common currency in total trading on the OTC foreign exchange market and according to these trading instruments. Since 1986, when the Bank for International Settlements started publishing the report, the US Dollar has been the currency that continuously occupies the first place in the average daily trading on the OTC foreign exchange market, but we should indicate a decline in its share from 89.9% in 2001 to 86.7% in 2016. As there is a double calculation of purchases and sales by currencies and trading instruments, the total sum of the participation is 200%. In second place is the euro, whose share in the mentioned period was also reduced (from 37.9% in 2001 to 31.4% in 2016). Due to the promotion and internationalization of the Chinese yuan, its share increased from 0.0% in 2001 to 4.0% in 2016. In addition to the yuan, the Australian dollar recorded a significant increase in average daily trading (from 4.3% in 2001 to 6.9% in 2016).
When it comes to currency pairs, USDEUR is the most prevalent (23.1% in 2016), followed by USDJPY (17.8% in 2016) and USDGBP (9.3% in 2016). Although the USDEUR currency pair has the largest share in average daily trade, its share has been declining over the years (in 2001, it accounted for 30.0%), while the share of USDCNY increased (increase by 3.8pp) over the same period.
According to the announcement of the Bank for International Settlements, the next report will be published in December 2019 and will contain data on the average daily trading volume from April 2019. More than 1,200 financial institutions from 53 countries will participate in that report.

The Role of the Euro on the International Market of Debt Securities
It is important to analyze the share of the euro in the international debt securities market, but also to make a comparison with other currencies. Statistics of the Bank for International Settlements provide an opportunity to examine the share of the euro by the type of debt securities issuer and the data presented in Table 3 indicate that the euro  is the most common currency, after the local currency and the US dollar. The justification of the large share of debt securities issued in domestic currency could be found in the effort to eliminate currency risk. It is important to point out that a minor part of the amount outstanding of debt securities is with a maturity of up to one year, including one year, which indicates that these are securities which were issued with a longer maturity.
The higher share of issues of debt securities in dollars can be explained by lower interest rates. In the period from 2008 to 2015, the effective Federal Funds Rate was almost zero, which in turn had an impact on lower US dollar borrowing costs. In the same period, the reference interest rate of the European Central Bank, which at the same time represents the rate on the main refinancing operations, was at a higher level. In October 2008, this rate was 3.75%, after which there was a gradual decline and in December of 2015 it was at the level of 0.05%. It is precisely this divergence of monetary policies of the major global central banks that affected the borrowing costs and the choices of the issuer regarding which currency their debt securities will be issued in. This increase in the issuance volumes is the result of the effects of many factors, above all a stable economic environment characterized by a positive growth prospect; low inflation and low interest rates encourage issuers (Galati and Tsatsaronis, 2001, 11).  Buduće učešće evra na međunarodnom tržištu kapitala zavisiće od uslova zaduženja u valuti evro u poređenju sa drugim valutama. Pored toga veliki uticaj imaće i dalji pravac vođenja monetarnih politika glavnih centralnih banaka, ECB-a i FED-a. Na sastanku u julu 2019. godine ECB je navela da će kamatne stope ostati na trenutnom ili nižem nivou najmanje tokom prve polovine 2020. godine, što je za šest meseci duže u odnosu na saopštenje iz aprila, u kojem je navedeno da će kamatne stope ostati na trenutnom nivou najmanje do kraja 2019. godine. U martu 2019. ECB je najavila primenu trećeg kruga targetiranih dugoročnih operacija refinansiranja (eng. targeted longerterm refinancing operations -TLTRO III), koje će sprovoditi od septembra 2019. do marta 2021. godine, kako bi kreditni uslovi banaka i dalje ostali povoljni. Kamatne stope za svaku operaciju u okviru programa TLTRO III inicijalno će biti na nivou koji je za 10 b.p. iznad prosečne stope koja se primenjuje u glavnim operacijama, tokom perioda trajanja operacija TLTRO III (0% + 0,1 p.p.). Kamatne stope koje će se primenjivati u operacijama TLTRO III mogu biti manje za banke čiji je iznos neto pozajmica iznad referentne vrednosti, i to na nivou prosečne kamatne stope na depozitne olakšice uvećane za 10 b.p. (-0,40% + 0,1 p.p.).

The Role of the Euro on the International Credit Market
The euro's share in the international credit market in 2018 has had a growth trend, both in absolute terms and in relative terms. Data in Table 3 indicate that developing countries largely rely on borrowing in euros, where the developing countries in the Asia and the Pacific are in the lead, right after the developing European countries. Between 2006 and 2014, the euro's share in international loans has been steadily decreasing, reflecting, inter alia, the deleveraging of banks in the eurozone, as well as the regulatory efforts to reduce the exposure to FX loans denominated in euros. The data suggests that unconventional ECB monetary policy measures, in particular in the form of loan expansion programs, have supported crossborder borrowing of banks in the eurozone. In response to the ECB's flexible monetary policy, the eurozone banks with their subsidiaries abroad are reallocating their funds abroad within their banking organizations, suggesting that internal capital markets can boost the power of monetary transference abroad. The larger supply of funds denominated in euros outside the eurozone also increased lending in the euro currency from banks outside the eurozone (ECB).
The future share of the euro in international credit markets will depend on the borrowing conditions of loans indexed in euros, compared to other currencies. In addition, the continued direction of the monetary policies of the major central banks, the ECB and the Fed will have a major impact. At a meeting in July 2019, the ECB indicated that interest rates will remain at the current or lower level at least during the first half of 2020, which is six months longer than the announcement from April, stating that interest rates will remain at the current level at least until the end of 2019. In March 2019, the ECB announced the implementation of the third round of targeted long-term refinancing operations (TLTRO III), which will be implemented from September 2019 to March 2021, so that the credit conditions of banks remain favorable. The interest rates for each operation under the TLTRO III program will initially be at a level that is 10 b.p. above the average rate applied in the main operations during the duration of the TLTRO III operations (0% + 0.1 p.p.). The interest rates to be applied in TLTRO III operations may be less for banks whose net loan amount is above the reference value at an average interest rate on deposit facilities increased by 10 b.p. (-0.40% + 0.1 p.p.). In

The Benefits and Costs of Using the Euro
The main idea of creating the European Union in 1957 was the creation of a single market for trade. Over time, it became clear that it was necessary to create a unified monetary policy and strengthen economic co-operation. In order to have a common monetary policy of the eurozone countries, there should be a common currency ( On the other hand, it is necessary to make a presentation of the costs of using the euro for member states. The costs of using the euro are the following (Economics Help): • the loss of an independent monetary policy -in euros, interest rates are determined by the ECB but may be unsuitable for the British economy. For example, the recession from 2008 hit the United Kingdom harder than other European countries due to exposure to the financial sector. The ECB increased interest rates earlier than the UK. • loss of ability to make currency depreciation in recession -there is no possibility of devaluation in the euro area. If a country has higher inflation than other European countries (e.g. higher wage growth, lower productivity growth), the country will soon become uncompetitive. This was a major problem for European countries such as Greece, Spain, and Portugal. The decline in competitiveness led to a decline in exports and lower economic growth, which contributed to their reduction in tax revenues. • the growth and stability pact limit the expansionary fiscal policy in a recession -the pact for growth and stability limits the amount of government borrowing, which is why it is more difficult to avoid a recession. The EU's response to the fiscal crisis is to make stronger contractual legislation to punish countries with excessive deficits. However, spending cuts can lead economies to a recession. The austerity policies in the period from 2011 to 2014 were a factor in the continuing recession in southern Europe. • there is no possibility of applying lender of last resort -in the eurozone, the ECB is not willing to act as a lender in the last instance. This provokes more pressure on government bond yields and exerts pressure on countries to continue with savings (spending cuts) that generate lower economic growth. • the impossibility of abandoning the eurozone -
Prema mišljenju Međunarodnog monetarnog fonda postoje tri glavne oblasti, kako bi se postiglo jačanje otpornosti evrozone, a time i njene valute, i osiguravanje njene budućnosti ( Greece suffered great financial difficulties, with a drastic recession. However, the costs of abandoning the euro were too high, and they had to accept stringent spending cuts and conditions from Europe in order to get the funds to remedy the effects of the crisis. It also damaged the sense of national pride and democracy because the government had little impact on economic policy.

Future of the Euro
The introduction of the euro and the establishment of the European Central Bank as the monetary authority of Europe went smoothly. But doubts remain about how full economic and monetary integration will be achieved in Europe (Dominguez, 2006, 86). In the 20 years since the introduction of the euro, the European Economic and Monetary Union (EMU) have faced significant challenges. For example, in 2008, the economic crisis resulted in Greece, Portugal, Ireland and Cyprus failing to meet the Maastricht criteria or convergence criteria, forcing the EMU to take measures to enable these countries to fulfill their obligations as members of the eurozone. This process has resulted in mechanisms that protect the work of the system, and one of these examples is the creation of the European Stability Mechanism (ESM). However, the 2008 crisis led to skepticism about the value of the euro. Even in developed European countries, such as Italy, there were arguments that the euro is the cause of their economic problems (Ekathimerini). The key thing to keep in mind is that economies linked to the monetary union are bound to follow the same monetary policy, whether it is appropriate or not, while economic shocks may differ in different countries (Schadler, 2004, 30).
Poor economic performance and the inability of public finances to adapt to a crisis situation have led to a significant deterioration in the public finances of the eurozone countries (Prokopijevic, 2010, 374). European leaders have acknowledged that Europe's problems cannot be solved without economic growth. But they failed to explain how they would achieve growth with saving measures. Instead, they stressed the need to restore confidence (Stiglitz, 2014, 17).
In July 2012, President of the European Central Bank, Mario Draghi, in his speech, announced the following sentence, which is considered crucial to preserving the value of the euro and represents a kind of verbal intervention: "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough." Subsequently, in order to preserve the stability of the eurozone, the ECB applied different nonstandard monetary policy measures as a way to return inflation rates to the level below, but close to 2% in the medium term (ECBa ). The ECB used the following programs to deal with the effects of the global economic crisis: asset purchasing programme (APP), corporate sector purchase programme (CSPP), public sector purchase programme (PSPP), as well as two covered bond purchase programmes (CBPP).
In the opinion of the International Monetary Fund, there are three main areas in order to strengthen the resilience of the eurozone, and thus its currencies, and to ensure its future (IMFa ): 1. The formation of a banking union should be completed with the adequate support of the Single Resolution Fund and a common deposit insurance scheme. This is important because in the end, with the appropriate safeguards, it is economically justified to ensure credit risks in all member states. 2. Eurozone requires integrated financial and capital markets that enable companies to easily raise funds across borders and support investment. In the short term, it is critical to ensure that regulatory and supervisory capacity is ready for the arrival of financial firms that will move to continental Europe -and Ireland -as a result of Brexit. In the medium term, greater harmonization of national illiquidity and securities regulations will be required. Značajna je uloga evra na tržištu dužničkih hartija od vrednosti. Odluka emitenta u kojoj valuti će emitovati dužničke hartije od vrednosti zavisi od dejstva mnogih faktora, pre svega stabilnog ekonomskog okruženja koje karakteriše pozitivna perspektiva rasta; niska inflacija i niske kamatne stope ohrabruju emitente. Buduće učešće evra na međunarodnom tržištu kapitala zavisiće od uslova zaduženja u valuti evro u poređenju sa drugim valutama. Pored toga veliki uticaj imaće i dalji pravac vođenja monetarnih politika glavnih centralnih banaka, ECB-a i FED-a. Na sastanku u julu 2019. godine ECB je navela da će kamatne stope ostati na trenutnom ili nižem nivou najmanje tokom prve polovine 2020. godine, što je za šest meseci duže u odnosu na saopštenje iz aprila, u kojem je navedeno da će kamatne stope ostati na trenutnom nivou najmanje do kraja 2019. godine. Sa druge strane, FED je u 2018. godine četiri puta povećao ciljani raspon referentne kamatne stope (u martu, junu, septembru i decembru) za po 0,25 p.p., tako da je na kraju 2018. iznosio 2,25-2,50%.
Projekat uvođenja evra jeste nastojanje stvaranja jedinstvenog valutnog i monetarnog tržišta, eliminacija transakcionih troškova, common fiscal rules and reduce the level of public debt. The crisis of 2008 was a great test of endurance and survival of the euro, as well as of the preservation of the price and financial stability of the eurozone. The very effects of the crisis should be a lesson on further improvement of the overall economic policy and efforts to build mechanisms for the rapid detection of the first signs of potential crisis. In addition, it is necessary to anticipate the direction of the monetary policies of other global central banks, but also to work on resolving trade disputes and strengthening protectionism, which is currently present between the EU and the US. Also, in October 2019, UK is expected to leave the EU, but it is currently unclear whether leaving the union will happen with or without an agreement. The future of the euro is uncertain and will depend on macroeconomic stability, as long-term macroeconomic stability affects the increase in monetary sovereignty and increased credibility in the implementation of monetary policy and its instruments (Martin, 2018, 3).

Conclusion
The euro was introduced as the common currency of the eurozone countries in January 1999. The introduction of the euro was based on a political and economic agreement that the common currency will contribute to the implementation of the common monetary policy by the ECB, but also the integration of the market through lower transaction costs, the elimination of currency risk and the improvement of the turnover of goods and services. And while the introduction of the euro was going smoothly, the path to achieving full monetary and economic integration was more difficult. The first major test for the durability of the euro was facing the effects of the global financial crisis. At that time, some countries, such as Greece, Italy, Portugal, did not meet the Maastricht criteria or convergence criteria, forcing the EMU to take measures to enable these countries to fulfill their obligations as eurozone members.
Today, twenty years after its introduction, the euro has a significant role in international foreign exchange reserves, as a currency actively traded on the international foreign exchange market, plays a significant role in the debt securities market and in the credit market. At the end of the first quarter of 1999, the euro's share in international foreign exchange reserves was 18.12%, and the US dollar was at 71.19%. Over time, the euro's share in international foreign exchange reserves increased so that at the end of the first quarter of 2019, its share was 20.24%, and the US dollar's was 61.82%. The largest share of the euro was recorded at the end of the third quarter of 2009 (28.03%).
Since 1986, when the Bank for International Settlements started publishing the report, the US dollar has been the currency that continuously occupies the first place in the average daily trading on the off-regulated foreign exchange market, but we should indicate a decline in its share from 89.9% in 2001 to 86.7% in 2016. The second trading place is the euro, whose share in the mentioned period was also reduced (from 37.9% in 2001 to 31.4% in 2016).
The role of the euro in the market of debt securities is significant. The decision of the issuer regarding which currency their debt securities will be issued in depends on the effects of many factors, above all a stable economic environment characterized by a positive growth prospect ; low inflation and low interest rates encourage issuers. The future share of the euro in international credit markets will depend on the borrowing conditions of loans indexed in euros, in comparison with other currencies. In addition, the continued direction of the monetary policies of the major central banks, the ECB and the Fed will have a major impact. At a meeting in July 2019, the ECB indicated that interest rates would remain at current or lower levels at least during the first half of 2020, which is six months longer than the announcement in April, stating that interest rates will remain at the current level at least until the end of 2019. On the other hand, in 2018, Fed increased the target range of the reference interest rate (in March, June, September and December) four times, each by 0.25 percentage points, so that at the end of 2018 it amounted to 2.25-2.50%.

Martin V.
Dvadeset godina od uvođenja evra Literatura / References trade links and the free movement of people, goods, services and capital. The future of the euro as the common currency of the eurozone countries is uncertain. The value of the future movement of the euro depends and will depend on the level of inflation in the eurozone, as well as in other countries that are the main trading partners of the eurozone, on macroeconomic stability, monetary policy measures of the ECB and the Fed, on the outcome of whether the UK will leave the EU with or without agreement, but also on the further development of the policy of protectionism and the trade tensions that are present around the US-China relationship.