The Eurozone and the 2008 Crisis

The Maastricht Treaty, signed by the members of the European Community in February 1992 and taking effect in November 1993, established the legal framework for Economic and Monetary Union and set out the convergence criteria that member states had to meet to adopt the planned single currency. These criteria required low and stable inflation close to that of the best-performing member states, government budget deficits below 3 percent of GDP, public debt below 60 percent of GDP, exchange-rate stability within the European Exchange Rate Mechanism, and long-term interest rates close to those of the most stable economies. The euro was introduced as an electronic accounting currency on January 1, 1999, used initially for non-cash transactions and financial markets among eleven founding member states, before physical euro banknotes and coins entered circulation on January 1, 2002, replacing national currencies such as the deutsche mark, the French franc, and the Italian lira. Greece, notably, joined the eurozone in 2001, two years after the initial group, and later evidence that its budget figures had been understated at the time of entry would become central to the debt crisis that engulfed the currency union less than a decade later.