Traveling through Europe, you used to end up with a lot of different spare change: French francs, Italian lira, German marks, and more. But 15 years ago, a new currency called the euro made its debut. The euro revolutionized the way European nations did business—and helped tourists minimize leftover pocket change.
Before the euro, Europeans had to convert their money when entering neighboring countries. This was especially cumbersome since most of those nations are smaller than Texas. Imagine if every U.S. state used a different currency!
The euro was introduced to simplify the money used by nations in the European Union (E.U.). The E.U. is an international political and economic partnership among 28 countries in Europe.
A total of 12 E.U. nations initially adopted the euro, and 7 more have made the switch since then. Even though not all E.U. countries use the euro, the currency helps make international trade—the buying and selling of goods—easier, says Irish economist Ronnie O’Toole.
That’s because with a common European currency, there are no exchange rates (the value of one currency compared with that of another), which change constantly.
When the euro was introduced in 2002, 1 euro was worth U.S. $0.89, then it climbed to an all-time high of U.S. $1.59 in 2008. But major world events can cause dramatic and rapid changes in currencies. One such event occurred last summer, when the United Kingdom unexpectedly voted to become the first country to leave the E.U. National leaders are still working through the details of Britain’s exit, nicknamed “Brexit.”
Though the U.K. uses the pound, not the euro, some economists worry that the nation’s strong ties to the rest of the E.U. could cause problems for the euro. Despite the uncertainty, O’Toole is optimistic. “I think more countries will join the euro and the currency will be steady, if not expanded, in the future,” he says.