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TEHRAN, December 28 - The euro is about to celebrate its 20th birthday, but the countries that use it are still wrestling with how the shared currency should work and how to fix flaws exposed by the debt crisis that marred its second decade.
TEHRAN, Young Journalists Club (YJC) - The euro was launched on Jan. 1, 1999, when 10 countries fixed their exchange rates to it and handed decisions on interest rates to the newly-founded European Central Bank.
Euro notes and coins went into circulation three years later.
The shared currency was seen as a solution to the constant quarrels over exchange rates that had marked European politics after World War II and as a logical extension of the European Union's tariff-free trade zone. Britain, notably, opted out, but 19 of 28 EU countries use the euro.
The euro is credited with increasing trade between members. But countries have struggled to adjust to trouble after giving up two big safety valves: the ability to let their currency's exchange rate fall to boost exports, and to adjust their own interest rates to stimulate business activity.
One partial solution could be a central budget to keep paying bills when member countries are slammed with recessions. European leaders called for some sort of central pot of money in 2015 and are finally working on how to set one up.
Finance ministers were tasked at this month's summit with filling in the details by June.
The budget remains, however, a severely limited version of an original 2017 proposal from French President Emmanuel Macron.
Another key patch — EU-wide deposit insurance to help prevent bank runs during times of stress — has been put off.
Meanwhile, the possibility of a new crisis like the one that threatened to break up the euro in 2010-2012 lurks. Italy's populist government chafes at spending restrictions that go along with the euro and wants to spend more on social welfare.
Italy's dispute with the EU's executive arm, the European Commission, is on ice for now. But Italy's large debt load of 132 percent of annual economic output, lack of pro-business reforms and slow economic growth over its euro membership remain a simmering threat that could blow up during the next recession, whenever it comes.
The original euro setup under the Maastricht Treaty signed in 1992 made it clear that economic policy and spending were strictly national responsibilities, and member states were forbidden from bailing each other out. That concept went by the wayside in 2010, when the more financially solid countries led by Germany gave bailout loans to weaker ones whose debts were no longer sustainable, and enforced tough austerity as a condition.
Source: AP
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