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Economy and Finance

The euro outside the euro area

Which non-EU members use the euro or link their currency to the euro, and how the euro is used as a global currency.

Who else uses the euro?

The euro is used widely in global currency markets. It is also used as an official or de facto currency as well as an 'anchor' currency by a number of countries and regions outside the European Union.

Certain parts of the euro area are part of the European Union even though they are not on the European continent, such as the French overseas departments of Guadeloupe, French Guyana, and Martinique in the Caribbean, as well as Mayotte and Réunion in the Indian Ocean. The Portuguese islands of Madeira and the Azores, and the Spanish Canary Islands, all in the Atlantic Ocean, are other examples.

As part of the euro area, and because they fall within the legal rights, capacity, and supervision of the relevant European Union Member State, these regions use the euro normally.

However, the euro can also be found in other countries and regions which are neither part of the EU nor the euro area.

The euro as official currency

  • the Principality of Monaco, the Republic of San Marino, the Vatican City State the Principality of Andorra have concluded monetary agreements with the EU, granting them the rights to produce limited quantities of euro coins with their own design on the national side, but not to issue euro banknotes
  • certain French overseas territories, which are not part of the European Union have also signed agreements with the EU. They do not however issue their own coins:
  • the Saint-Pierre-et-Miquelon islands close to the eastern coast of Canada,
  • the Island of Saint-Barthélemy

The euro as de facto currency

Kosovo and Montenegro, in the Balkans, use the euro as a de facto domestic currency, as they have no agreements with the EU.  This is keeping with an older practice of using the German mark, which was previously the de facto currency in these areas.

Links to other currencies

Several countries and territories outside the euro area and EU have linked their currencies to the euro. This is because the stable monetary system behind the euro makes it an attractive 'anchor' currency. In some cases, it is by bilateral agreement with euro area countries (such as France or Portugal because of their historical relations with some countries), while in others it is a unilateral decision of the country concerned. Different systems are used to establish these links

  • non-euro area EU countries link their currencies to the euro through the Exchange Rate Mechanism (ERM II). This linkage is one of the conditions for joining the euro area
  • countries, which are not part of the EU or do not wish to join ERM II, may decide to support an exchange rate against the euro that is only allowed to fluctuate within defined limits (‘currency peg’). The countries’ monetary authorities support this exchange-rate peg on their own by intervening in currency markets. The euro area has no agreements or obligations to support these currencies
  • other countries organise a ‘basket’ of currencies that includes the euro.  In such cases, the link is less direct. The exchange rate of the national currency is linked to a fictitious exchange rate from a ‘basket’ of other currencies, such as the euro, the US dollar, and the Japanese yen
  • an additional tool available to countries’ monetary authorities are euro-based currency boards in charge of supporting the fixed foreign exchange rate, to which the normal objectives of central banks are subordinated

An international presence

The widespread use of the euro in the international financial and monetary system demonstrates its global presence

  • the euro is widely used, alongside the US dollar, as an important reserve currency for monetary emergencies. In 2015, more than one-fifth of the global foreign exchange holdings were in euros
  • the euro is the second most actively traded currency in foreign exchange markets. It is a counterpart in around 33% of all daily transactions, globally
  • The euro is used to issue government and corporate debt worldwide. In 2015, the share of euro denominated debt in the global markets was around 40%, on par with the role of the US dollar in the international debt market
  • the euro is also a currency used for invoicing and paying in international trade, not only between the euro area and countries outside the EU, but also between non-EU countries. It is used as trade invoicing currency for more than 50% of all euro area imports, and for more than 65% of all euro area exports
  • several countries manage their currencies by linking them to the euro, which acts as an anchor or reference currency.

Read more

Flash Eurobarometer 424 - Possible obstacles to using the Euro in international trade (Report), February 2016