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Definition: Eurozone

The ‘Eurozone’ is the term used to refer to the collective group of countries which have adopted the Euro as their common currency. It is an economic and monetary union.

The Eurozone was formed in 1999, originally consisting of 11 countries. Now, 17 European Union (EU) countries are members of the Eurozone: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.

The Eurozone does not include every country in the European Union (some countries are not yet using the Euro), and does not include every country who is using the Euro (to become part of the Eurozone, the country must use the Euro as its sole legal currency). United Kingdom, Denmark and Sweden are members of the EU, but not of the Eurozone.

There is a difference between the European Union and the Eurozone, most often (wrongly) interchangeably used. The EU is a political (and economic) union of 27 European states; whereas the Eurozone is an economic and monetary union of only those (European) nations which have adopted Euro as their common currency, after dissolving their individual national currencies (apart from some other additional mandated rules).

As a currency union, monetary rules are created and maintained by the European Central Bank (ECB). The Euro is supposed to be the most widely used and liquid currency, but the concept has faced a lot of flak after the Eurozone debt crisis.



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