How the Euro Works

The European Central Bank (ECB) was established in 1998. Its job is to make sure that the European System of Central Banks (ESCB) implemented the changeover required by the euro statutes and generally carries out its duties. The General Council of the ECB was responsible for setting the conversion rate for the euro for each participating country. Those rates were established in January 1999, and are "irrevocably fixed." The conversion was based on the existing currency so that the euro is simply an expression of the previous national currency.

The ECB used guidelines established in a Joint Communique that was issued on May 2, 1998, by the ministers of the member states who were adopting the euro. In order not to modify the external value of the European Currency Unit (ECU), they used the bilateral rates of the Exchange Rate Mechanism (ERM) to establish the fixed conversion rate for each national currency. The calculation of the exchange rates followed the regular daily concertation procedure, which used the representative exchange rate for each nation's currency against the U.S. dollar as of December 31, 1998.

Here are the established values. One euro equals: