Cent - 100th of a euro, sometimes called euro-cent.

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Convergence criteria: the rules defined in the Maastricht Treaty which set out economic tests which a country must pass before being allowed to join the euro (often referred to as the Maastricht criteria): low inflation, sound public finances, stable exchange rates and low and stable interest rates:

• Annual government deficit must not exceed 3 per cent of GDP
  
• Total outstanding government debt must not exceed 60 per cent of GDP
  
• Rate of inflation within 1.5 percentage points of the three EU countries with the lowest rate
  
• Average nominal long-term interest rate must be within 2 percentage points of the average rate of the three countries with the lowest inflation rates
  
• Exchange rate stability, meaning that for at least two years the currency has kept within the "normal" fluctuation margins of European Exchange Rate Mechanism (ERM)
  

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Duisenberg, Wim: First President of the European Central Bank, formerly head of the Dutch Central Bank.

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Dual circulation: The use of both national currencies and euros from January 1 up to March 1 2002. The last date that national currencies can be used as legal tender varies from country to country.

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Ecofin: Monthly meeting of finance ministers from all EU countries which takes decisions on economic policy in the EU. They ensure effective coordination of the member states' economic policies, observance of the Stability and Growth Pact and exchange rate policy.

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Economic and financial committee: Prepares Ecofin meetings. Composed of national treasury officials, central bankers and two members of the European Commission.

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Economic and Monetary Union (EMU): the single currency area within the European Union, created by the Maastricht Treaty and started in 1999 through the launch of the single currency.

There were three stages involved in establishing EMU:
Stage 1: July 1990 - December 31 1993: dismantling all internal restrictions to the free movement of capital within the European Union.
Stage 2: January 1 1994 - December 31 1998: establishing the European Monetary Institute (EMI), a temporary institution to strengthen co-operation between the central banks of the member states and the co-ordination of the monetary policies of the member states with the aim of ensuring price stability.
Stage 3: January 1 1999 onwards with the transfer of monetary policy to the Eurosystem, irrevocable fixing of exchange rates between the currencies of the participating EU member states and the introduction of the euro.

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Ecu: European Currency Unit, precursor of the euro. Together with the Exchange Rate Mechanism it formed the European Monetary System in 1979. It was a basket of nearly all the European Union's currencies and was weighted according to each country's share of EC output. It eventually set the starting value of the euro, 1 euro= 1 ecu. It was never a fully-fledged currency, never becoming legal tender.

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Euro: European single currency, established in 1999 after years of preparation and negotiations. National notes and coins will be replaced by euro notes and coins in January 2002.

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Eurocreep: Colloquial term for the infiltration of the euro into countries that have not joined.

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Eurogroup: key co-ordination group bringing together finance ministers representing member states from the eurozone. The group meets the day before the Ecofin meeting to informally discuss economic issues notably budgetary consolidation and the stability programs of the member states. The Eurogroup also addresses practical issues about the euro including measures to protect the euro against counterfeit and changeover plans. It also discusses external issues concerning the euro including representation of the eurozone (e.g. at G7, IMF meetings) and contacts with applicant states for Emu. The group is chaired by Didier Reynders, the Belgian finance minister until December 2001.

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European Central Bank (ECB): Frankfurt-based central bank established on June 1 1998. It is responsible for deciding monetary policy for the euro-zone and oversees all phases of the euro introduction.

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European Commission: The body responsible for initiating legislation and administering the day-to-day running of EU policy, made up of 20 commissioners (two nationals from Germany, Spain, France, Italy and the UK and one representative from the other member states) and about 27,000 subsidiary staff organised into directorates-general and specialised departments. In the area of economic policy, the commission recommends broad guidelines for economic policies in the Community to the European Council. It also monitors member states' performance, and if necessary draws attention to any slippage from economic targets. The commission also analyses member states' convergence programmes, prepares recommendations, including possible fines. More information

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European Council: Is the EU's main decision-making body and brings together the heads of state or government of the member states and the president of the European Commission.

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European Economic Community (EEC): Old name for the European Community.

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European Parliament: Is the assembly of 626 representatives (MEPs), elected every five years by the European Union's 375m citizens.

Parliament has steadily acquired greater influence and power through a series of treaties.

These treaties, particularly the 1992 Maastricht Treaty and the 1997 Amsterdam Treaty, have transformed the European Parliament from a purely consultative assembly into a legislative parliament, exercising powers similar to those of the national parliaments.

It has three key powers:

• the power to legislate - normally through co-decision with the European Council. Although on some sensitive issues such as taxation, it can only give an opinion.
• the power of the purse - shares budgetary approval for the European Union with the European Council
• the power to supervise the executive - exercises democratic supervision over all Community activities

MEPs have debated the recommendations of the European Commission on which countries qualify for Emu. They also grilled the nominees to the executive board of the Central Bank. Maastricht also requires the ECB president to present the bank's annual report to Parliament which can hold a general debate.

Parliament is split between Brussels, Luxembourg and Strasbourg.

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European System of Central Banks (ESCB): Is composed of the ECB and the national central banks of all 15 EU Member states.

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European Union: The framework for political and economic co-operation and integration between 15 European member states.

• to promote economic and social progress (the single market was established in 1993; the single currency was launched in 1999);
• to assert the identity of the European Union on the international scene (through European humanitarian aid to non-EU countries, common foreign and security policy, action in international crises; common positions within international organisations);
• to introduce European citizenship (which does not replace national citizenship but complements it and confers a number of civil and politic rights on European citizens);
• to develop an area of freedom, security and justice (linked to the operation of the internal market and more particularly the freedom of movement of persons);
• to maintain and build on established EU law (all the legislation adopted by the European institutions, together with the founding treaties).

The Maastricht Treaty established three central pillars for the EU:

• European Community - Union citizenship, Community policies, Economic and Monetary Union, etc.
• Common foreign and security policy.
• Police and judicial co-operation in criminal matters.

Eurostat: The EU's statistical office situated in Luxembourg, responsible for the publication of EU economic and social statistics, such as consumer price inflation, unemployment and industrial production. These statistics include series for the eurozone as an entity as well as for each of the EU member states. Its eurozone consumer price inflation index is closely watched by the ECB and the financial markets. (see price stability)

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Eurosystem: refers to the ECB and the euro-zone national central banks.

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Exchange Rate Mechanism (ERM): The framework, launched in 1979, which aimed to stabilise rates between EU currencies. Each currency within the system was allowed to fluctuate only within agreed limits against the Ecu (precursor to the euro). The system was jeopardised in 1992 when a number of currencies (UK sterling, Italian lira and Spanish peseta) were unable to maintain these rates. The system was relaunched in a looser form allowing greater fluctuations in 1993. A new Exchange Rate Mechanism was established in 1999 for Greece and Denmark. Sweden and UK declined to join. A steady exchange rate is one of the requirements for joining the euro.

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Five economic tests: The conditions that the British government wants to see fulfilled before Britain joins the single currency. They apply in addition to the convergence criteria.

• Whether there can be sustainable convergence between Britain and the economies of a single currency.
• Whether there is sufficient flexibility to cope with economic change.
• The effect on investment.
• The impact on our financial services industry.
• Whether it is good for employment.

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Maastricht Treaty: The agreement that set out the framework of the euro, and gives it legal status.

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Member states: 15 countries that make up the European Union: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, UK.

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Price stability: Maintaining price stability has been established as the ECB's key monetary policy objective. The ECB's governing council has said that inflation must be kept below 2 per cent year-on-year. Harmonised Index of Consumer Prices (HICP) is the official indicator for inflation in the euro-zone.

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Stability Pact: Short for Stability and Growth Pact. German-inspired agreement set up to enforce budgetary discipline in the eurozone. The pact imposes penalties, including fines, against countries running excessive budget defecits. This is to ensure that high government borrowing in one member state does not adversely affect the others. The pact has been criticised by, among others, the IMF for being too inflexible in times of economic downturn - i.e. governments can run a relaxed fiscal policy in good times but when the economy weakens the pact places too much weight on achieving fiscal savings. Critics argue that the need to tighten rather than loosen fiscal policy could risk prolonging the downturn.

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Treaty of Rome: Signed in 1957 creating what was then called the European Economic Community. It has since been amended by the Single European Act, the Maastricht treaty, the Amsterdam treaty but much is still applicable.

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