Reuters: US Dollar Report: TIMELINE- How compromise turned to crisis for the euro

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TIMELINE- How compromise turned to crisis for the euro May 23rd 2012, 15:48 Wed May 23, 2012 11:48am EDT May 23 (Reuters) - The euro started life as the product of an uneasy compromise between core Europe's top two economies, and political turmoil in a country on its periphery now threatens its future. As Greece gears up for an election next month that may hasten an unprecedented departure from the currency club it joined as a late entrant in 2001, here are key events in the euro's history. March 1979 - The European Monetary System (EMS), the precursor of the euro that establishes links between the region's currencies to stop large exchange-rate fluctuations, is launched under French and German leadership. Nov 1989 - French president Francois Mitterrand reacts with fury to German Chancellor Helmut Kohl's plans to quickly reunite Germany following the fall of the Berlin Wall, a close Mitterrand aide later recalls. Dec 1989 - Kohl agrees to give up the deutschmark and start work on European Monetary Union, and in return wins French support for German reunification. Dec 1991 - EU heads of government agree the Maastricht Treaty that sets a timetable and conditions for a single European currency by 1999. Three months later, Prime Minister John Major negotiates an opt-out for Britain. Jan. 4, 1999 - The euro begins trading at $1.1747 and rises on the same day to around $1.19, a level that remains its all-time high until May 2003. It begins a decline fuelled both by dollar strength and by a perceived reluctance by the new European Central Bank to respond to political and market pressure for lower interest rates to help economic growth. Jan. 1, 2001 - Exactly a year before euro banknotes and coins enter circulation, Greece becomes the 12th member of the European Union's single currency club. The country undertakes a derivatives deal with U.S. investment bank Goldman Sachs that helps it dress up its public finances by deferring interest rate payments. Sept. 23, 2004 - An overhaul of Greece's national accounts reveals it joined the euro with a budget deficit above the 3 percent of gross domestic product limit set under the stability and growth pact adopted by the EU in 1997. Sept/Oct 2008 - Lehman Brothers files for bankruptcy and the U.S. government bails out insurer AIG. Investors flock to the safe-haven dollar and yen, and the euro sinks to a low of $1.2328 on Oct 28 from $1.4825 on Sept 22. Nov. 5, 2009 - New prime minister George Papandreou says Greece's 2009 budget deficit will be 12.7 percent of GDP - more than double the previously published figure - and pledges to save the country from bankruptcy. May 2010 - Greece seals a first, 110-billion-euro bailout with the European Union and International Monetary Fund in return for extra budget cuts. An 85 billion euro bailout for Ireland follows in November 2010 and a 78 billion deal for Portugal in May 2011. Greece seals a second bailout worth 130 billion euros in February 2012. October 2010 - German Chancellor Angela Merkel and French President Nicolas Sarkozy strike a deal for private debt holders to share the pain of future restructurings in the euro zone. Germany later backtracks. Nov 2011 - Merkel and Sarkozy break a taboo, saying for the first time that the euro zone is prepared to move on without Greece if that country puts the stability of the bloc in danger. Sarkozy had earlier told a TV interviewer Greece adopting the euro in 2001 was "a mistake" because its economy was not ready. May 2012 - Following an inconclusive parliamentary election that reveals strong support for parties opposed to Greece's bailout, the country sets a second ballot for June 17, whose outcome will largely determine whether the country quits the euro zone. Sources: Reuters/Center for European Integration Studies Link this Share this Digg this Email Reprints

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