Glossary

General Glossary

E

Early redemption 

The refund of a loan or credit prior to its maturity date.

ECB's capital key 

A mechanism for distributing the share capital of the European Central Bank (ECB) among the central banks of the European System of Central Banks (ESCB), which are its sole shareholders. The ECB's share capital, which is fully subscribed, amounts to €5,760,652,402.58. The central banks integrated in the Eurosystem have paid up the total subscribed capital, while those European Union (EU) States which have not yet adopted the euro have only paid 7%. The weighting criterion followed to assign a percentage of share capital to each central bank has been the sum of 50% of its percentage investment in the EU population and 50% of its percentage investment in the EU's gross domestic product. The value is adjusted every five years based on these same criteria. The ECB's Governing Council uses the weightings of the Eurosystem's central banks as a criterion for allocation and distribution, among others, of the ECB's profits and losses, monetary income and output of euro banknotes. The central banks of Member States which do not participate in Economic and Monetary Union (EMU) do not participate in the distribution of ECB profits and losses.

Ecofin Council 

European Union Council comprised of ministers for economics and finance.

Economic analysis 

One of the pillars of the European Central Bank framework for the thorough analysis of risks to price stability, which is the basis of the monetary policy decisions taken by the Governing Council. The economic analysis is basically focused on the assessment of the current economic and financial situation and the implicit short and medium-term risks to price stability from the perspective of the interplay of supply and demand in goods, services and factor markets during the time span stated. Due attention is paid to the need to identify the nature of shocks hitting the economy, their effects on cost and pricing behaviour and the short to medium-term prospects for their propagation in the economy. See also "Monetary analysis".

Economic and Financial Committee (EFC) 

A consultative body of the Council of the European Union (EU) and the European Commission created by the Treaty on the European Union, which began its activities at the start of stage three of EMU on 1 January 1999, replacing the Monetary Committee. Its main responsibilities are: to issue advisory opinions; to keep under review the economic and financial situation of the European Community, in particular on financial relations with third countries and international institutions; to report the situation of capital movements and freedom of payments in the Community; and to contribute to the preparation of the work of the Council of the European Union, especially the tasks related to economic and monetary policy. The Committee is made up of two representatives from the European Commission, two from the European Central Bank (ECB) and two from each Member State, one of which is usually a senior official from the Ministry of Economy and the other from the national central bank. To guarantee its smooth operation after the EU enlargement, the Committee has modified the criteria for attending meetings, according to the matters to be debated. In this way, the national central bank representatives only attend when matters relating to their functions and experience are dealt with. In other cases, the Committee can convene in "restricted composition", so that only the representatives from the national administrations, the Commission and the ECB are present.

Economic and Monetary Union (EMU) 

The process that led to the single currency, the euro, the single monetary policy of the euro area and the co-ordination of the economic policies of European Union Member States. This process was implemented in three phases, in accordance with the provisions of the Treaty. The third and last phase commenced on 1 January 1999 with the transfer of monetary competencies to the European Central Bank and the introduction of the euro. The changeover of coins and notes was carried out on 1 January 2002, thus completing the process of creating the EMU.

ECU (European Currency Unit) 

The ECU was a basket currency made up of the sum of fixed amounts of twelve out of the fifteen currencies of the EU Member States. The value of the ECU was calculated as a weighted average of the value of its component currencies. The ECU was replaced by the euro on a one-for-one basis on 1 January 1999.

Effective exchange rate for the euro 

The weighted average of the bilateral exchange rates for the euro and the currencies of the euro area's main trading partners. The European Central Bank publishes the nominal effective exchange rates for the euro in relation to two groups of trading partners: The EER-22, made up of the 12 Member States of the European Union that do not belong to the euro area, and the 10 main trading partners outside the EU; and the EER-42, made up of the EER-22 and a further 20 countries. The weightings used reflect the share of each partner in euro-area trade, as well as their competition in third markets. Real effective exchange rates are nominal effective exchange rates deflated by a weighted average of external costs or prices in relation to prices or costs inside the euro area. As such, they are measurements of competitiveness in terms of prices and costs.

Electronic purse  

An electronic form of payment consisting of a card with incorporated microchip that is charged with a certain, normally not very high, amount of money to make small payments. As payments are made, the amount is deducted until the available balance is used and it must be reloaded. It was created to substitute the use of low value coins, but its implementation has been very limited.

Emergency banknote 

At times, central banks maintain a banknote with a different design to that of the banknotes in circulation to respond to large-scale counterfeiting.

E-money  

An electronic substitute for coins and banknotes, stored on an electronic medium such as, for example, an intelligent card and which, in general, is intended for making electronic payments of a limited amount.

Endorsement  

A written declaration on a commercial document through which the owner or holder transmits their rights to another person.

EONIA 

Interest rate prevailing in the euro interbank overnight market. It is calculated and published daily by the ECB as a weighted average of the interest rates on unsecured overnight lending transactions denominated in euros, as reported by the 50 most active credit institutions in the interbank market.

Equities 

Financial instruments whose future performance is neither fixed nor known with certainty in advance, but is linked to the economic results of the issuing entity.

Equities  

A type of investment which does not allow information on the profitability that will be obtained in advance. A typical example of equities are public limited company shares, with dividends depending on the company's performance. The price of listed shares will determine the gains or losses at the time of sale thereof.

Equity market 

Market in which equities are issued and traded.

Equivalent value  

The equivalent in own currency of an amount expressed in another currency.

Establishment dealing in currency exchange and managing bank transfers  

Establishments, other than credit institutions, authorised to carry out the following activities: buying and selling foreign banknotes and travellers cheques, managing the receipt of bank transfers received from abroad or managing bank transfers sent abroad.

EURIBOR 

Offered interest rate at which credit institutions are willing to lend each other funds in euros. The European Banking Federation publishes it daily for fifteen maturity terms ranging from one week to one year. The EURIBOR is calculated as the average of the daily offer rates of a representative panel of fifty of the most active credit institutions in the interbank market. The one-year EURIBOR is the most widely used official benchmark rate for mortgage loans in Spain since 1 January 2000. Operations which were formalised prior to that date used the one-year MIBOR as the official benchmark, which was the equivalent interbank rate in pesetas for markets.

Euro 

The name of the single European currency adopted by the European Council at its meeting in Madrid on 15 and 16 December 1995.

Euro area 

The area encompassing those Member States that have adopted the euro as a single currency in accordance with the Treaty, and in which a single monetary policy is applied under the responsibility of the Governing Council of the European Central Bank.

Euro area PMI survey 

Manufacturing and service sector activity surveys conducted in some euro area countries and used to prepare indexes. The euro area manufacturing industry PMI is a weighted indicator which is calculated based on production, new order, employment, supplier delivery term and purchasing inventory indexes. The services sector survey includes questions on sector activity, expectations relative to future activity, outstanding transactions, new transactions, employment, input prices and prices charged. The euro area composite or synthetic index is calculated combining the results of the surveys conducted in the manufacturing and services sectors.

Eurocheque  

An international payment system created by banks from several countries, mainly used in Central Europe. The Eurocheque book is linked to an electronic debit card.

Eurogroup 

An informal gathering of the ministers of economics and finance of the euro area countries, at which they discuss issues connected with EMU Member States. Representatives of the European Commission and the ECB are invited to take part in meetings. The Eurogroup usually meets immediately before an Ecofin Council meeting.

European Central Bank (ECB) 

The ECB was established on 1 June 1998 with its own legal personality as the body at the centre of the European System of Central Banks (ESCB) (formed by the ECB and the central banks of the European Union) and the Eurosystem (formed by the ECB and the central banks of the Member States whose currency is the euro). Its main mission is to guarantee that the functions performed by the Eurosystem in the euro area are fulfilled: the definition and implementation of monetary policy, the holding and management of the official foreign reserves of the Member States, the conduct of foreign exchange operations and the promotion of the smooth operation of payment systems. Its basic legal framework is formed by the Treaty establishing the European Community and the Statute of the ESCB and the ECB. As part of the regulatory powers assigned by the Treaty, the ECB has a consultative function with respect to Community and national authorities in matters within its scope of competence on the basis of advisory opinions.

European Commission Opinion Survey 

Harmonised economic surveys of business and/or consumer opinion conducted on behalf of the European Commission in each of the EU Member States. Questions are addressed to managers in manufacturing, construction, retail and services sectors as well as to consumers. From each monthly survey, composite indicators are calculated that summarise the replies to a number of different questions in a single indicator (confidence indicators).

European Council 

An EU institution that brings together the Heads of State or Government of the EU Member States, assisted by their ministers of foreign affairs, and the President of the European Commission. Its primary objective is to drive the process of European integration and to define the European Union's general political guidelines. It meets at least twice a year and is chaired by the Head of State or Government that at the time holds the rotational presidency of the European Union Council.

European Monetary Institute (EMI) 

A temporary EU body established on 1 January 1994 at the start of stage two of Economic and Monetary Union. It was wound up on 1 June 1998, after the creation of the European Central Bank.

European Monetary System (EMS) 

This regime was established based on a European Council Resolution of 5 December 1978 and began to function on 13 March 1979, according to the agreement reached that same day between the central banks of the Community Member States. Its main objectives were to stabilise interest rates to correct existing instability, to reduce inflation and to prepare European monetary union through co-operation. The EMS was made up of three basic elements: ECU. EUROPEAN CURRENCY UNIT: European unit of account made up of a basket of Member State currencies, whose value was the weighted average of its component currencies based on indicators of their economic weight and international trade. Although it was not legal tender, the ECU was used as a unit of account of the Community budget, it served as a method of payment and reserve of the central banks and was used as a denomination currency for financial instruments. During the European Council held in Madrid on 16 December 1995, it was agreed that the future Community currency would be called the euro. The ECU was replaced by the euro on a one-for-one basis (1 euro=1 ECU) at the start of stage three of EMU on 1 January 1999. ERM. EXCHANGE RATE AND INTERVENTION MECHANISM: A mechanism whose objective was to establish the different exchange rates between the participating currencies. A central exchange rate was established for each currency against the ECU and bilateral central rates between the participating currencies. The exchange rates could fluctuate within a band established around the bilateral rates. The central exchange rates could be modified by mutual agreement among all the ERM participating states. In 1993, upon extending the system's fluctuation band, the ERM entered a crisis and was substituted in 1999 by a new framework for exchange rate co-operation between the euro area and EU Member States whose currency is not the euro: the ERM II or the Exchange Rate Mechanism II. EMCF. EUROPEAN MONETARY CO-OPERATION FUND: Created in October 1972 to promote the progressive narrowing of fluctuation margins between European currencies, to make interventions in Community currencies on exchange markets easier and to promote settlements between the central banks whose objective was a concerted policy on reserves.

European System of Accounts 1995 (ESA 95) 

A detailed and integrated system of macroeconomic accounts based on a set of internationally agreed statistical concepts, definitions, classifications and accounting standards aimed at achieving a harmonised quantitative description of the economies of the EU Member States. The ESA 95 is the Community's version of the United Nations' System of National Accounts (SNA 93).

European System of Central Banks (ESCB) 

It comprises the ECB and central banks of all EU Member States, including those which have not yet adopted the euro and, according to the Treaty establishing the European Community, will become the common monetary authority once all the Member States form part of EMU. As there are still EU Member States which have not yet joined EMU, the Governing Council has adopted the term Eurosystem to increase transparency and better explain the structure of the monetary authority of the euro area. As long as there are still Member States which have not yet adopted the euro, it will be necessary to maintain the distinction between the ESCB and the Eurosystem, the legal framework of the ESCB being applicable to the latter. The ESCB is governed by the Governing Council and the ECB Executive Board. There is also a third governing body, the General Council, that regulates non-EMU Member States.

European Technical and Scientific Centre (ETSC) 

A centre for the technical analysis and classification of false euro coins. The ETSC was temporarily set up as an independent administrative entity within the Pessac Mint (France).

European Union (EU) 

Political structure created by the 1992 Maastricht Treaty, consisting of Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. It is based on three basic pillars: The European Communities, co-operation regarding a common foreign and security policy and police and judicial co-operation in criminal matters. Its main objectives are: The creation of an area without internal frontiers, the strengthening of social and economic cohesion and the establishment of an economic and monetary union. The five basic institutions of the EU are: The European Parliament, the Council of the European Union, the European Commission, the Court of Justice of the European Union and the European Court of Auditors.

Europol 

An organism created within the European Union by the Schengen treaties, thanks to which EU Member State police forces share information and provide mutual support to improve efficiency in their respective geographical areas. The European Central Bank has signed a collaboration agreement with Europol to fight against the counterfeiting of euro banknotes.

Eurostat 

A statistics office dependent upon the European Commission which is responsible for standardising, preparing and publishing European Union statistics. Most of the data stem from institutions that produce statistics in Member States, such as national statistics institutes and national central banks.

Euro symbol (€) 

"The graphic euro symbol (€) is inspired on the Greek letter epsilon and also denotes the first letter of the word ""Europe"". The two parallel lines refer to the stability of the new currency. ""EUR"" is the official abbreviation of the euro registered at the International Organisation for Standardisation (ISO) and is used in the economic, financial and commercial sphere. The name of the currency appears on euro banknotes both in Latin (EURO) and Greek characters (EYPW)".

Eurosystem 

The central banking system of the euro area. It comprises the ECB and the national central banks of those EU Member States whose currency is the euro.

Eurosystem credit assessment framework (ECAF) 

The framework that defines the procedures, standards and techniques to guarantee that all collateral complies with the high credit quality requirement established by the Eurosystem.

Eurosystem Economic Projections 

Estimations by ECB and national central bank experts on the economic outlook of the euro area. Specifically, they present projections on the harmonised index of consumer prices and the gross domestic product and its components. They are published in ECB monthly bulletins, are instrumental in nature and support the decisions taken by the ECB Governing Council, who analyses them in relation to their monetary policy strategy.

Eurosystem liquidity in foreign currency 

It comprises the Eurosystem international reserves and other assets and liabilities in Eurosystem foreign currencies, including net positions with respect to residents within the euro area.

Exchange 

The action to exchange an amount of banknotes for another equal amount, in different banknotes.

Exchange 

The action whereby a very used, legal currency banknote is exchanged for another of equal value. It is also the process whereby the banknote denominations in a monetary system are replaced (changed) by another. For example, the exchange of peseta banknotes in the monetary system for euro banknotes.

Exchangeable and convertible bonds and debentures  

Private debt assets or securities that confer their owner the right to exchange them for shares of the issuing entity, at an established price and on an established date. If they entitle their owner to obtain old company shares they are referred to as "exchangeable", but if they can be transformed into newly issued shares they are referred to as "convertible" bonds.

Exchange of damaged euro banknotes 

National central banks exchange authentic euro bank notes that are legal tender and are mutilated or damaged when over 50% of the note is presented. If 50% or less is presented it will only be exchanged if proof is provided that the rest has been destroyed. In some cases certain conditions are stipulated, such as the identification of the person requesting the exchange if there are doubts as to the ownership or authenticity of the note.

Exchange rate mechanisms II (ERM II) 

Exchange rate co-operation framework between the euro area and those EU Member States whose currency is not the euro. It was established by the European Council on 16 June 1997 to substitute th exchange mechanism of the European Monetary System on initial recognition of the third stage of EMU. Its objective is to maintain exchange rates as stable as possible between the EU Member States which have adopted the euro and those who have not, avoiding, as far as possible, mismatches in real exchange rates or excessive fluctuations in nominal exchange rates which could lead to trade shocks and affect the smooth operation of the single market. Its operating procedure consists of fixing a central exchange rate or parity with respect to the euro for the currency of each non-euro area EU Member State that participates in this mechanism. Although membership in ERM II is voluntary, it is considered one of the convergence criteria for adopting the euro. A fluctuation margin of up to +15% is established for the currency of each participant Member State with respect to the euro central rate or parity supported, in principle, by automatic and unlimited intervention at the margins, with very short-term financing available. However, the ECB and central banks participating in ERM II could suspend automatic intervention if such intervention were to conflict with their objective of maintaining price stability. Likewise, the central rate or fluctuation band can be modified through agreements between the parties. At present, the Danish krone, Estonian kroon, Latvian lats, Lithuanian litas and Slovak koruna participate in ERM II.

Exchange rate policy 

A set of actions aimed at setting or influencing the exchange rate of a country's own currency with respect to other currencies.

Executive Board of the ECB 

One of the governing bodies of the European Central Bank (ECB), the Eurosystem and the European System of Central Banks (ESCB). It comprises the President and Vice-President of the ECB and four other members, all of whom are appointed by the government of euro area Member States, from people of renowned prestige and experience in monetary or banking issues. The term of office is eight years and is not renewable. Its main responsibilities are: to implement monetary policy for the Eurosystem in accordance with the guidelines specified and decisions taken by the ECB Governing Council; to exercise certain powers delegated to it by the Governing Council, including some of a regulatory nature; to prepare Governing Council meetings and to manage the day-to-day business of the ECB. It normally takes its decisions by simple majority of votes cast by attending members. The president has the casting vote.

Expert economic outlook survey 

Quarterly survey carried out by the ECB since 1999 which reflects the macroeconomic forecasts made by experts from EU financial and non-financial institutions on inflation, real GDP growth and unemployment in the euro area.

Expert valuation report 

The process of analysing a banknote in order to determine whether said banknote is legitimate or counterfeit. In the latter case, the corresponding type of counterfeiting is determined.