20 Jan 2025
Italy is a country in southern Europe rich in history, traditions, stunning natural beauty, fantastic cuisine, and a developed culture. Italy has undergone many political transformations and shifts in its economic structure over several centuries, with one of the most significant decisions in recent years being its adoption of the Euro.
In the following article, we will explore the characteristics of Italian currency, describe the history of its formation, and discuss the role of the European Union in money circulation. The Euro also offers a simplified money transfer between Italy and other countries, offering greater ease for Italians living abroad to support their families or conduct business internationally.
Italy joined the 12 EU member countries that adopted the Euro as the national currency on January 1, 2002. The Euro is the single currency of the Eurozone, and it is used by 19 members of the European Union, who have agreed to use this currency instead of separate ones.
Having prepared for their adoption for several years, the EU member states have agreed to adopt the Euro as their major currency. As with many other European countries, Italy had only the Euro as part of the European integration process after the Cold War and the formation of the EU, which sought to make Europe a more coherent and stable economic community. The Euro displaced a currency that, for well over a century, had represented Italy, namely the Italian lira.
The € sign is an easily understood icon that symbolizes the cohesiveness and solidity of the European monetary area. It was designed in December 1996 before introducing the Euro's physical form. The emblem comprises the overly simplified element ‘E,’ which refers to the first letter of the word Europe. Two horizontal lines crossing the letter signify the currency's stability.
The Euro currency is subdivided into 100 cent sub-divisions or cents, but in symbol form, it is represented as ‘¢.’ Currency used in circulation includes one, two, and five cents, one, two, five ten, twenty, and fifty cents, and one and two Euros.
The experiences that Italy had by joining the Euro also shaped its economy. Before establishing the Euro, the country used Italy’s lira or ITL to establish the single currency. The LIRA was an Italian currency that had been around for many years but had falls in inflation and devaluation in the last decades of the twentieth century.
A few years ago, entering the Eurozone was a strategic move aimed at consolidating the Italian economy and strengthening its link with other European countries. Italy's joining the Euro buffered its monetary policy to the general EU framework. It was connected to the ECB system, which manages the monetary policy for countries using the currency.
Since switching to the Euro, Italy has enjoyed lower interest rates, lower costs of exchanging currency, and higher levels of trade with Eurozone countries. However, the government has also strived in some ways. The Euro is not immutable, and like any other currency, it has faced variants and crises. For example, the European debt crisis negatively impacted Italy’s public balance.
Before the Euro took over, Italy had used other forms of currency for a long time. The historical development of the currency in Italy could well be divided into several phases, which would indicate Italy's political and economic conditions.
The history of money in Italy began during the Roman Empire when the Romans used gold, silver, or bronze coins. The denarius was also the primary type of small change within the Roman Empire, and this type of coinage became firmly established throughout much of Europe.
The old Roman coins were even used in the barter system in business activities. Hence, the old Roman coins used by the Roman people were also used as propaganda icons by the emperors and the leaders to gain more authority.
After the decline of the Roman Empire, Italy found itself in the medieval age, and many cities, states, kingdoms, and territories started to mint their coins. Grosso of Florence or Florins, a gold coin minted in the city of Florence in the mid-thirteenth century in 1252, can be considered one of the most influential coins of medieval Europe. Called the florin, this coin changed the face of business and commerce and could be traced to Italy and the world.
In the Middle Ages, several important states were located in Italy, and they all had their mints, which issued coins like Venetian, Genoese, Milanese, and Pisan mints, etc., making the picture quite heterogeneous.
The modern Italian system of money use dates back to the 1800s and came with the introduction of the Italian lira. Since the formation of the Italian state in 1861, it has adopted the lira as the country’s currency. It was initially linked to the French franc, and the new government quickly stabilized the Italian currencies.
It had 100 centimos, and coins and banknotes were available in different forms. Over the years, the lira has experienced inflation, especially after World War Two. Moreover, with the growth of the post-war economy, the value of the Lira oscillated, and later, due to political instabilities, the country embraced the use of the Euro.
Italy's currency change from the Lira to the Euro was also part of the European countries' shift to a single currency project for the continent. The following factors were key in that decision: economic stability, ease of trade, and integration with other European nations. Transitioning from the Lira to the Euro meant pulling out old money and introducing new ones.
The Italian government cooperated with the European Central Bank (ECB) and other Euro-zone partners for a seamless transition. For this reason, as of January 1, 2002, the Euro became the Italian currency, and the lira became obsolete.
The European currency, the Euro, has put Italy in the alliance of the European Union's monetary policy. Concerning monetary policies within the Eurozone, the European Central Bank or ECB controls and—as you know—adjusts key interest rates and/or inflation rates to keep the Eurozone stable.
This is rather advantageous as it means the country has direct access to trade with other EU countries since they pay in the same currency: euros. This has assisted Italy in becoming more realized in the European economy. Many Italian companies have been positively impacted as they can now engage in Europe as individuals without fear of exchange rates.
This contrasts with the pre-Eurozone era, where Italy had full control over its monetary systems. There is no national currency; thus, Italy cannot change the Euro to a lower value or change interest rates to favor the needful economy. This has posed some problems, principally when the global financial climate is weak or during financial crises when Italy cannot respond similarly and with similar results as the countries with their currencies.
The ECB is tasked with managing the monetary policy of the Euro area member countries, including Italy. This is because the ECB is an independent central bank based in Frankfurt, Germany, and is to set and control interest rates, inflation, and the stability of the Euro. They seek to ensure that its prices remain stable for the Eurozone, home to Italy, among other nations.
In downturns, like during the European debt crisis, the ECB has taken profound measures to ensure the structural integrity and safety of the financial system and support ailing economies like Italy. Such measures have entailed cutting interest rates, direct funding to the banking system, and implementing measures to boost demand.
As of today, Italy has the euro as its official currency; Italy belongs to the eurozone. Italian experience has shown that the single currency offers the following advantages: Some European countries have offered lower charges in the form of interest rates after the issue of the Euro. Yet, this also implied that Italy has lost some ability over its money supply, which is not helpful during difficult economic times.
With more twists and turns in the eurozone and the fluctuation of the global economy, the Italian economy will continue to depend on the Euro. Italy has consistently supported the European Central Bank and is still cooperating with other member countries to develop the European monetary union system further. For Italians living abroad, the Euro also plays a crucial role to send money back home, enabling them to support family members and contribute to the economy. Whether for remittances or business transactions, the ease of using the Euro helps maintain strong connections within the EU and beyond.
Nevertheless, the euro is used as legal tender, and while most traders may accept payment in other legal currencies, such as the US dollar, not many may freely offer their products in exchange.
Forex bureaus, banks, and some hotels provide foreign exchange services. More on the same, cash point machines, also known as Automated Teller Machines (ATM) are easily accessible and provide the necessary cash in different currencies.
Traveler’s checks are not normally easily accepted in Italy. Stick to euros for payments; credit or debit cards are the most preferable.
Indeed, you can generally pay with your debit card to withdraw euros from cash machines in Italy.
Indeed, your bank may limit the amount of money you can withdraw daily. It is advisable to contact the bank before your trip to inquire about the amount of money they allow you to withdraw daily.