THE PRESIDENT of Panama has revealed that his country wants to use the euro as its legal tender – despite being over 5,000 miles away from Berlin.

President Ricardo Martinelli has told reporters in Germany that he raised the prospect of having the euro as legal tender during a conversation with Germany’s chancellor Angela Merkel.

“Panama is a country where the currency in free circulation is the American dollar,” Martinelli told reporters.

Euronews quotes him as saying: “I told the chancellor we are looking for mechanisms for the euro to become another currency of legal tender and for the euro to be accepted in the Panamanian market.”

Panama already has its own currency – the balboa – the value of which is pegged 1-to-1 against the US dollar. Because of this fixed rate, the US dollar has always been accepted as legal tender.

This means the domestic central bank does not need to worry about monetary policy, but also means the policies implemented by the US’s federal reserve could be inappropriate to the economic conditions in Panama.

The country’s economy is one of the fastest-growing in the world – Reuters reports that GDP grew by 10.6 per cent last year, largely as a result of an aggressive expansion in government construction, including expanding the Panama Canal.

Panama would not be the first country outside the eurozone itself to use the currency: the Vatican, San Marino and Monaco have used the currency since its inception, as the euro replaced currencies to which their own were pegged (the Vatican lira, Sammarinese lira and the Monegasque franc).

The currency is also used in Andorra – which has never had an official currency – and in both Kosovo and Montenegro.

Those two countries were part of the former Yugoslavia, but preferred to use the German Deutschmark rather than the Yugoslav dinar for local political reasons. They both therefore adopted the euro in 2002, ahead of each becom

The euro is also used as a currency in some French overseas territories.