Europe Greets the Euro

January 2, 2002

The long wait is finally over, as more than 300 million people in 12 member countries of the European Union finally said goodbye to their francs, marks and liras and began using Euros. The conversion is the culmination of a plan, adopted over 10 years ago, to create a common European currency.

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“In effect large and medium sized businesses will see little change from the introduction of the Euro,” said Michel Beaucourt, head of a private accounting firm in Paris. “The large enterprises, especially banks and insurance companies, have been using the Euro for over a year now. It’s the smaller shops, like bakeries, tabacs and newsstands, who may have some problems.”

At the outset many European leaders hoped the Euro would pose a challenge to the global use of the dollar as the world’s primary trading currency. However, it has fallen short of the original expectations first envisioned by German Chancellor Helmut Kohl and French President François Mitterand when they agreed on its adoption over 10 years ago. Originally pegged to trade at a value of $1.16 to the dollar, the Euro’s value has slipped to around 89 cents, where it seems to be more or less stable.

The impact on business has, however, been largely positive. To meet the criteria to join the common currency EU members had to agree to hold budgetary deficits under two percent, which has significantly reduced inflation. European businesses have also benefited from the elimination of charges related to currency conversion, more stable pricing, enlarged markets and the virtual elimination of devaluation threats, all of which led to use of the dollar as the chief currency of reference.

However, the Euro hasn’t been a positive factor in fighting Europe’s unemployment problem. In fact the anti-inflationary policies surrounding its adoption have probably slowed down many sectors of the EU’s economy. It nonetheless becomes the most widely used currency system in Europe since the days of the Roman Empire, and will have an impact on the entire community, even the U.K., Sweden and Denmark, which have refused to join, will feel the effects.

Visitors to, Europe should enjoy the new money as well, especially Americans, who’ll be getting a 10 percent premium for their dollars. It avoids changing money every time you travel from one country to another, and makes comparing prices significantly easier; however, as one Italian lady told the BBC, paying 120,000 lira for a new pair of shoes made them seem more important than paying 61 Euros.

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