It’s E-Day in Euroland. That means 300 million Europeans are welcoming the new year by bidding au revoir, auf wiedersehen and arrivederci to their francs, marks and lira and greeting a brand new currency. Hello euro.
Not since the Dutch introduced the natives here to the concept that trinkets could be used to buy a really primo chunk of real estate–“24 bucks worth of beads for the whole of Manhattan island, you’re getting a great deal, honest”–has a continent attempted such a total monetary transformation.
This day has been years in the planning and comes after the participating countries overcame monumental political and logistic hurdles, not the least of which was producing and distributing 15 billion euro notes and 52 billion coins.
Now, after all the preparation, hype and anxiety, Europeans in a dozen nations are getting their hands on this new money. More important, Europe and the world now will find out if the euro can unite a continent beyond the pocketbook. That’s the true test of this new currency.
The euro-zone includes most of the European Union countries–Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. The other EU countries–Britain, Denmark and Sweden–have so far declined to join.
The euro actually has been around for three years as a virtual currency. Stock and bond trades, bank transfers, credit cards, other electronic transactions and international trade have been conducted in euros since Jan. 1, 1999.
To help prepare people for the shift, prices throughout euro-zone countries have been posted both in local currencies and euros for the past several years.
But knowing it’s coming is one thing. Having to finally deal with the new money is quite another and not all euro countries are approaching E-Day the same way.
Germany is the only one going cold turkey. Stores in Germany no longer have to accept marks after Jan. 1, although they still may if they wish for the next two months. The other countries are giving their citizens and old currencies grace periods of as much as two months. So the French franc, Spanish peseta, Italian lira, Irish punt and all the rest can still be used for a time. Then they become relics of another era and will no longer be legal tender. In their place will be 1, 2, 5, 10, 20 and 50-cent, one EUR and two EUR coins, and bills in denominations of 5, 10, 20, 50, 100, 200 and 500 euros.
This new money is not nearly as ornate as some of the currencies it replaces. Given the difficulty of getting all these countries to agree whose face should be on the money, they decided not to depict any people at all. Instead the bills are illustrated with windows, gateways and bridges from various European architectural periods–Romanesque, Renaissance, Gothic, modern and so forth. And each denomination is a different size and color–red for the 10-euro note, green for the 100.
The rationale behind a single currency was that it would boost competition and promote structural reforms, helping revitalize European economies. Imagine Chicago drivers having to change money, comply with different rules and speak a different language each time they crossed into Indiana. And deal with yet a different set of rules, language and money when they went to Wisconsin. Having to don yellow cheesehead hats is bad enough.
So the euro is a start in what many believe will be the inexorable integration of Europe into a whole greater than the sum of its parts. Whether this leads to some kind of political federation of European states remains unclear. But it has the potential to make Europe more of a competitive counterbalance to the U.S. over time.
In the euro’s first three virtual years, that didn’t happen. European productivity continues to lag behind the U.S. There are still barriers to competition among euro countries, barriers that a single currency alone cannot eliminate.
Merely sharing the same money doesn’t guarantee that cultural and language differences can be overcome, nor does it insure that countries won’t continue to try to protect domestic companies from more efficient cross-border rivals.
The euro so far also hasn’t given the dollar a run for its money as the preferred mode of international transaction or the world’s safe haven currency. It has consistently lagged in value behind the dollar, now trading 24 percent below its introductory value three years ago.
But today the virtual becomes real–and the potential could too. Now it’s up to the euro to perform.
