A new year, a new currency. On January 1, 1999 Europe's single currency, the euro, became a reality — the culmination of a fifty-year drive toward the dream of monetary union. "The euro heralds a new departure for Europe," declared Jacques Santer, the President of the European Commission. "I believe, with the euro, Europe will be present on the international stage much more."

Markets too gave the euro an immediate vote of confidence. Stock markets in Germany, France, Italy and Spain all rose by at least 5%, influenced by the euro's smooth debut. At the close of its first day of trading, January 4, the euro was worth US$1.18, slightly above the rate at which its precursor, the European Currency Unit, had ended its trading life. Subsequently the relationship between the euro and the U.S. dollar stabilized at a level of more or less 1 euro to US$1.15. Monetary stability is especially important for the success of recovery policies in the crisis-stricken countries of Asia.

"Euroland" as the new euro-denominated zone has been dubbed, groups 11 of the European Union's 15 Member States: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. Between them, the 11 nations account for almost one-fifth of world economic output and trade. Euroland has financial clout and population, at 291 million, broadly equivalent to that of the United States.

That weight gives the euro a firm underpinning and challenges the dominance of the U.S. dollar and the Japanese yen on the world's currency markets. "That was one of our main goals," said President Santer. "The single currency will be a credible currency accepted by international markets." International investors and central banks are widely expected to switch some of their holdings to the euro.

The euro is expected to boost growth and prosperity within the euro zone. With the exchange rates of participating countries' national currencies, such as the French franc or German mark, permanently fixed against one another, businesses will benefit from a "real culture of stability," said President Santer, "creating the conditions for prosperity and employment." Businesses trading in "euroland" will enjoy massive savings on transaction costs and be able to plan ahead with greater certainty.

The euro is not just about big business, however. Wim Duisenberg, the President of the European Central Bank (ECB) expressed the hope that the euro will "become a unifying symbol for the people of Europe." The ECB "will do [its] utmost to make the euro a currency in which European citizens will be able to place their trust," Mr. Duisenberg continued. Consumers can already open euro-denominated bank accounts and make payments in the new currency by cheque and credit card. Euro notes and coins will enter circulation in 2002, at which point national currencies will be withdrawn. Travellers will be able to buy goods across Europe without the expense and inconvenience of changing money. Price gaps between nations are expected to narrow as comparisons of value become simple.

The National Australia Bank in Sydney had the honour of making the first official trade in euros when it reopened after the New Year's break. But most of the excitement at the birth of the euro was naturally felt in Europe. In Austria, France and Italy, local and national governments offered gifts of euros to January 1 newborn babies. In Frankfurt, home of the ECB, there was a weekend's worth of festivities to welcome the euro. The city's famous skyscrapers held a light show, switching their office lights so that their glass facades showed giant versions of the euro symbol — a circular "E" with two bars running horizontally through its middle. It was in the Belgian capital city Brussels, the headquarters of the European Commission, that the excitement was greatest. President Santer, Mr. Duisenberg and France's Finance Minister Dominique Strauss-Kahn got the champagne flowing at a press conference to toast the euro while outside dozens of children dressed in the blue and gold colours of the European Union flag released 3,000 balloons marked with the euro logo into the sky. Late on New Year's eve, 11 "euromen" backed by blue and gold flags and fireworks skated on an ice rink in Brussels main square to the strains of the European anthem — Beethoven's 9th symphony, "Ode to Joy."

Mr. Strauss-Kahn was echoed by EU Finance Commissioner Mr. Yves-Thibault de Silguy and Luxembourg Prime Minister Jean-Claude Juncker when he expressed confidence that the euro 11 would soon become 15. Denmark, Great Britain, Greece and Sweden have not joined the euro from the outset. Greece, which has not yet met the strict economic criteria necessary to adopt the single currency, used the launch to reconfirm its desire to be ready in two years. In Britain ministers expressed the hope that a successful euro would soon convince the British public of the many benefits of embracing the euro.

The smooth launch of the euro was a massive achievement, and President Santer paid tribute to all those who had contributed to its success. But its launch does not mark the end of progress toward greater pan-European cooperation. "The euro is not an end in itself, it is an instrument for greater economic development — social development,” said President Santer. "It is now up to us to see that we embark on the next stage, leading to political unity."

The Euro is born! (Associated Press)

Celebrating the birth of the Euro.

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