Next month, 11 European nations will venture into the unknown. Spain, Portugal, France, Italy, Germany, Belgium, the Netherlands, Luxembourg, Ireland, Finland and Austria will inaugurate the European Monetary Union (EMU) in just a few weeks. (The United Kingdom, Denmark and Sweden have opted out for the time being; Greece failed to comply with EMU convergence criteria).
Under the terms set forth in the Maastricht Treaty, the euro will be available for private and business banking, and public expenditure on January 1, 1999. Until 2002, the participating countries will gradually phase out their national currencies while introducing the euro into all aspects of their economies.
By January 1, 2002, euro notes and coins will be issued, replacing national legal tender by the summer of 2002. So in just a couple of years, francs, Deutsche Marks, pesetas and lira will disappear. Centuries-old currencies will be replaced by a new “super-currency” that will give Europe a far more powerful role in the global economy.
What the world is about to witness in Europe is a momentous and historic event. The advent of the euro has proven to be a controversial undertaking on both sides of the Atlantic.
In Europe, many see the euro as an attack on old institutions and an abhorrent infringement on national sovereignty; pessimists fear the whole project will fail, causing much damage to the European economy. Many Americans have raised concerns about the single currency, viewing it as a potential threat to American dominance in the global economy and the supremacy of the dollar. Although these concerns are understandable, I see the euro as a wonderful opportunity for people around the world, especially Europeans.
The member countries of the European Union have a combined GDP of over $7.3 trillion. That GDP, though, is split up between 15 different countries with 15 different currencies. Through economic integration, Europeans can pool their resources and form one solid, larger and stronger presence on the world’s economic stage.
The 11 “euro-states” will no longer have 11 smaller voices, but one larger and much more influential role in economic affairs â€” which will be on par with the role of the world’s economic behemoth, America.
The single currency will allow trade within the common market to be much more efficient by eliminating the additional costs that come with the existence of the various national currencies.
The monetary union will not only eradicate any remaining economic barriers within the EU, but will greatly increase Europe’s influence over the direction of the global economy.
The new currency should facilitate the full economic integration of Europe by providing economic stability and monetary continuity throughout the continent. As a result, Europe will have greater leverage in international organizations such as the World Bank, the International Monetary Fund and the World Trade Organization. A successful euro will allow Europe to amass more economic and political power, paving the way for a greater balance of power in the world.
Those who argue that the European Union is going forward with the euro too quickly and is not being careful enough often forget the amount of time and effort it took to get Europe to the point where it is now.
To ensure that the euro would be introduced in a climate of economic cohesion and stability, the Maastricht Treaty calls for all “euro-states” to meet specific standards in order to join monetary union.
Known as EMU convergence criteria, all members of the EU had to meet strict debt limits and had to curb inflation and public spending.
All EU states but Greece (which will not be permitted to adopt the euro) met the Union’s strict standards. Other issues, such as protection of national interests in Europe, have been addressed. In a move to protect national identity, individual member-states will, for instance, issue their own euro coins.
Also, EU member-states had the right to opt out of EMU, which was the route taken by the United Kingdom, Sweden and Denmark. Europe’s leaders are no doubt sure of the great importance of European Monetary Union and have worked hard to ensure that all countries that joined met the strictest of economic standards.
Europe is right in adopting the new currency because it has the potential to be such an incredible force for economic stability and cohesion.
If the early stages of the introduction progress smoothly, the euro will bring forth the presence of a stronger and wealthier Europe, promoting economic stability and high socio-economic development.
The introduction of the euro in just three short weeks will herald a new era that in which a secure and stable Europe will play a dynamic and significant role in the global economy.