Challenges ahead as euro turns 10
Issued on: Modified:
The financial markets of the 12 European countries adopted the single currency on January 1st, 1999. Ten years on, four others have joined them. The current global financial crisis is the euro's first real test.
As 16 European countries celebrate the 10th anniversary of the euro, the widely acknowledged success of the single European currency is under threat from the global financial crisis.
"This is the first test for the euro," said Antoine Brunet, an economist at French consultancy AB Marchés. He remarked that the crisis has introduced wide disparities in long-term lending rates in various Eurozone countries.
Former European Commission president Jacques Delors, the founding father of the European economic and monetary union, also expressed caution. "The euro gives protection but not dynamism," he told the French financial newspaper La Tribune on Monday. "The euro constitutes a protection even against the mistakes we may make ourselves," he added.
Financial markets in 12 European Union member states switched to the euro on January 1st, 1999. The previous day, EU finance ministers had definitively fixed the exchange rates between their currencies and the euro.
European citizens had to wait until January 1st, 2002 for the revolution to materialise under the form of notes and coins.
The euro changover was the result of a long process aiming to make the economies of euro accession countries converge towards the best performing among them – Germany.
In Germany itself, public opinion was reluctant to give up on the protective mark, having experienced traumatic hyperinflation in the 1930s. Many Germans saw the euro as an uncertain bet as the new curency would be shared with countries considered to be less able to rein in public deficits, such as Italy and Greece.
The convergence effort aimed to harmonise inflation, public deficit and debt as well as long-term interest rates within the region, while the European Central Bank was established to control the short-term rates that influence the Eurozone's monetary market.
Daily newsletterReceive essential international news every morningSubscribe