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Though the euro was launched as a cash currency with much fanfare, its performance has been particularly weak. Unless rigorous structural reforms are implemented by the ECB in the eurozone, recovery seems to be a distant dream.
The biggest currency swap, affecting the day-to-day lives of 300 million Europeans has ultimately become a reality. The euro has been launched as a cash currency on January 01, 2002 with the introduction of banknotes and coins. This is by far the largest monetary changeover, the world has ever seen. Henceforth, it will serve as a unit of account for all pricing and transactions. Though banks will continue to exchange the old currencies till July 2002, by the end of February 2002, all notes and coins will be replaced in the 12 European countries under the European Union (EU) and the Euro will become the legal tender in the entire region. Joining with the euro are the 12 members (France, Germany, Italy, Spain, Portugal, Ireland, Finland, Belgium, Netherlands, Luxembourg, Greece and Austria, as well as those of Vatican City, San Marino, Monaco and Andorra) of the EU. They have entrusted their monetary policy-making powers with the European Central Bank (ECB), thereby submitting themselves to the overall monetary discipline under the Stability and Growth Pact.
In January 1999, when the leaders of the EU met and agreed to combine their currencies, they envisaged that the euro would be far more than the single currency of Europe enabling the eurozone to become a strong player in the global financial market. They expected the currency to shift global portfolios to euro assets, depressing the value of the dollar relative to the euro. The launching of the euro was intended to bridge the economic gap between Europe and America, and eventually challenge the economic supremacy of the latter.
Though the initial take off was gorgeous, maintaining the standard became increasingly thorny. Reality soon started bifurcating from expectations. The euro plummeted against the dollar with time, thereby weakening the European economy. For various reasons, the voyage of the euro over the last three years has not been smooth. In fact, instead of narrowing the gap between America and Europe, the euro has broadened it over the years. The euro was neither able to shield Europe from the vulnerabilities of the sagging US economy nor was it able to develop as an alternative currency to fight the dollar.
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