Ten years of the Euro

The tenth anniversary of the launch of euro banknotes and coins has not been the object of extravagant celebrations in Europe.

Reuters/Yiorgos Karahalis/Files

It’s still not clear whether the fiscal pact agreed in December, amid much bad feeling at a European Union summit in Brussels, will fend off disaster for the currency.

On the first day of the summit, French President Nicolas Sarkozy said the pact was meant to fix to two fundamental flaws in the original introduction of the currency: a failure to ensure converging economies, and the decision to allow certain countries (eg.Greece) to join the Eurozone before they were ready.

Ten years on, Europe’s leaders are apparently paying the price for the errors of their predecessors who conceived the euro.

The low interest rates set by the European Central Bank led some southern European states to borrow excessively while the northern European states underestimated the dangers, leading to the current debt crisis within the zone.

As a currency, the euro is actually 13 years old, not 10 – it became the official unit of transaction on the financial markets for 11 countries in 1999.

But it was not until 1 January 2002 that the virtual currency became a physical reality for Europeans, with the launch of banknotes and coins in 12 countries.

There are now 17 countries in the Eurozone, and in many of them consumers frequently complain that the euro has somehow led to price increases for many goods and services.

The European Central Bank, an independent institution which manages the currency, would surely point to its success in keeping inflation in the zone down to an annual average of 2.0 per cent since 1999.

And businesses too tend to be enthusiastic about the euro, particularly in Germany, where the common currency facilitates exports of German-manufactured goods.

But André Sapir, an economist at the Brussels-based think tank Bruegel, counters that the euro was simply “one factor among others” which helped better integrate the European economy, along with the Maastricht Treaty on the single market, the opening of borders under the Schengen Treaty and the expansion eastwards of the European Union.