Ready or Not, Here Comes the Euro
The other day I visited my local bank and bought $30 each of French francs, German marks and Italian lire. I have no immediate need for them or the Spanish pesetas, Greek drachmas or Dutch guilders that I might also have purchased. I just wanted some historic mementos, because after Jan. 1 the national currencies of 12 European countries with 305 million people are scheduled to disappear in favor of the euro. Although I have long doubted the euro's benefits, the moment is undeniably historic.</br></br>Never before have so many people in so many countries simultaneously adopted a new money. Since 1999 stores and banks have priced in both euros and national currency; now people get the real stuff. The conversion is a massive operation. The European Central Bank (ECB) has minted 52 billion new coins (170 for each person in the "euro area") and printed 14.9 billion bank notes (49 per person). The total value is 649 billion euros, which, at present exchange rates (1 euro equals about 90 cents), is about $584 billion.</br></br>Throughout history, money -- its creation or destruction -- has always been a political act. The euro has been controversial precisely because it engages vast political ambitions. To critics, it represents a step toward "a European super-state that will submerge the individuality of the European nations in an unwieldy federation, hobbled by bureaucracy [that imposes] a crippling burden of regulatory and other costs on Europe's economies," wrote one British commentator. Having reservations, three of the European Union's 15 members -- Britain, Denmark and Sweden -- have so far rejected the euro.</br></br>To its enthusiasts, the euro means economic vitality and political unity. Companies won't have to convert all those different currencies. Easier cross-border price comparisons will compel firms to become more efficient. As cross-border investment rises, money will increasingly go to the most deserving companies. Economic success will strengthen a European consciousness.</br></br>Let's hope so. But I'm skeptical, because I fear that (a) the euro won't create major economic gains and that (b) it will trigger a political backlash. So much economic power is being centralized in Frankfurt and Brussels -- the homes of the ECB and the European Commission -- that local and global economic discontent may focus increasingly on "Europe" as the villain.