MULTIMEDIA: An interactive timeline
chronicling the history of the euro. (Requires Shockwave
NEW YORK -- It's
hard to understand the euro without knowing the new currency's
The term "euro" was coined in December 1995 at a meeting of the
European Council, a governing body of the European Union. The
concept of a common currency, however, has been discussed ever
since the end of World War II.
After the ravages of two great wars, European politicians hoped
that an economic and monetary union would help curb future
conflicts. Such a union would mean the creation of a single
monetary policy within a single economic market.
An initial step in this direction came soon after World War II
with the creation of the Single Market system to foster trade
In 1977, the president of the European Commission officially put
forth the idea of the European Monetary Union (EMU), which
eventually became a reality as a result of the 1992 Maastricht
Treaty. That treaty stipulated that the union would promote
economic progress and referred to the "irrevocable fixing of a
single currency, the European Currency Unit, (ECU), and a single
monetary policy and exchange-rate policy."
The ECU, which becomes the euro on Jan. 1, is the basket of 15
currencies representing the members of the European Union.
All members of the European Union were eligible to join the
monetary union, but they had to meet strict financial criteria,
such as limited budget deficits and low inflation. Denmark, Sweden
and the U.K. chose not to join the union but still have the option
to do so. Greece was unable to qualify for the monetary union but
may try again in the future.
So the euro is the ECU minus four.
Last May, the European Monetary Union was formally initiated as
11 countries qualified for membership and conversion rates between
the euro and national currencies were fixed.
The process is being controlled by the Frankfurt-based European
Central Bank (ECB), which was formally established in June,
following a skirmish between France and other EMU members over its
The ECB will also control the supply of the euro, a feature
still contested by some economists. Monetary union is to be
achieved by locking exchange rates between countries and merging
national monetary policies.
The French have sought a more politically influenced bank, tied
to countries' social and economic policies, while other union
members such as Germany have fiercely defended an independent
financial institution. In the end, a compromise was reached, and
the bank is managed by the German candidtate, Dutch banker Wim
Duisneberg, to be followed after four years by Jean-Claude Trichet,
a French banker.
The bottom line: New currency can be a time-saver for
NEW YORK -- The most obvious benefits of the euro -- a
much-reduced need to visit the exchange bureau or bank abroad and
streamlined rates -- are illustrated by a recent two-country
European visit I took in November.
I had British pounds, which I changed into Spanish pesetas.
First, dreading a rip-off, I interviewed three exchange bureau
employees in search of the best rate. Time wasted: 20 minutes.
Then, I kept getting confused between the currencies and
consistently handed the wrong national currency to patient members
of the service industry. Time wasted: Who knows?
Despite my best efforts, I was unable to locate the slip that
allowed me to change my pesetas back to pounds without paying an
additional fee. Time wasted: At least 10 minutes looking for the
slip of paper.
As a final act of silliness, I felt the need to overspend my
pesetas, thinking I might not be back in Spain for some time. Had I
been holding euros, I might have been more conservative.
The point of the above anecdote is that the euro not only has an
impact on the world economy -- as articles in this guide note --
but that the lives of you and me and the man who sells foie gras in
Paris will be permanently changed by the new currency, as well.