New Year 's Day 1999 The Euro

2010 Words9 Pages
On New Year’s Day 1999 the euro (€) was launched in non-physical form, used only for electronic payments and accounting purposes. After careful and deliberate exchange rate fixing (with help from the ECB) against one another, the national currencies of participating countries became simple subdivisions of the euro, to allow for an easier transition. In January 2002, banknotes and coins entered circulation in 12 European nations; Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
Not all EU members wanted to join the Euro and not all were able to join. To participate in the Euro Area, member states had to meet a set of rigid criteria, including a budget deficit of less than
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A common currency across the European continent was highly anticipated, being seen as a critical element in the pursuit of a single European market. Economist and Nobel laureate Robert Mundell said in 1999 that the euro would become a world-class currency, second only to the U.S. dollar. He also suggested that the euro would provide investors around the world with "another 'island of price stability ' in addition to the dollar area, in which they can put their capital and use to value their investments." (New York Times)
Additionally, a single currency and reduced macroeconomic unpredictability would produce other growth effects by reducing capital costs and creating a more integrated financial market through the removal of all exchange risk. With a “quieter” currency market international transactions are more secure and promotes portfolio and foreign direct investment flow. This more efficient allocation of international capital was expected to contribute to higher growth throughout Europe and a stronger presence in the global economy.
Not all were optimistic about the creation of the euro. Among the most famous of critics was none other than Mrs. Margaret Thatcher who predicted the devastation a common European currency was to cause. In her autobiography Thatcher explains how poorer countries with inefficient economies such as Greece would be devastated by a single monetary policy’s inability to properly accommodate both small and powerhouse economies.
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