The Euro

Dizer writes: "Today sees the historic introduction of the new European Currency (Euro) into European hands. The Eurozone market, with a population of 300 million people, will be cashing in their Punts, Francs and Deutschmarks in favour of the new common Euro currency. This is the biggest currency transition in history, vive l'Europe! See stories on ireland.com or the BBC."

Comments

Simple question..

[dj28]

Why did Britain (the country with the most stable currecny) opt out of using the Euro?

Re:Simple question..

[Jabes]

As the Chancellor said in his October 1997 statement, the Five Economic Tests will define whether a clear and unambiguous case can be made. The Five Tests are:

* sustainable convergence between Britain and the economies of a single currency;

* whether there is sufficient flexibility to cope with economic change;

* the effect on investment;

* the impact on our financial services industry;

and

* whether it is good for employment.

Some comentators have suggested that these conditions are so vague that it would be easy to claim we have met them, or haven't as required. Unfortunately I don't understand the economics enough.

What I will say though, is as a Director of UK software company that exports to Europe, and as a frequent traveller to Europe, the quicker we get the Euro the better.

Re:Simple question..

[Zeinfeld]

Initially I thought this was a good way of looking at it, but now I think you're not quite right. The Conservatives won the 1992 election simply because the Labour government of the time (Socialist, blatantly Left Wing) was unpalatable to the majority of the electorate..

Actually the election was far more finely balanced. The Tories benefitted from an unexpectedly high turnout which was largely due to the weather, it was the first fine day of spring. The margin was very narrow, less than 2000 votes in 20 seats. In fact had the 50 seats with the smallest majorities gone 50:50 to Tory/Labour then Labour would have won narrowly.

The voter perception of Labour policy was largely fuelled by the Murdoch press. What Major offered was a Conservative government minus Thatcher. The mistake the Labour party had made was that by daemonising Thatcher they allowed the Tories to get re-elected simply by putting a new face at the helm. The Labour policy changes from 1992 through 1997 were of presentaion, not substance.

The major change was not in the Labour party but in the Conservatives. Racked with open internal warfare few of the cabinet made any attempt to conceal their contempt for their party leader. The numerous corruption scandals, starting with sex and ending with peculation and perjury erased any remaining vesigest of respect for the party.

The main similarity between 1992 and 2000 is the extent to which a viciously partisan press tipped the balance in favour of the right. Bush was consistently praised despite his obvious deficiencies while every opportunity was taken to attack Gore. So Bush got a bye for lying about driving while drunk while Gore was called a liar for mistakenly saying he visited Texas with the head of FEMA when it was the deputy head, he having visited 19 other states with the head one might think it an innocent mistake. The list goes on.

The relevance to the Euro is that but for the campaign against it in the Murdoch press it is unlikely that UK opposition would be anything like as great.

We will see if the end result is the same, before 9/11 that looked very likely. The ecconomy was in recession, the administration had lost control of the Senate due to crass political judgement, the California energy crisis caused by blatant market manipulation by Bush's texas cronies at Enron. Of course the hil Bush now needs to climb is that the press loves nothing better than making history repeat. So just as the Clinton years were spent trying to repeat Watergate, the press will now be trying to tie Bush II to the script of Bush I.

Picture of bills with US bill

[Therlin]

I was able to get a hold of a couple Euros and I took a picture with the only bill I had at home at the moment (a $2 bill)

Picture of a 5 Euro bill, 10 Euro bill, 1 Euro coin

They are pretty cool looking.

Re:Picture of bills with US bill

[snake_dad]

Hmm... overnight? That hurt, you flaming [fill in the blank]! :-)

I really, really hope for you that your country never switches currencies. These past 2 years, and especially the last couple of months have been hell, putting a lot of effort in adapting some real old software packages to a different currency, converting millions of records to the new values, dealing with rounding errors, and trying to find out where critical errors may come up.

The economy will not be affected very much imho, but for us IT people it has not been fun.

btw, you were right. That did it indeed :-)

Re:Picture of bills with US bill

[dgroskind]

They pegged their currency to the U.S. dollar - in all practical terms that means they adopted the U.S. dollar. But the U.S. dollar kept gaining value as the American economy grew, so that Argentinian exports became too expensive and the economy suffered.

Ecuador adopted the U.S. dollar as its national currency in March, 2000, and now, according to the Economist, "Ecuador is now Latin America's fastest-growing economy, its GDP set to expand by over 5% this year. Much of the social unrest of recent years has died down."

When a country can't control its own monetary policy, it is more likely a symptom of a serious problem, not a cause.

Re:Picture of bills with US bill

[rcs1000]

I won't get any Karma for this - but hey, I gave up whoring ages ago...

There are two common fallacies about sharing currencies between countries:

(1) It is necessary to have a shared government. Monetary integration *must* lead to political integration;
(2) Entering a 'common currency' is a once-and-for-all measure.

Both these can be countered by recent history.

Ireland and the UK.
Until the mid-1970s Ireland and the UK shared a currency - the British pound. This situation began with Irish independence at the beginning of the Century. Yet Ireland was not subsumed inside some British super-state. Ireland's independence as a country was never in doubt.

Ireland decided to go its own monetary way following the start of the 'troubles' in Northern Ireland. The Irish government made the, no doubt politically correct, decision that breaking from a currency agreement with a country responsible for 'Bloody Sunday' when tens of Catholic (Northern) Irish citizens were killed would not harm its electoral chances.

If anything, Ireland and the UK had less interlinked economies than most of the Eurozone (cf the figures for Ireland's exports as a % of GDP in the 1970s, esp. pre its entry into the EU - then the EEC.) Add in the almost complete lack of Ireland/UK trade resolution agreements - don't forget that one of Ireland's two major political parties was against the partion of Ireland - and it becomes clear that there is no reason why countries cannot share a currency without sharing a government.

Belgium and Luxembourg:
OK, they're both small. But the point remains.

France and the 'Convertible Franc':
Interesting one this, and one which I don't know as much as I should. (Reminder, read books on the subject.) France's ex-colonial 'possesions' in Africa share/shared with their previous overlord, a semi-convertible currency, even as 'colonial ties' were being increasinly relaxed. No greater disparity between the (predominantly) African economies of the former colonies and their erstwhile masters can be imagined. Yet, these countries regarded the convertible franc as the one beneficial legacy of colonialism.

I don't know how this has changed since the 'creation' of the Euro. Nor can I point to any noted economic successes in Africa. (Although, I would say - largely without any hard evidence - they have done no worse than peers.) So, it is not necessarily a great example.

BUT - they do go some way to demonstrate that a 'sovreign federal' body is hardly a necessity to a working currency.

One simple reason why it won't work:

[SlackMeister]

common-currency zones must have two things: free movement of capital and free movement of labor. When the factories in Detroit lay people off they can move to Dallas, LA, etc. But when people are layed off in Paris they won't be able to chase jobs to Berlin. It's not a problem if both countries have their own currency that they can devalue to discount their products, but with a common currency the country with high unemployment will be stuck, much like Argentina's problem when they pegged their currency to the US dollar and therefore priced themselves out of competition with other south american nations.

Unless people can freely move to where the jobs are, all Euro-using countries will start to look like Argentina in 10 years.

Re:One simple reason why it won't work:

[fidget42]

I agree 150%. In the US, we have problems where states compete against each other for business and the political backlash that causes (S. Carolina gives incentives to pull corporations from Verginia, etc.). Here, there is a stable overseeing government to keep things civil, but the EC does not have that sort of power. I expect the next five years to be very uncomfortable in Europe as nationalism gets entered into the equasion.

Re:One simple reason why it won't work:

[Lemmy Caution]

What are you talking about? What restrictions on moving and working in other European countries are you refering to?

One of the advantages that Europe has is that language and culture maintain national entities in such a way as to resist the "winner take all" scenario, in which all the educated professionals move to a tiny handful of economic supercenters. Economic growth can be distributed geographically more in Europe, but it has nothing to do with any restrictions on travel.

One of the ironies of economic popular wisdom in the 90's is apparent by the fact that Brazil, with its protectionist policies, is doing reasonably well, while Argentina, which did almost everything the IMF and the US banking establishment told it to it, is about to go toes-up. The Argentine disaster could spell the end of WTO-styled globalism far more than the protests of Seattle etc. ever could

Are we becoming like star trek?

[alen]

First we have international trade and monetary agreements like nafta, european union, european common market and the upcoming north and south america trade zone. How far away are we from a one world federal union? Europe is already moving to a common legislature and and some common agencies like approving corporate mergers.

I think in the next 20 years as trade zones evolve we will see the union of trade zones until there is true free world trade. Then in our lifetimes we may see the start of a common world government.

I hope it works!

[Martigan80]

I realy hope this currency unification will help. But I have a feeling it will also do harm, for instance in a couple of years Italy will not be able to make some "trademark" wines because the EU is shifting production locations for all countries involved.

Different versions of the Euro...

[wavecentral]

Interestingly enough, each member of the EU has a series of euro coins for their own countries. Sort of like how the US has produced quarters for different states. It's quite nice and still perserves the autonomy.

Also, an interesting note, is that the EU states will still need to produce their own stamps but put them in the EURO currency pricing, which will be nice for collectors and more autonomy.

FYI, I was over in Germany for three weeks and spoke to a couple of folks about how they viewed the EURO. Alot of the older folks were worried about how non-assest items will be valued. For example, appraisals. Something that use to be appraised for 5.500 DM, will it be assessed at 2,811 EUROS come a couple months down the road?

Congrats to the Brits

[Ars-Fartsica]

For having the brains to let the rest of Europe muck around with the Euro before they bother with it. They have the facts on their side - the Euro has drifted lower and lower with regards to the greenback since it was introduced.

Until the EU can get the Euro some value, the Brits are much better off using Sterling for a few more years.

Issues with the euro in day-to-day life

[Xouba]

Well, being one of the 300 million affected, I just thought that I could karma whore a little and get an "informative" mod by telling you (the non-european or non-affected-even-if-european people) a few issues that arise in real life with this change :-) Let's hope not to be another of a million messages about this O:-)

• First, I suppose that you don't really imagine what this change means for every Joe European's day-to-day life. In Spain, 1 euro is 166.386 pesetas. There's a few rough equivalences, like 6 euro = 1000 pesetas, but anyway it's quite tricky to know, for example, how many euros are 135 pesetas, or how many pesetas are 4.27 euros. And many people (me, at least) need to know that equivalences in the first days, to make an idea about what you are paying.
• Given this difficulties, every government has tried its best to inform every citizen about the equivalences, how to use the euro ... and has made available a kind of "calculators" that consist in a little plastic piece that shows euros and their equivalences in the local currency, to be used by everyone. They're pretty cool, if someone is able to take a photo of any and post it, please do :-)
• The devil is in the details, as they say, and in this case the devil is in the rounding. As I said, 6 euros are roughly 1000 pesetas. But that's not exact: 6.01 is more precise. This doesn't mean anything in "cheap" things, but if you're going to buy a car ... There's a lot of concern about the way that commerces are going to apply rounding, as many think that they're going to raise prices to make them more "euro-compliant".
• Most of the prices were already both in euros and local currency since months ago, so everyone could make an idea about what prices were going to be like in euros (a cinema ticket is about 4 euros in "spectator's day", for example). But anyway, in my personal experience, nobody looked at the prices in euros, so the impact of this measure is, for me, doubtful :-) Anyway, bussiness have to work in euros from now on, and most of them were already prepared when year's end came.
• There's no 25 cents coin. Someone tell me why, because I don't understand it. Specially since a coffe here is about 125 pesetas, which is roughly 0.75 euro. We've got 2 and 20 cents coins, but anyway, I don't know why there're no 25 cents coins.
• As someone already said, the coins are pretty cool :-) A few of them are in two colors, and have a face with a local design and the other with a common european one.

• There's more, but I don't recall anything specially interesting now, so let's hope that another one with a better english and memory can say something more fulfilling ;-)

Coming from a store owner...

[snellac]

I own a chain of stores here in London, and after several meetings with lower management, we have decided to not accept the Euro currency in favor of the pound from foreigners. We came to this conclusion for several reasons, which make both economic and political sense for a store dealing mainly in jewlery such as ourselves.

• The Euro costs us £0.50 to exchange for every transaction made. That's right, the banks charge us to convert our money back into pounds! They don't charge at the consumer level, just merchant to merchant, so we mandate consumers do this on their own, or pay via another means.
• The new anti-counterfeit measures contained in the Euro. This may seem like a good thing, but the larger Euro demoniations contain coils electromagnetically charged to a certain serial number. This can thus be tracked, and as much as consumers are worried about their privacy, merchants are worried about ours in respect to competitors.
• The attitude here in London is mostly anti-Euro, as Brits object to this new prospect of a continental government. We've been independent for this long, and under no means do we want to be governed by someone higher than the Parliament
• The conversion rates fluctuate constantly. What's to say that one day, we charge 500 for a gold ring, and then going to the bank to exchange it, it's then worth 90% of that? That's lost money to us. We can't afford to be dealing in currency fluctuations. Both the pound and the US Dollar are stable enough to be dealing with, but I won't put my corporation's trust into the Euro.

Businesses like mine are doing the same thing. I can't find a single business here in London Square willing to redeem Euros for face value. So, when you come to London, be sure to bring your plastic, or redeem it for pounds.

-snellac

Re:Coming from a store owner...

[Sanity]

The new anti-counterfeit measures contained in the Euro. This may seem like a good thing, but the larger Euro demoniations contain coils electromagnetically charged to a certain serial number. This can thus be tracked, and as much as consumers are worried about their privacy, merchants are worried about ours in respect to competitors.

Er no they don't, didn't you see the article here just a few days ago about how they were considering doing this, but didn't expect to see it before 2006?

The attitude here in London is mostly anti-Euro, as Brits object to this new prospect of a continental government.

Speak for yourself, there are many in the UK who are pro-Euro.

We've been independent for this long, and under no means do we want to be governed by someone higher than the Parliament

Such as, um, the WTO? Or perhaps the US government who seems to be making the decisions about how the UK uses its military these days?

This is such a short sighted view point. Only through cooperation can European countries have a say in world affairs, the UK, a country of about 60 million people, will be ignored in the face of trading blocks of 300 million people and upwards.

Sooner or later, the UK will come crawling into the Euro with its tail between its legs, and feeling rather stupid.

Re:Coming from a store owner...

[tdrury]

With regards to tracking the serial number:

The only way I can see someone tracking you via a Euro is this: you go to an ATM to withdraw money. The bank knows you and can read the Euro as it is dispensed. You spend the bill. Assuming the merchant deposits all cash to their bank, the bank could resolve the bill from the merchant to the bill dispensed from the ATM assuming it is the same bank or banks share info. This is only likely for large denominations since smaller ones may be tendered as change. Once changed hands, any tracking data is bogus unless the merchant themselves are tracking the euros coming in and going out.

Every US bill has a serial number too, just not magnetically encoded. It would be quite easy to build a box that scans in US bills and reads the serial number. I believe cash is still the best anonymous tender. Magnetic encoding doesn't change anything.

Just food for thought.

-tim

Re:Coming from a store owner...

[Menthos]

Sweden is not in Euroland either, but most major, country-wide shops have already announced that they will accept payment in Euro, mostly as a service to customers (after all they want to attract all customers, also foreign ones).
They are not likely to list prices in Euro however, since the SEK<->EUR exchange rate is not fixated and the list prices would have to be changed almost every day, which of course would be impractical. But payment in the converted Euro amount will be entirely OK. A lot of smaller shops are expected to follow this policy, used by the bigger ones, and allow payment in Euro.

Cash machine problems

[Jacco de Leeuw]

I tried three cash machines this morning (there were queues, people are enthousiastic apparently) and one of them had an error. I don't know whether it was out of bills or there was some bigger problem.

Then I tried the recharging stations for the (chipcard based) debit card called "Chipknip" (similar to Proton in Belgium and Geldkarte in Germany). Two out of three malfunctioning.
Now, these chipcards are not used very much by the general public. But the thing is, banks have promoted it a lot lately, because it would make the transition easier. The banks should have done a better job if they are really serious about this.

Also, I have a device which I can use to recharge my chipcard at home. I connect it to a phone line and then it makes a connection with the bank.
I noticed that from now on I can recharge it with 25 euro as a minimum. Previously the minimum was about 10 euro. I wished they had maintained that minimum amount.

Re:Xenophobia and pig headedness ?

[SerpentMage]

Me as a German and having lived in the UK, I thank God that there are Brits in the EU. Because without the Brits the EU would have gone to hell in hand-basket. Sure the Brits sometimes challenge too much. But very often the Brits are a sounding board of reason. If the EU were mainly run by Germany and France there would be NO EU!!!!

So maybe this with the Brits sitting it out may be a funny thing. But eventually things will be different. Until then the EU would do well to listen more often to the Brits...

The Euro is here, i can feel it in my wallet.

[ginkelb]

I live in Holland and for the last year i have been fearing the thing that happend this morning. This morning, as everybody knows, the euro became the official currency in the Netherlands and Europe. The comming of the Euro has had a lot of impact in daily life before this morning.

For the last couple of months all prices in supermarkets and all point of sale have been double priced. The prices had to be displayed in the normal currency and the Euro. This was done so the normal people could check to see that the price conversion was made correctly.

The idea was that prices would remain the same. Yehhh, right.

In the last couple of months general prices in the Netherlands were raised bij 15%. Almost all price conversions were made so that the new Euro price was a nice and round figure. 2,95 EURO in stead of 2,72 Euro for example.

These things are the things i have been fearing of. And these fears came through. Not to think of the drop of value of the Euro compaired to the Dollar. The euro was to become a strong currency. But since its introduction in the financial sector a year ago it droped from about $1,20 to $0,85. Now that it is introduced into the general public we will have to see if this value will hold.

The coming of the Euro has been feared by me and others. Im saddend that it has arrived. Not only because of the raised prices that had nothing to do with the normal inflation but also because we have to say farewell to our dutch banknotes and coins.

The Euro is here, and now i always have to use the same currency as the french. And i hate the french.

Re:Cash movements

[Joe Decker]

I'd guess that in a few years you'd have a pretty even distribution (actually one based on the relative proportion of coins produced by each country.), perhaps some bit of "more coins of my own country" still visible left in the distribution.

I can provide some data from a loosely analogous situation in the United States. US bills are printed at 12 locations in the US, and are originally distributed to banks based on which of the 12 districts that bank is located in.

I'm part of a fun projectthat involves tracking the motion of US currency. I live near (60 miles from) San Francisco--here are the locations the bills I've marked come from, and their relative proportion.

San Francisco 776 32.0%
Kansas City 323 13.3%
New York 205 8.5%
Dallas 187 7.7%
Minneapolis 182 7.5%
Chicago 146 6.0%
Atlanta 133 5.5%
St. Louis 129 5.3%
Cleveland 99 4.1%
Boston 97 4.0%
Richmond 82 3.4%
Philadelphia 63 2.6%

Now, while the banks print out different numbers of bills and such, it's pretty clear that the San Francisco printed bills dominate my sample.

This analogy is unlike the situation with Euro coins for at least one reason--the lifetime of bills is much shorter than the lifetime of coins. Bills tend to last a year or two in circulation, coins for a decade or more. So, as time goes on, I'd expect mixing to be a much larger effect for coins in the EU than it is for bills in the US...

Re:The real reason the Euro is BAD NEWS

[Anonymous Coward]

giving control of your currency to another nation is suicide.

When will you nationalists finally get it. There is no "other nation" in a united Europe. Hopefully we'll get rid of the national borders and governments as soon as possible too.

Re:The real reason the Euro is BAD NEWS

[Anonymous Coward]

There is no "other nation" in a united Europe.

You are wrong. The German Govt. is not elected by the Irish population, and it is the German population which controls the new money, therefore, the German people control, unilaterally, the economy of all the other EU nations.

This is a fact.

Any of the EU nations can "derrogate" from EU laws, including the human rights legislation. The statement that the european nations are connected and in some way equal is a fallacy.

The Euro is an undemocratic currency. Period.

Re:Advantages of a single currency (or not!)

[rcs1000]

Yes. Labour (labor) is much more mobile in the US than in Europe.

And Yes, that does mean 'asymetrical shocks' can be more easily absorbed than in Europe.

But that does not mean an Indiana steelworker can easily become a networking expert. (Or, in the current environment, the opposite.)

Even inside countries, people are surprisingly unlikely to move. How else can you explain the persistently high unemployment rates in some parts of the US? The statistics tell a story: very few people change 'region' in the US during their lifetime. And an even smaller proportion change for economic, as opposed to life-style, family or educational reasons.

And at the 'high end' of the emplyment spectrum - by which I mean skilled professionals - locational mobility is increasingly becoming the rule rather than the exception. Find the major investment bank in London where 'brits' make up the majority of senior positions.

I am uncovinced by cultural arguments: I know many Scottish nationalists working in London; many opposed to further European integration find themselves working on computing contracts in Brussels, Frankfurt or Paris.

I could well be wrong, but the evidence does not yet point clearly to either (a) labour mobility being *that* important or (b) people being *much* more unwilling to move - at least temptoraily - around Europe than around the US.

Re:Euro symbol in HTML

[JJP]

Dollar comes from the Dutch "daalder", an old coin with the value of one and a half guilder (thats EUR 0.68).

Re:Complete image collection at official Euro site

[RC514]

There is an official pdf document called Spelling of the words "euro" and "cent" in the official Community languages . The footnote for the English spelling says: "This spelling without an "s" may be seen as departing from usual English practice for currencies." Note the "may be seen".

Re:When the rest of the world switch to the Euro ?

[El Cabri]

Well actually it would make sense.

Unlike the dollar, the euro is constructed as a multi-state currency, and many thirld world countries that have dollarized their economies, but still make more business with Europe than they do with the US, might adopt the euro, or the peggind of their currency to the euro. Do you imagine the Fed and the US government concerting their monetary policy to take into account the interests of Brasil and Argentina ? I don't, but I can imagine the ECB letting them in, as a partnership with spain and portugal for example.

Re:Advantages of a single currency (or not!)

[pcb]

...the US has widely differing economic areas. How closely correlated are tobacco farming in Virginia, car manufacturing in Detroit, optical networking in San Francisco and investment banking in Wall Street? When car making is suffering from Japanese competition, it might seem to make sense to devalue the Detroit dollar - yet no-one has ever suggested breaking the US into regional currencies.

I just wanted to add something here. While your post is excellent, there have been several arguments made from some very prominent economist (cf. Jane Jacobs or John Kenneth Galbraith ) over the years that this is precisely the reason for the rather large difference in economic development between various regions in the US.

I could write for hours on this topic, but I don't have time. Suffice it to say that it is their opinion that the US should not have a single currency. In fact it would be much better for all if each state had their own currency to reflect the economic reality that exist in each state. This idea is not a new one, but I don't know why it is never taught. Though out most of European history, it was very common for each city to have its own currency and they seemed to manage well enough. Anyway check out the above books if you're interested. Check out the reviews as well. Talk about differing points of view.

For what it's worth, I think the ECB is nuts creating a single currency. France and Germany will benefit well enough, but Greece, Spain and Portugal are going to get screwed. They well become simple supply regions for central Europe; industrialization will stop or be significantly reduce, just like in Mississippi or Tennessee.

Re:Advantages of a single currency (or not!)

[mpe]

Despite the different economic areas in America, there are far more similarities between them than differences: a common language and culture, common systems of government and political parties (Reps, Dems, Libs, Greens) and common legal structures (the US court system and relatively uniform state court systems.) Mobility comes in where a person loses his/her job as a dot-commer in San Fran, and moves to Seattle/Atlanta/NY/Chicago to do something else there. You don't see quite as much mobility in Europe, because there is a stronger identification with nation (France, Germany, etc.) than with continent. In America, you don't have people who identify themselves primarily as Michiganders (stupid name, I know) or Californians or Ohioans, but as Americans. (With the exception, maybe, of Texans.)

The difference is that European nations have existed for a long time, in some form or other. Whereas the states of the USA are mainly creations for their own sake. Most of the borders between US states are simply lines drawn on a map with no reference to geographical features in the area. Very few of the US states have ever been nation states.
I'm not convinced about the common language and culture. In the West and South West of the US the echo of the Hispanic empire is quite apparent. Also there are plenty of distinct ethnic groups, who are often refered to as X-Americans where X is some other part of the world. However there is still the lack of identity with specific US states.

The rationale for a common currency

[pkaral]

There are two main reasons for implementing the common currency - political and economic. Although the economic might be important (think in hundred billion dollar terms of potential efficiencies), the political have been the most important motivation.

The political goals behind the Euro are, of course, the often-cited "ever closer union". Many people think that a "United States of Europe" model, much along the lines of the USA, would be a good thing. Such a development goes hand in hand with tearing down the barriers for commerce, travel, cultural exchange and relocation of people and businesses. The whole EU Common Market project has been doing this explicitly for the last 6 years, and implicitly since the eighties. There are many arguments for and against such a European Federations, the most vocal opponents cite nationalism or the loss of local governance/influence, whilst the advocates usually talk about economic benefits, European identity and the need for transnational coordination to tackle global environmental issues etc.

The economic goals are basically to remove wasteful practices and increase productivity through increased competition and specialization. To deal with those individually:

Wasteful practices: A lot of resources in Europe are used for tackling currency translations of different sorts, ranging from exchange bureaus to expensive accounting consultants and accounting software development. This might sound marginal, and it is indeed way beyond one percent of GDP, but when applied to economies of this size it still adds up to triple-digit billions (Euro or US, take your pick). There is also a lot of (costly) risk taking will be removed.

Increased competition: Especially in the smaller countries, local markets can be so small that they don't support enough suppliers (or buyers) to ensure good competition. This leads to monopolistic behavior, and hurts the economies in terms of lost production and mis-allocation of production resources. By removing barriers to cross-border tenders, competition (and thereby efficiency) is increased.

Specialization: Because the Germans are better at making cars than the Swiss, while the Swiss are better at making cheese, it makes sense if the Swiss make cheese for the Germans and the Germans make cars for the Swiss. This is called specialization, and occurs within economies as well as between them (in fact, specialization is the main reason why e.g. currency, the corporation and industrialization have been so important for the economic development in our history). Specialization between economies is realized through trade, which will be facilitated by the common currency.

The cons: The economic cons are well-known, but hard to quantify. Basically, the main problem is that with a common currency comes (by definition) a common monetary policy. Monetary policy needs to be adjusted to the business cycle. The cost of the common currency will be incurred when different policies are needed in different parts of the EU, e.g. if boom in Ireland requires a contractionary policy (high interest rates) while recession in Germany requires stimulation (low interest rates). This has been experienced by the US, when Chicago (car industry) was in recession while California (high-tech etc.) was booming, and the Fed had no way to respond to this situation.

The gravity of this problem is determined by how different the business cycle is within the common currency region, which again is determined by the mobility of resources (notably including labor resources). It is widely accepted that European workers are, at least at present, less likely to move to other countries than Americans are to move to other states. Therefore, this problem is likely to be bigger in Europe than in the US. Whether this will eat up all the economic benefits is not predictable with present analytic tools, and only time will show. Most economists seem to be in favor of the Euro, though.

pk

Re:Different countries...

[El Cabri]

Germany is technically i a recession, just as the US is, and it's been a couple of years since their annual growth has not hit 2%.