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Euro The One That I Want

Well, so far so good. Twelve European nations introduced the new Euro currency (€ , EUR) last January, and it’s been about as exciting as the Y2K millennium bug. In other words, the transition has been relatively smooth.

The road to the Euro started some time ago. The name for the Euro was adopted back in December 1995. December 31, 1998, was “conversion weekend,” where the participating countries converted to the Euro (EUR) for transactions. The exchange rate for the Euro and the various national currencies were fixed permanently at this point. The Deutschemark (DEM), for example, is fixed at 1.95583 DEM to 1 EUR.

Starting the following January 1999, the euro would be the official currency of these nations. National currencies would merely be denominations of the Euro.

Finally, in January 2002, the Euro would be issued as a currency that people could use. Up until February 28, 2002, both the Euro and national currency would be legal. After this date, only the Euro would be legal tender in the participating countries. In other words, you will not be able to pay with the Deutschemark, Franc, Lira, etc., even though in some countries, you can still exchange the old currency at the banks.

The Maastricht Criteria was established to determine which countries would be allowed to participate in the Euro. Originally, 11 countries the met the Maastricht Criteria (don’t ask me what these criteria are, as I’m not sure) had agreed to the Euro. Later, Greece was added to this group in January 2001, bringing the total to 12 countries. The twelve nations involved are: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain.

Interestingly, Great Britain is not part of this list (see my website at www.emansworld.com/lefty.html for my take on this topic).

Euro Shine

The symbol for the Euro (€ ) itself is based on the Greek letter epsilon. It looks like the letter E with two horizontal lines going through it. Each of the seven different bills is a different size, with each higher denomination bigger than the previous one. On the back of each bill is a picture of a bridge from different time periods, symbolic of the communication of the different countries as well as Europe with the rest of the world. The denominations are 5, 10, 20, 50, 100, 200 and 500.

The coins are the same for all countries as well, except the 1 Euro coin. The backs of these coins will be unique to each country that mints it (think of the American quarter with the different states represented on the back). The coins are 1-, 2-, 5-, 10-, 20- and 50-cent pieces, and 1 and 2 Euro coins.

There are 100 “cents” in a Euro. Technically, each country can call the cent what ever they would like, as in 1 “euro-pfennig” in Germany. Here in Germany, however, they are referring to the cent simply as “cent.”

How Much Is That Doggie In The Window?

So far this may not sound like a big deal, but how often do nations change their national currency? I believe a lot of people in Europe had a quite a bit of angst regarding this change. Shopping becomes an interesting ordeal. What cost DM300 yesterday now costs € 153 today. Or does it? Are shops marking up their prices with this change? That’s what some people are unsure of.

Francs and Cents and More

For me as an American, I welcome the change because the Euro is much closer to the dollar than the Deutschemark or French franc, for instance. Comparing prices are closer to one-to-one for me. I also like the fact that I only have to carry one kind of currency when traveling around most of Europe.

What saddens me, however, is the loss of part of the European culture. We will no longer be able to say you spent so many Franc on the Champs Elyseé at a café in Paris, or so many Drachmas for a vase at a market in Athens, or millions of Lira for a hat in Milan. These are now a footnote in European history.

Addendum

Those Wacky Brits

So why doesn’t Britain want the Euro? That’s at tough question that I’m not really qualified to analyze, which is precisely why I’m going to do it anyway. Most of my information comes from Roy Davies’ site from the University of Exeter. Most of that information, in turn, comes from his father Glyn Davies’ book A History of Money - From Ancient Times to the Present Day. Some additional information come from British publication The Observer (see links below).

Memories Are Made Of These

One interesting fact I discovered is that the British pound is one of the oldest currencies in the world, if not the oldest. It is certainly the oldest in Europe. It was first established in 928 with the Statute of Greatley. There was a brief pause due to some incursions by the Danes, but the pound was re-established in 1066. It’s been essentially the same pound since then. There has been no new “pound” for some 900 years.

In Germany, for instance, the first time a German “Mark” appeared was in 1871, during the unification of Germany. It was later followed by the Rentenmark, the Reichsmark, and then after WWII by the Deutschemark and Ostmark.

Rule Britannia

I am not truly adequate enough to list all of the pros and cons of Britain using euro. I have, however, tried to list some of the major issues stated in this debate. As with all debates, there are two sides of the issue. Apparently, there is no compelling side, or else it would have been decided already.

There are two aspects of the issue: economic and political, but sometimes they cannot be easily separated. I’ll touch on the former first.

Economic

The basis for using the euro lies first and foremost an economic one. Britain is currently the fourth largest economy in the world, with mainland Europe representing half of its trade. Possible advantages mentioned with respect to joining the euro include increased trade with the rest of Europe. Using the same currency will have the long-term effect of stable, lower prices throughout Europe. By not joining the euro, foreign (European) investors to Britain will likely stay away. Also, by joining the euro, Britain will be part of the central committee making decisions on things like the interest rates.

On the other hand, most of the advantages stated above have already been address by the formation of the European Union. Additionally, individual countries will not be able to control their interest rates independently. The interest rate will be controlled by the European central bank, with Britain only one of the many representatives controlling its policy.

Britain’s economic cycle typically runs counter to that of the rest of Europe. Making centralized economic decisions for Europe may not benefit Britain.

Politics / Culture

This is probably the bigger issue facing Britain with respect to the euro, as it is ultimately the people that will decide the issue. There is talk of putting the euro to a referendum in Britain. Current polls have Britons running two to one against the euro. In Denmark, the euro was put to a referendum for economic reasons, but narrowly lost due to political and cultural reasons. Joining the euro is not a sure thing in Britain.

Losing sovereignty is one of the biggest stumbling blocks against the euro. Whether this is perceived or real remains to be seen, but it is certainly in the minds of people. The ability for the British government to make decisions for Britons could be hindered if Britain is to stay within the guidelines of the euro. Interest rates would be fixed centrally, based on nations other than Britain. There could be increased pressure on how Britain taxes and spends its money. Britain would have to conform with the Stability Pact, which outlines many of these financial issues. Many people believe that by joining the euro, Britain will have little say in guiding its future.

What To Do?

As with all debates regarding global economics and national sovereignty, the choices aren’t always as easy as one would think. I would resolve this the same way as I resolve major, life-changing decisions: flip a coin. One would just have to decide if the coin will be a British penny or euro cent.

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February 2002