Euro misses 10th birthday bash

Euro misses 10th birthday bash

2nd May 2008, Comments 0 comments

Despite great success since introducing the euro, the EU will not celebrate its 10th anniversary because it is still a work in progress.

No speeches will be made, no champagne will flow. The European Union (EU) is not planning a celebration to mark the euro's 10th anniversary this spring, although it has every reason to be proud of the common currency's success.

Exactly a decade after the historic decision to introduce euros and cents in 11 of the EU's then 15 member states, the Brussels-based union apparently does not want to underscore its internal divisions.

If there were a celebration, which countries would take part? Only the 15 now using the euro? Or all 27 members?

On June 1, however, there will be a ceremony in Frankfurt marking the 10th anniversary of the establishment of the European Central Bank (ECB), which is headquartered in the German city.

And in January 2009, all eurozone countries will issue a commemorative two Euro coin with a common design.

By then, Slovakia will probably be welcomed as the zone's 16th country.

The coin's deliberately primitive design, a stick figure of a person, one of whose arms forms part of the euro sign, came, ironically, from Greece, which cheated its way into the eurozone in 2001 by fudging its budget-deficit-to-GDP ratio.


Tough start 


On the night of May 2, 1998, then German chancellor Helmut Kohl, French president Jacques Chirac, British prime minister Tony Blair and other EU leaders decided to launch the European Monetary Union on January 1, 1999.

Following 12 hours of haggling at their summit meeting in Brussels, the leaders finally agreed on Wim Duisenberg of the Netherlands as the ECB's first president.

France insisted, however, that Duisenberg not serve out the full eight-year term.

Jean-Claude Trichet, a Frenchman, was already crouched in the starting blocks.

Five years later, the self-assured Trichet succeeded the lanky, white-haired Dutchman.

Trichet has styled himself immodestly as "Mr Euro" ever since. "You'll find my signature on euro notes" is his motto.

The ECB was born of a typical EU compromise, which some people saw as a sign of weakness.

But predictions that the euro would be a failure were wrong: it has become the world's second most important currency after the US dollar.


Problems in Germany


A lot of Germans, not to mention other Europeans, continue to take a dim view of the common currency, though, dubbing it the "teuro" after the German word "teuer" (expensive).

But it allows them to travel across Europe without having to change money, and it has long shielded them from the unpleasant consequences of rising oil prices.

Now, however, the 318 million people living in the eurozone are feeling the pinch of an inflation rate well over 3 percent.

What is more, the soaring value of the euro, which has risen above 1.60 dollars, is causing concern among European exporters.

One reason EU officials in Brussels are eschewing public cheers at birthday time may be the fact that the euro remains a work in progress.

Although the ECB has established itself as an independent institution, politicians in EU member states continually try to harness it to boost economic growth.

The most recent case involved newly re-elected Italian prime minister Silvio Berlusconi, who during his election campaign urged that the bank's field of activity be expanded "beyond the task of controlling inflation."

France also regularly calls on the ECB to lower interest rates, which irritates Germany.

The main problem is the way the eurozone is governed.

While monetary policy - such as decisions on base rates - is concentrated in the hands of the ECB, economic and budgetary policy has remained largely the prerogative of the EU's member states.

This causes constant conflict.


Internal struggles 


For years, wrangling over the excessive budget deficits run up by Germany and France (under the EU's 1997 Stability and Growth Pact, member countries' budget deficits may not exceed 3 percent of GDP) preoccupied eurozone finance ministers.

They meet once a month and are known as the Eurogroup.

The Eurogroup's decisions are non-binding, however.

"This is soft leadership," conceded Eurogroup President Jean- Claude Juncker, who is Luxembourg's finance and prime minister as well as the EU's longest-serving head of government.

"I'm not satisfied with the coordination of economic policies," he said.

Nor is EU Economic and Monetary Affairs Commissioner Joaquin Almunia. He is calling for tighter supervision not only of member states' budgets, but also of their economic competitiveness and financial stability.

In December in Lisbon, EU leaders signed a reform-laden treaty, not yet ratified by all member states, explicitly stating that the euro is the goal of the entire EU.

That, Juncker said, was an achievement in itself.


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