The Euro: Implications for the European Economy and the U.S.
A breakfast meeting with Pedro Solbes, European Commissioner for Economic and Monetary Affairs sponsored by the West European Studies Program, the Project on America and the Global Economy, and EUROPE magazine
Referring to the successful launch of the Euro curre ncy on January 1, 2002, Commissioner Pedro Solbes spoke of the physical, economic, and psychological effects of the transition to the common currency in the 12 EU member nations that currently compose the "Euro zone." The euro already existed as a unit of account, but Solbes saw the move to a physical euro as having a daily impact on the thinking as well as the economic behavior of Europeans in the "Euro zone." He saw the euro as facilitating trade, empowering consumers, and attracting investment within the "Euro zone."
Preparations for the integration of the Euro into public circulation have been underway for some time -- including the distribution of coins in the form of Euro kits in the months before its formal introduction as legal tender in January. After January 1, cash machines also played a huge part in distribution in the first days of the Euro. Solbes remarked that the effectiveness of cash changeover process serves to further strengthen the euro region's ability to coordinate economic policy and stabilize exchange rates and prices. That region wide capacity for coordination has helped the European Union respond to external shocks, such as the events of September 11th, and the world economic slowdown.
With the changeover from national currency to euro nearly complete, Solbes turned to the future role of the new currency. Solbes stressed that the euro was not created to compete with the dollar but it was widely expected to become the world's second most important currency, emerging as something considerably stronger than the twelve national currencies that preceded it. Solbes noted that the euro has already become a major factor in the international bond markets. It is also used as a key currency peg for third party countries in Eastern and Southeastern Europe, many African nations with a former tie to France, and African states that had used the Portuguese escudo.
In addressing the outlook of the European economy as a whole, Solbes acknowledged that the euro region was not able to escape the effects of a sour global economy. Lagging investment and a fall in net exports had resulted in stagnant growth. Solbes saw a brighter 2002. He saw the recent pick up in personal consumption, relatively low unemployment and inflation, and other key economic indicators signaling a "gain in momentum (for the Euro) in the year to come."
Finally, Solbes touched on some of the positive implications of the euro for Europeans and for Americans. Solbes saw the euro simplifying travel and business throughout the European Union. By creating easily compared prices across Europe, the euro will serve consumers and help fight inflation. The same ease and transparency will also make it easier for American tourists traveling in Europe and for American businesses operating in Europe.