Stars in our pockets
A decade after its birth, the single currency has gone from strength to strength, outdoing the dollar and now snapping at sterling's heels. But will the feisty euro keep us safe from economic harm in the future? asks FIONA McCANN
HAPPY BIRTHDAY to you, happy birthday to you, happy birthday dear euro . . .
Who can believe it's been 10 years since the birth of our beloved, border-crossing, continent-uniting, yellow-starred and brass-ringed single currency. A full decade since it started life as an accounting currency on January 1st, 1999, even though we weren't allowed to see and touch it until three years later. It's been 10 years of highs and lows, at least in terms of its exchange rate, a staggering 10 years since we first grappled with the concept of ridding our wallets of the faces of James Joyce, Daniel O'Connell and that nun on the fiver, and swapping them for pictures of aqueducts and architectural features, with maps of Europe on the back.
It was a long and painful labour, you'll recall. After years of negotiations and deliberations, the conditions were finally readied for the euro's introduction in the Maastricht Treaty in 1992, but the protracted process of deciding who got in on the parenting was still to come. Member states had to up their game to get involved, and show they could keep inflation at bay, their debt-to-GDP ratio in line, their national currency relatively stable and that they could boast a good long-term interest rate record. Such rigorous testing finally produced 11 proud adoptive parents, who agreed to chuck out their francs, deutschmarks, punts and pesos, and bring in a shiny shared currency.
And so it came to pass: on January 1st, 1999, the euro was given life as the official currency in the participating countries - known thereafter as the Eurozone - with foreign exchange operations carried out in euro, public debt issued in euro and stocks and bonds quoted in euro from that date.
A bit like Tom Cruise and Katie Holmes's offspring, however, we didn't get to see the new arrival straight away, perhaps because we were too busy struggling with the concept. The naming ceremony proved complicated enough. We all just about managed to get our various tongues around the notion of one euro, but when it came to the plural, a veritable chassis ensued.
It turned out the simple addition of an "s" wasn't going to cut it, so Command Central in Brussels decided to employ the well known "sheep" model, whereby the plural and singular stay the same. That's what went down on the legal documents, anyway, and, true to form, we Irish fell in line when our Department of Finance followed.
To complicate matters even further, the Directorate-General for Translation at the European Commission decided to recommend that the added "s" should be used, giving us euros and cents again. Next thing the Italians decided to throw a spanner in the works and introduce their plural variation of euri. The mind boggled, the Eurozoners reeled, until finally Dublin's street traders sorted it all out once and for all by issuing the definitive "Wrappin' paper two euro", and the "s" and the "i" were forever consigned to history, at least in Ireland.
In the meantime, despite the controversial naming ceremony, the little mite was already being minted; by January 1st, 2002, seven years ago on Thursday, we had our first euro in our hands. By this time, Greece had joined the growing Eurozone and, in a logistical feat that defied all expectations, 12 different national currencies were removed from circulation and replaced with the new notes and coins as punters set about spending the new as quickly as the old. Within a matter of hours, the euro became the cash currency for some 304 million citizens, and the currency's grand old Godfather, then European Central Bank President Wim Duisenberg, was laughing all the way to the bank.
The Irish were well on board at that stage, having already revealed themselves in a Eurobarometer poll as the nation most in favour of the single currency, though our delight tapered off somehow when it became clear that the costs of goods and services in the new currency far outstripped those in the old. A report by Forfás, the trade and enterprise think tank, just six months after the new currency was in our pockets, identified "unusual increases" as it emerged that the new currency was being used by canny retailers as an opportunity to hike up prices and take advantage of mathematically challenged consumers.
These weren't the only teething problems. In the first few months, the euro's survival was touch and go as it steadily lost ground to the dollar and nobody seemed willing to bet on its longevity. Yet, as the euro found its feet, and the dollar lost its own, the euro began to muscle up and take its place in the currency game, finally outstripping the dollar in July 2002 and maintaining its supremacy as cheers resounded across Europe (except in Sweden, which voted against adopting the euro in the same year).
It seemed that the euro could do no wrong, with murmurings even from the British, who had resolutely opted out of the single currency, that a euro referendum could be on the way there too. After intimations from the harbingers of doom that Ireland's decision to join the euro without the UK on board would spell doom for our economy, this was excellent news. Tony Blair appeared all for it, and the euro just kept gaining ground, taking on all-comers like a cheeky youngster that made the dollar suddenly seem old hat.
Sure, there were naysayers who told us its strengthening value was not necessarily a positive, but this caused little concern on this island, where punters began enjoying the benefits of such strength by jetting off hither and thither to spend it anywhere but home.
All this was taking place amid constant hand-wringing about whether it could become a reserve currency, whether the new kid on the currency block was getting too big for its boots, and whether the fluctuating exchange rates were good or bad for the Eurozoners. Yet still it persevered, and still the Irish came in droves to deposit their punts at the Central Bank, with over €4 billion worth of the defunct Irish pound having been returned since the new currency was introduced. This year alone, €2.4 million worth of old Irish bank notes came in, with another half million in coins counted up by the fancy coin-counting machine at the Central Bank.
It's no surprise, really, that the Irish were ready to chuck in the punt. Apart from the fact that it was constantly changing identity anyway (remember the Saorstát pound anyone? Decimalisation that put paid to the shillings?), wherever else we ventured - and we were always venturing - we had to contend with foreign coinage clogging up the wallet. With the introduction of the euro, the days of getting a pocketful of useless currency as change for a cup of coffee in Schipol or Charles de Gaulle were a thing of the past, as were the mentally taxing calculations which had been required from the constant currency converting abroad.
As Ulster Bank chief economist Pat McArdle points out, the euro was considered, at least by the Irish public, as a winner from day one. "It has brought enormous benefits in terms of travel and business in the Eurozone. You can now trade and travel in your own domestic currency, and nobody has measured the benefits of this but it is significant," he says.
Despite all this, the Brits, Swedes and Danes stayed out, but Cyprus, Malta, Slovenia and - this week - Slovakia came on board and brought the Eurozone membership to 16 countries. It seems like the baby of European Monetary Union has grown into a thriving, popular ten-year-old.
So why are the naysayers still out in force? Just last month, the Wall Street Journal was predicting all sorts of terrible travails for the euro, with suggestions that the economic slowdown in the Eurozone might mean some of its most indebted members would have to chuck in the euro altogether.
Yet, as McArdle explains, euro membership was a considerable blessing for Ireland when the global economy went wobbly. "Were we not in the euro, we would probably be in a similar situation to Iceland," he says. "The currency would have depreciated rapidly and interest rates would have had to have been raised, so we'd be in a pretty awful situation."
It hasn't all been positive, however. "The minuses are that, relative to the Irish economy, interest rates were kept too low for too long, so the housing market was stoked, and the excesses that resulted were greater than they otherwise would have been," says McArdle.
It seems the euro pushed us to the edge, and then cushioned our fall when we tottered over. Now it's approaching sterling parity, which according to economists is bad news for the Eurozone given the effect it will have on the competitiveness of its members.
Punters have heard it all before, though. Talk of currency fluctuations, inflation and interest rates are all very well and good, but if a euro gets you a bargain New York shopping spree or a weekend in London on the lager, there's still something to be said for the young currency. The change is in your pocket, remember? Except it's change you can now use in 16 different countries across Europe, and even as far afield as Cuba's beach resort of Varadero, which in 2002 became the first place outside Europe to operate in euro thanks to Castro's delight in dumping the dollar.
Its future may be in the hands of economists and financiers, which means it's anyone's guess, but the euro has come a long way in 10 years and, given the gloom that is pervading these days, any cause for celebration should be welcomed. For the euro's a jolly good currency, and so say all of us (except the UK, Denmark, Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, and Sweden).
What is it?A single European currency now official in 16 countries.
Why is it in the news?It celebrated 10 years in existence on January 1st.
Most appealing characteristic:Its versatility - works in 16 countries, after all.
Least appealing characteristic:All the punditry that accompanies it everywhere it goes. Yaaaaaaaaawn.
Most likely to say:"I'm in the zone, man."
Least likely to say:"Spare a dime, anyone?"