Out With The Old, In With The Euro
The euro started its life three years ago, when the 12 member states locked their currencies irrevocably together and the new currency came into use for paper transactions. It is already having a significant impact on our economic fortunes. However for most of us the new currency will only become a reality tomorrow, when we will get our first chance to use the notes and coins. While pounds can still be used until February 9th - and will remain a mental point of reference for some time thereafter - it is likely that by the middle of January the vast bulk of our day-to-day transactions will be conducted in euro.
Tomorrow is thus an important landmark - and the end of a process which has been championed by many of Europe's leaders over the past 30 years. The introduction of the euro - and the abandonment of national notes and coins - is a powerful symbol of closer EU integration; the new currency is already used by business and the financial markets, but now some 300 million people will be using it every day.
The introduction of the euro notes and coins will have important consequences. People travelling from one euro zone state to another will no longer need to change their money - indeed early indications are that the euro will also be accepted in many shops in non euro zone areas , such as the North and in Britain. Consumers will be easily able to compare prices in different euro zone states, leading to additional competition. There are concerns that some will seek to take advantage of the changeover. The Office of the Director of Consumer Affairs has an important role in policing the changeover from the consumer viewpoint. The best response to those who do try to take advantage of consumers is clear - people should take their business elsewhere.
The longer-term implications of the move to the euro are far-reaching. The initial goal of monetary union was monetary stability, where a strong currency would foster low interest rates. The performance of the euro on the financial markets, however, has been mixed and the European Central Bank (ECB) has struggled to build its credibility. It is now evident that the benefits of the euro can only be built in the long term - and that their emergence cannot be taken for granted. Success will depend not only on the ECB, but also on the economic management and performance of the member states.
The move to the single currency also raises more fundamental issues. Already the challenges of setting interest rate policy are evident - both the ECB and the member states will have much to learn in the years ahead about economic management in a single currency area. Inevitably other issues - such as tax harmonisation - will also come onto the agenda. The advent of the euro is clearly a landmark in the development of the EU. It will throw other issues relating to the future of Europe into sharp focus, pointing to the need for the Government here to take a clear and coherent policy approach.. For now, however, it is time to get ourselves accustomed to the new notes and coins, as the euro zone states take a most significant step.