Europe’s Hello-Goodbye

The new year is a moment for fresh beginnings and poignant farewells. As the new currency called the euro is fully introduced Tuesday, Europe will experience both. Twelve currencies are being traded in, and more may follow. Say goodbye to the franc, the deutsche mark and other European currencies that have been around for centuries.

Like most progress, the shift to the euro has taken place with a good deal of grumbling. The euro has lost 30% of its value against the dollar since it was introduced as a parallel currency in 1999, primarily because of the weakness of the European economies. That has given pause to Germany, which during the hyperinflation of the 1920s saw its population carting wheelbarrows full of marks to buy a loaf of bread. The French fear that the euro will be run along Germany’s strict anti-inflation lines, which means that lowering unemployment won’t be a primary consideration. The British are still sitting on the fence about adopting the euro, reluctant to give up the pound but fearful that they will be left behind. In a kind of muddled half-solution, it appears most shops in England will unofficially accept the euro.

The euro signifies a loss of one chunk of national sovereignty. Brussels, headquarters of the European Union, will be in charge of currency-related policies. The Italians and French will no longer be able to run big deficits because of the strict requirements of the European Central Bank, which is intent on strengthening the euro. Eventually that will happen, and the effect will be to make U.S. goods more competitive in Europe.

The euro is also likely to compete effectively with the dollar for foreign investment. But for now, American tourists can relish the weak euro. The stronger dollar has made European vacations cheaper, as well as eliminating the need to learn all those confusing currencies. In the end, it matters to tourism today less than it would have five years ago. Travelers now use their credit and ATM cards everywhere, with the bonus of a better exchange rate.

The biggest effect of the euro is that it will cut trading costs between countries inside Europe. Imagine if businesses in the United States had to pay a conversion fee for each state’s currency. With the new currency in full use, the path is cleared for an economically unified Europe. The change will ultimately affect everything from NATO to farming, but that is an adventure yet to come.