INDEPTH: THE EURO
Here comes the euro
Amy Olmstead & Gary Graves, CBC Business News Online | Dec. 2001 Updated Sept. 2003
On January 1, 2002, the face of shopping in Europe changed forever.
On that day, the hands of 301 million shoppers in 12 countries began spending the euro. It replaced the French franc, the Italian lira and 10 other currencies in a massive rollout of 15 billion notes of legal tender and more than 60 billion coins. The logistics were daunting, but the benefits to shoppers and businesses were billed as considerable.
The rollout of the euro was gradual. About three years before it found consumer pocketbooks, it was given a fixed value relative to the franc and other soon-to-be phased out currencies.
By all accounts, the early groundwork was successful. The euro ranks as the second most important currency in the world, after the U.S. dollar. January 1, 2002, proved it to be a hit with consumers, not just in Europe, but around the world. And Canadians, particularly those with family in Europe or with trans-Atlantic travel plans, found themselves players in the currency switch.
Changeover challenges
Some businesses were worried that things would not go smoothly. Procter & Gamble, for example, feared stores would be clogged with confused customers and long lines for days after the changeover. The consumer goods giant was encouraging people to make sure they had enough soap or diapers on hand to get them through early January.
Governments also foresaw challenges. The Dutch finance minister said his biggest worry was the weather. Ice or snowdrifts could have disrupted distribution of new currency.
Changeover created opportunities for fraud since the unfamiliar bills made easy targets for counterfeiters. Some euros were stolen even before their distribution, possibly enabling counterfeiters to get a head start on trying to copy the real thing.
Many thought the extensive money exchange could attract money launderers. There's a higher risk for fraud outside the Euro Zone, where there has been less consumer education about the new bills.
Euro benefits
Despite the effort of switching to the euro and the potential glitches, supporters say the move is worth it to improve economic growth. Having a mishmash of currencies over a population not much larger than the United States is inefficient, say the supporters. A common currency is designed to fix that.
The euro has brought economic and business benefits, said Alister Smith, deputy chief economist at CIBC. The currency cut costs for businesses and promoted trade. Cross-border transactions are easier and cheaper since there are no complicated and costly currency exchanges within the Euro Zone.
The euro has also encouraged foreign investment by removing currency costs and exchange rate uncertainty. For businesses, and for consumers, the euro makes it easier to compare the prices of goods and services. All that makes the economy more efficient and improves competition.
The road ahead
In the short term, changing over to the euro was costly for businesses and governments. There was also some hand-wringing because the euro spent most of three years declining in value against the U.S. dollar. While many people say the euro should be worth more, European economic weakness continues to weigh on the value of the euro.
Despite those concerns, 12 countries of the European Union have embraced the euro with mild grumbling. Supporters have expected the currency to expand beyond the original 12 countries since its inception. In addition to the economic pressures, many think the drive for European unity will outweigh most opposition.
^TOP
|
|
 |
 MENU |
|
|
| BACKGROUNDER: |
|
|
| CBC STORIES: |
|
|
| TIMELINE: |
April 1951: Paris Treaty signed
March 1957: Treaties of Rome signed
March 1979: European Monetary System created
Feb. 1986: Single European Act signed
Feb. 1992: The Maastricht Treaty signed
Jan. 1994: European Monetary Institute created
Dec. 1995: EU backs euro as name for single currency
June 1998 : European Central Bank established
Jan. 1999: Euro is launched
Jan. 2001: Greece adopts euro
Aug. 2001: European Central Bank releases final details of euro banknote
Sept. 2001: Euros made available to banks and some retailers
Dec. 2001: Euro 'starter packs' with coins distributed
Jan. 2002: Euro bills enter common circulation
March 2002: Old currencies no longer accepted as legal tender
Sept. 2003: Sweden rejects euro
|
|
| 3-D MODEL: |
|
|
| EXTERNAL LINKS: |
|
|
| MORE: |
|
|
|
CBC does not endorse and is not responsible for the content of external sites. Links will open in new window.
