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WORLD> Europe
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Euro currency turns 10; seen fulfilling promise
(Agencies)
Updated: 2008-12-29 09:32 But since then, the euro has soared in strength and value, rising to as high as US$1.6038 against the dollar this year. It's down to around $1.40, but has risen strongly against the British pound.
Randall Filer, a visiting professor of economics at Charles University in Prague and Hunter College in New York, said the requirement to cut government debt before joining gave political leaders the backbone to make economic reforms but place the blame on EU requirements. "It has enabled governments to embark on the labor market and fiscal reforms that were absolutely necessary," said Filer. The euro became "a convenient scapegoat" that enabled reforms that were needed but Europe "did not have the political will to do." The euro spread the ECB's tough anti-inflationary stance to countries that didn't previously have it, said economist Franco Bruni at Italy's Bocconi University. "It gave us a monetary policy that we wouldn't have been capable of doing," Bruni said, adding that when Italy had the lira, the country had a greater tendency toward inflation and interests rates were higher. "We entered in the euro area, we had integrated finances with other foreign countries, which made it easier to invest abroad," he said. "Italian banks can operate on a wider scale, and we could buy shares abroad more easily." Some 15 million new jobs in the last six years have been created by making trade and travel easier through a single market. That has also invited more foreign investment, too. With the inclusion of Slovakia, the euro will be used by about 330 million people with a gross domestic product of more than euro4 trillion ($5.5 trillion). Euro countries now enjoy a bigger and more efficient bond market with less risk of currency devaluations and inflation. Newer EU members such as Poland, the Czech Republic and the Baltic countries Latvia, Lithuania and Estonia are in the process of meeting the conditions of joining the euro zone, but the crisis has put their hopes off for now. Pro-euro sentiment has risen in euro holdout Sweden, whose weaker krona has helped supporters in their arguments, said economist Lars Calmfors. He also said EU-leaders' swift response in agreeing to pour billions of new capital and loan guarantees in their financial systems boosted confidence in the euro. "It demonstrates that if you stay outside, you are not present at the table when the decisions are taken," he said.
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