Focus: An A-Z of the euro

If you think 1 January 1999 means just another hangover, you haven't been paying attention to an event that will change for ever the way money is spent all over Europe. Our guide will help the penny drop

A is for Arsenal Football Club. As befits a team now about as English as coq au vin, the Premier League champions are the first British club to open an account in euros.

B is for Bundesbank. The powerhouse of Europe's economy, like the other national central banks joining the euro, will lose the power to set interest rates in January. It will, however, retain some influence by virtue of its place in the European Central Bank (see below). Its current president, Hans Tietmeyer, is due to retire next year, and the appointment of his successor is an issue of hot debate in Germany.

C is for convergence criteria. These are the tough conditions demanding low public spending, borrowing and interest rates, which had to be met to qualify for entry. The four main ones are: the public deficit should not exceed 3 per cent of gross domestic product (GDP); public debt should not exceed 60 per cent of GDP unless it is falling at a satisfactory rate; inflation should not be more than 1.5 percentage points above that in the three member states with the best record; and long-term interest rates should not be more than 2 per cent higher than the three best-performing countries.

D is for Delors, Jacques. As President of the European Commission from 1985 to 1995 he was the real architect of the euro (and bete noire of the Eurosceptics). A former finance minister in France, he drove through a common-currency project dreamt up by Europe's founding fathers, his report of 1989 leading to the treaty in which the project was agreed. D is also for Duisenberg, Wim: chain-smoking, white-haired 62-year-old who will have the most powerful economic job in Europe as president of the European Central Bank. A reward for serving 15 years as governor of the Dutch central bank during which his country's economy underwent a revival. Although appointed for eight years, he is, under a Euro-fudge, expected to give way to the French central bank governor, Jean-Claude Trichet, after four.

E is for ERM-2. In September 1992 sterling was forced out of the Exchange Rate Mechanism of the European Monetary System which was designed to peg currencies within bands. ERM-2 is the system which, from January, is supposed to link the countries not joining the single currency. Britain is refusing take part in ERM-2 because to do so would be politically explosive. This could be a technical complication if and when Tony Blair decides he wants to join the euro, because the Maastricht Treaty lists membership of ERM for two years as one of the criteria for entering the currency. E is also for European Central Bank. Managed by a Governing Council composed of central bank governors and an executive board, it is responsible for the issue of euro banknotes and authorises member states to mint coins. The ECB, based in Frankfurt, will set interest rates in all 11 participating countries.

F is for florin: Kenneth Clarke's idea for what the single currency should be called. Went down as well with the rest of the EU as most British thinking.

G is for Germans. Margaret Thatcher always saw European economic and monetary union (EMU) as a German plot to dominate economically where they had failed militarily. In fact, although the political elite backed the euro, many Germans see it as a sacrifice. They tend to be reluctant to give up the prized Deutschmark and the strong Bundesbank which has delivered steady growth and low inflation.

H is for harmonisation. The word sends shivers down the spines of New Labour spin-doctors, particularly suggestions that tax rates will have to be standardised. Already there are moves to harmonise corporation tax, as EMU will make capital movements easier. No one has yet dared to suggest income-tax harmonisation, but watch this space.

I is for interest rates. When the euro is launched, interest rates will be the same in all 11 countries taking part. The ECB is expected to set rates at about the current level in Germany, 3.3 per cent, which is about half the British rate.

J is for January 1, 1999. D-Day for the euro. Eleven countries will surrender control of interest rates and lock their exchange rates irrevocably.

K is for Kohl, Helmut. Another great driving force behind the euro, in partnership with former President Mitterrand of France. At the Maastricht summit Mr Kohl insisted on a timetable for EMU which proved crucial to the success of the project. A big figure in every sense, but he lost the elections in September to Gerhard Schroder.

L is for Lafontaine, Oskar. The new German finance minister, well to the left of his predecessor, Theo Waigel. Mr Lafontaine has caused a sensation in Germany by calling for interest rates to be cut to help job creation. This is interpreted as an attack on both the mighty Bundesbank and its successor, the ECB.

M is for Maastricht. The town where John Major claimed to have won "game, set and match" in negotiations for the 1992 treaty which led to the rupture in the Tory party. The agreement defined the three stages leading to the euro.

N is for Nerds. The IT impact of the euro pales beside the Millennium bug, but it has presented computer nerds such as Bill Gates with an excuse to convince us that we are facing a software revolution. They are already alarming companies and government departments by warning that their systems may not be able to operate in a world with two currencies quoted at all times.

O is for Outs - those countries not joining the single currency in January. They are the UK, Denmark, Sweden and Greece.

P is for Pact for Stability and Growth, an agreement under which countries inside the euro can be fined if their public deficits exceed 3 per cent of GDP. In recent weeks, political leaders, including the new Italian premier, Massimo D'Alema, have suggested that it should not be interpreted too tightly. This is code for saying that countries should be allowed to invest in big infrastructure projects without facing sanctions if they overshoot the target figure.

Q is for queasy - the word used by Mr Kohl to describe how he felt when confronted with a prototype five-sided coin modelled on the 50p piece. Plans went no further.

R is for retailers. Will be in the front line when cash goes into circulation. In for a huge headache during the change when experts have warned of mass confusion.

S is for sterling. Will stay outside the euro when it launches in January. The Government now says it supports the idea of joining in principle but only when the economic circumstances are right. Tony Blair has also promised a referendum.

T is for transparency: Euro jargon for the fact that salaries and shop prices will be easy to compare across Europe once everything is paid in one currency. Companies that operate in adjacent countries are deciding whether to harmonise prices up or down. T is also for transition, the period to early 2002 during which consumers will be able to use national money alongside the euro.

U is for unelected central bankers. Euro MPs are angry at the lack of accountability of the ECB, to be made up of central bankers rather than politicians. Mr Duisenberg has not impressed critics with his offer to publish the minutes of meetings - 15 years after they take place.

V is for Vatican. Thorny discussions are under way on whether the Holy See is to be brought into the euro. The Vatican issues lire coins, and Italy is joining the euro.

W is for Waterloo and City Line. The City of London Corporation is paying for the line to stay open on 1 January so that traders can take advantage of the new dawn.

X is for X is for xenophobia, the condition that federalists believe will be eradicated by a common currency. After all, once we all use the same cash we can hardly go on fearing (and maiming and killing) one another, can we? Look at the US. On second thoughts, don't look.

Y is for Yelland, David. Editor of the Sun, one big obstacle to British membership of the euro. After its notorious "Up yours, Delors" headline, can it yet do the ultimate U-turn? Mr Yelland has hinted that if the currency is a success, the Sun may come round. He will need Rupert's permission first.

Z is for Zalm, Gerrit: the Netherlands' finance minister, known for taking a tough line reminiscent of the old German position, and resisting Italy's entry into the euro.

NO QUEEN'S HEAD FOR THE NOTES OF UNITY

WINDOWS, doors and bridges will feature on the 10 billion euro banknotes, evoking Europe's architectural heritage and symbolising openness and co-operation. But hopes of a space for the Queen's head if Britain joins have been dashed.

It had been thought that a small area on the notes would be reserved for monarchs and other national symbols. But, anxious to have a uniform symbol, the European Central Bank has decided to omit them. The coins will retain one national face.

The Queen aside, finding any common image for the notes that would not give offence was a headache. Even the architectural designs eventually chosen had to be revised when it was found that the artist had modelled them on existing famous bridges and windows. He was told to make them more anonymous to avoid vexing member states whose landmarks were not used. Meanwhile, anti-counterfeiting devices ran into trouble when the euro hologram, a crucial safety device in the notes, was stolen at Frankfurt airport.

Reaching agreement on the size, shape, design, composition and edging for the 55 billion coins was also a tortuous procedure. Vending-machine operators and blind people have dominated the debate about shape. They attacked early five-sided models as both too confusing and the wrong shape to fit into millions of cigarette or sweet machines. All the coins will be round, except the 20 cent one, which has grooves cut into the side.

Then there was a row over the nickel content, provoked by the Swedish government, which alarmingly predicted that the new coins would cause 80 million people across Europe to come out in a nasty rash. In the end it was agreed that the coins will be nickel-free. Luc Luycx, of the Belgian Royal Mint, won a coin design competition. Three coins show Europe on the globe, while the higher-value ones show the EU as a collection of nations on a background of lines and stars. It will take until 1 January 2002 (four years since minting began) to complete the production of coins.