A new year and a new currency for much of continental Europe, but will the euro cement the European Union or create a new source of tension between the member countries?
In Britain the advent of the euro is inevitably seen through the prism of British self-interest. Both the "ins" and the "outs" argue their case on the grounds of whether it would be in our political and economic interest to join the currency and abandon sterling.
But ultimately the "will it be good for Europe?" question is much more important than "might it be good for Britain?", for the answer will determine the future of the EU.
Like most really important questions in global economics, no one can know until long after the event.
We know that Europe is starting a grand experiment but we cannot know whether that experiment will succeed or fail. The euro could become a significant step forward into turning the Continent into a more efficient economic region, able to give its people both a better standard of living and a more secure political environment. Or it could, like so many other currency unions of the past, break up in disarray.
Either way, we cannot possibly know the outcome in 2002. What we can expect to see will be some early signs of both the benefits and the tensions that the euro will bring.
Some of the benefits will be quickly evident; most of the tensions will take longer to emerge. There will inevitably be a spate of "euro chaos" stories in the next few days. Ignore them. The chaos will be real enough but it will not matter, for after a few weeks the mechanics will be fixed and people will settle down.
Think of going on holiday in America: for the first few days it is odd to have to think in dollars but after a while it becomes quite normal to do so.
Indeed for Britons visiting the Continent the euro will be great: like a dollar, only worth (at present rates) about 10 per cent less. Suddenly you will know that the taxi in from Athens airport really is amazingly cheap and, no, you haven't got the decimal point in the wrong place.
What for us will be an occasional convenience will, for European business and consum- ers, be a revolution. Prices will remain very different in different countries, just as they vary enormously in different parts of Britain. But suddenly such gaps will become immediate and obvious.
The low-price areas of Europe will suddenly find that their price advantage brings economic advantage: shoppers and visiting business people will flock to their door.
The high-price areas, for their part, will have to find ways of justifying their prices, or cutting them.
Expect, too, some sense of unity to develop. The aim of the project was only partly economic, though it was sold as a way to help Europe achieve the same sort of economies of scale that the United States enjoys. It was also political: to foster unity between nations that had so frequently been at each other's throats. By the summer it should be evident whether this is succeeding.
Will, for example, the Germans feel more relaxed about their neighbours? Or will they resent "their" money being taken away and given to "someone else", even if the European Central Bank is, like the Bundesbank, in Frankfurt? If the latter is the case, then the euro will indeed be in long-term trouble. Much will depend on the relative success of the European economy in the months ahead. This year will be a tough test for all.
Recovery in the US is far from evident but most people expect it to be first out of recession. The UK looks like being the best-performing of the large developed nations and may well avoid recession altogether. And while parts of the eurozone are still growing at the moment, the region as a whole is probably in recession right now.
As things have turned out, it is an unfortunate time to be launching a new currency. The planners could never have known that the launch would coincide with the first synchronised global recession for 30 years.
Remember that the single currency is not just a single currency but also a single interest rate. For some countries that interest rate will inevitably be too high or too low. The benefits of the larger market have to be set against some parts of that market having the wrong interest rate.
If during the next few months, Europe stages a reasonable economic recovery, then the future tensions will seem more manageable.
If, on the other hand, the existence of the euro seems to be impeding recovery and the US and UK economies continue to outperform the Continent, then the auspices will be grave indeed. The euro will surely survive this recession but what about the next one – or the one after that?
A rival to the dollar, or a failed experiment? The tussle starts today.Reuse content