-Caveat Lector- >From Int'l Herald Tribune Paris, Thursday, December 31, 1998 E-Day for Europe: Euro Debuts in 11 Nations Finance Ministers Will Set Rates ------------------------------------------------------------------------ By Barry James International Herald Tribune ------------------------------------------------------------------------ BRUSSELS - In the biggest transfer of sovereignty since the creation of the Common Market in 1957, finance ministers will hand the reins of monetary power to the European Central Bank on Thursday and usher in a new currency, the euro, for some 290 million people in 11 nations. The ministers, meeting at the European Council headquarters in Brussels and acting on advice from central banks and the European Commission, will adopt the final and irrevocable rate at which the participating national currencies will convert to the euro. The ministers' meeting will be televised throughout the European Union, and the rates will be made available on the Internet (http://europa.eu.int) at about 1:30 P.M. Central European time as 3,000 blue balloons are launched into the sky. Following publication in the European Union's Official Journal in Luxembourg, the rates will go into effect and the euro will become the single currency for all participating countries at midnight local time on Friday - meaning that it will first become reality in Finland, which is an hour ahead of most of its EU partners. Around the world, from Tokyo to London, traders and back-office staff in financial institutions will be at work over the holiday weekend to prepare for trading in the powerful new currency - an instant rival to the dollar - when business starts on Monday. When they awake Friday morning, most Europeans will not notice much difference. They will still have francs, marks, lire, pesetas and other familiar currencies in their pockets and purses. But those expressions of national sovereignty will effectively have ceased to exist as independent entities. Until euro bank notes and coins are introduced in the first half of 2002, the existing currencies will continue to circulate, but only as units of the euro. The euro will be immediately available, however, for noncash transactions - such as check and credit card payments. Also, beginning Monday when the markets reopen, European stock and bond trades will be denominated entirely in euros, as will all government borrowing and other financial transactions. Until the actual currency begins to circulate, however, no one will be obliged to accept or make payments denominated in euro. But many of Europe's largest companies have announced that they will start using the currency immediately, simplifying their accounting procedures and eliminating transaction costs within the single currency zone. For the first time, Europeans will have the means of directly comparing prices and costs across the Continent, which could lead to increased cross-border trade in goods and, above all, in financial services. In return for stability and low inflation, countries will surrender monetary policy to the Frankfurt-based central bank, which will establish the exchange rate for the euro against the dollar and other external currencies. Leading European stock markets ended the last trading day of the year Wednesday on a nostalgic note, as Frankfurt completed its last Deutsche mark-denominated session and the Paris Bourse saw out the last hours of the French franc. (Page 11) European currencies have remained rock steady in the face of crises in Asia, Russia and Latin America, and the European Commission predicts that the euro zone will continue to be a ''pole of stability'' in the world, even though growth in the region is expected to slow next year to around 2.4 percent. The countries entering the currency zone are France, Germany, Italy, Spain, Austria, the Netherlands, Belgium, Luxembourg, Portugal, Finland and Ireland. The finance ministers will also decide the terms under which Europe's postage-stamp nations - Vatican City, San Marino and Monaco - can participate in the euro. Three members of the European Union, Britain, Denmark and Sweden, are staying out of the monetary union by choice and a fourth, Greece, was unable to join because it was not able to meet the standards for entering and staying in. But Greece is joining the European exchange-rate mechanism, pegging the drachma to the euro, and hopes to adopt the currency by the time the notes and coins are introduced. The introduction of the single currency fulfills the dreams of united Europe's founding fathers, such as Jean Monnet, who envisaged federation. This is just what scares the independent-minded British and many in the EU who are apprehensive that such a dramatic transfer of sovereignty will whittle down the power of the state. To deal with problems, such as persistent high employment, governments will no longer be able to juggle exchange rates to make their countries' goods and services more attractive. They will have to become more efficient and, many experts say, they will be forced into cooperating in areas such as taxation and social policy. Already they are considering highly controversial proposals to tax interest on savings accounts held by nonresidents, and to eliminate corporate tax loopholes. The introduction of the euro is officially the final phase of economic and monetary union, or EMU, which was called for by the Maastricht treaty on European Union. In effect, EMU is so far only a monetary union. Economic union is likely to follow as governments establish a policy framework. The existing national central banks, such as the powerful German Bundesbank, will continue to exist, in effect as branches of the European Central Bank, which recently established a base interest rate of 3 percent for the entire zone. The national banks will transfer 50 billion euro ($58.38 billion) in reserves to the central bank. Their chiefs will travel to Frankfurt twice a month to debate and decide policies. But the central bank's president, Wim Duisenberg, Europe's counterpart to the chairman of the U.S. Federal Reserve Board, Alan Greenspan, will bear ultimate responsibility for those decisions. ~~~~~~~~~~~~ A<>E<>R The only real voyage of discovery consists not in seeking new landscapes but in having new eyes. -Marcel Proust + + + + + + + + + + + + + + + + + + + + + + + + + + + + In accordance with Title 17 U.S.C. section 107, this material is distributed without charge or profit to those who have expressed a prior interest in receiving this type of information for non-profit research and educational purposes only. DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance—not soapboxing! 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