Wednesday, January 13, 1999
11 European nations link currency through euro
MONEY: Single currency will lead to fiscal fizzle in strong
nations, some say
By Yiloc Lai
Daily Bruin Contributor
The political and economic unification of Europe moved one step
closer to becoming a reality on Jan. 1, as 11of the 15 members of
the European Union (EU) formally linked their currencies through
the euro.
Because the EU accounts for 20 percent of the world’s economic
trade and output, the euro – the union’s official currency – has
garnered international attention for its potential to replace the
American dollar as the forum through which international trade is
conducted.
Since euro bills and coins won’t be circulated until 2002,
however, it currently is only bought and sold in the stock and bond
markets electronically.
The lack of a physical euro currency is partially responsible
for the lukewarm reception it has received from many native
Europeans at UCLA.
"At this time, the euro means nothing (because it) has no
value," said Christina Alcover, an environmental engineering
graduate student and a French citizen.
The fact that the euro represents the combined economies of 11
nations presents a more immediate concern than its intangibility,
however.
Although Germany, France, Italy, Spain, the Netherlands,
Belgium, Portugal, Finland, Ireland, Austria and Luxembourg were
all permitted to fuse their currencies by meeting standards of the
EU’s governing board, the economies which the euro represents have
fueled both discontent for the new currency and speculation of its
failure.
Many people believe that Germany, which has the strongest
economy among the euro-adopting nations, is especially wary of the
proliferation of the euro onto the world market, because of the
havoc it could wreak upon its economy, according to published
reports.
"Surveys conducted by the German press indicate that the
Germans, in general, are not content with the euro, and would like
to have the mark (as their currency) again," said Claudia Wihof, a
fourth-year economics student from Germany.
"The Germans consider the mark a strong currency, and are afraid
of it weakening when it (merges) into the euro," Wihof said.
Other nations in the EU – Britain, Denmark and Sweden – share
the German concern that their currency will weaken. They refused to
fuse their currencies with the euro out of fear that it would erode
their political independence, according to the published
reports.
The British, who have the strongest economy of the non-euro
adopting nations, believe that the euro’s attempt to integrate
diverse economies will eventually lead to its demise, according to
UCLA professor of economics Deepak Lal, a British citizen.
"Most people believe that the euro will crash because of its
diverse union," Lal said.
He said the euro is susceptible to crashes because the nations
who have adopted it have no independent mechanisms – such as
changing exchange rates or spending patterns – to address the
country’s unemployment rates that rise when an economic shock
hits.
The refusal of Britain, Denmark and Sweden to link their
economies to the euro demonstrates the uncertainty many European
governments harbor about the possibility of a united Europe.
Conceived in the 1950s, the EU originally sought to politically
and economically link the nations of Europe, in the hope of
avoiding another intra-continental war.
"The euro is causing trouble now, (but) it will be good, in the
end, when Europe is united through its currency," Wihof said.
According to Lal, the British, who only agreed to membership in
the EU because they wanted to be able to sell in the same market as
the rest of Europe, disagree.
"Politically, (the British rejected the idea of) one currency
because it would lead to (the formation of a) single political
entity, the United States of Europe," Lal said. "England doesn’t
want to be a part of an economically and politically linked
Europe."
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