Europe Launches New Currency

PARIS — It has been called a leap of faith, a huge financial gamble, but most European Union nations have made an irreversible transition to a new currency, the euro.

The money’s use started smoothly on Jan. 4, its first day of trading in what Europeans hope will be a strong rival to the dollar in international markets. When the trading day ended, one euro was worth $1.17, up about a penny, against the dollar.

It will be some time before the new currency is in full circulation. Euro coins and bills will not begin appearing until July 1, 2001, but people can continue using their national currencies, such as German marks and French francs, alongside the new denominations. Then on Jan. 1, 2002, euros will become the only legal tender accepted in the 11 European Union countries that have adopted the single currency.

The nations making the switch are: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain.

Britain, Denmark, Greece and Sweden are the only member nations that have not embraced the euro, and business executives in those countries think the failure to join is going to hurt their competitiveness.

Mats Etenborg, a spokesman for Volvo Truck Corp. of Sweden, said being outside the "euro zone" is going to cost the company tens of millions of dollars a year.

"We are going to have additional currency transaction costs that our competitors, who are in the euro zone won’t have," he said.

For Volvo, revenue in euros will have to be converted to Swedish kronor, and will be subject to currency rate changes.

A recent business survey by United Parcel Service Europe shows that European business executives are bullish on the euro. A majority, according to the business monitor survey, think the euro will overtake the U.S. dollar as the world’s premier reserve currency within 20 years. But at the same time, less than half of the 1,500 executives polled think the euro will benefit their companies over the next 12 months.

For the full story, see the Jan. 11 print edition of Transport Topics. Subscribe today.