Introduction of euro goes smoothly, but jury still out on monetary union Will monetary union meet expectations?

• Pages: 17-20

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With much press attention from around the world, euro notes and coins were introduced in the 12 member countries of the euro area on January 1, 2002. This event represents the final step in European economic and monetary union (EMU), a process begun in 1990 as a way to revitalize economic integration and as a further step in the achievement of "ever closer union" in Europe. Enough time has passed to make it worthwhile to take stock of some of the issues surrounding this project.What are the prospects for the working of EMU? How do the Europeans view the single currency? Is Europe's hoped-for transformation into an economic powerhouse-one to rival the United States in dynamism as well as size-in the cards?

An economic forum entitled "The Euro: Ready or Not" was held at the IMF on January 10. The discussion was substantive and lively. The members of the panel were Gerard Grisse, the European Central Bank's (ECB's) observer in the IMF;Moreno Bertoldi, the European Union's (EU's) Economic and Financial Counselor in Washington; American University Professor C. Randall Henning; and Gerard Baker of the Financial Times.

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The forum was moderated by the Director of the IMF's European I Department,Michael Deppler, who noted that the euro project actually goes back at least to the 1970s and that the IMF has followed it closely since its inception. The penultimate stage of EMU occurred on January 1, 1999, when the rates of conversion between the euro and 11 European currencies were fixed.Most transactions continued to be conducted in national currencies until euro notes and coins were put into circulation, but dual pricing was adopted for goods and services, both to help consumers get used to the single currency and to allay their fears that the changeover would enable retailers to apply hidden price increases.

Describing the introduction of the euro as smooth and free of technical glitches, Deppler hailed it as a unique event in monetary history. Popular support for the project is evident, he said, although the project is much more than the changeover from 12 (Greece joined the original 11 countries) currencies to 1. The big question is whether the euro area can boost living standards and create more job opportunities. The record to date is mixed, Deppler said, observing that much will depend on whether the euro area uses its resources efficiently over the longer term.

Smooth transition

One of EMU's enthusiastic advocates, Gerard Grisse, declared the title of the forum outdated. "The euro is here," he said, flourishing a brand-new state-of-the-art currency note. Not only has the introduction of the new currency been an impressive success, Grisse said, but the period of dual...