|Europe united over euro but bickering still exists
|Harsh debate is currently underway and is expected to continue in the coming weeks. Trade Commissioner of the European Union, Pascal Lamy, made it clear last week that the UK would inevitably join...|
After only three weeks in circulation, Europe's united currency, the euro, is in full swing despite the ups and downs of the global economy. The latest reports show the eurozone economy, which includes 12 countries, is expected to increase its power in the international money markets.
Statistics by the European Commission predict the eurozone's gross domestic product will grow by half a percent in the first quarter of 2002.
Such optimism remains high even amidst the on-going row in Britain over using the united currency. Harsh debate is currently underway and is expected to continue in the coming weeks. Trade Commissioner of the European Union, Pascal Lamy, made it clear last week that the UK would inevitably join the euro system.
British fears of doing away with their home currency created much controversy with many beginning counter-campaigns urging British Prime Minister Tony Blair not to yield to the European mandate. British politthe UK will save the sterling pound.
"The sky has not fallen in with the introduction of the euro. Jobs have not been lost. Businesses may find it easier to export worldwide, trading simply in euros and dollars," added Vaizey, who is a close ally to the opposition Conservative Party. "All this convenience and simplicity, while maintaining economic independence, is a delight that we Tories are keen to praise and preserve."
For many analysts, the strength of the pound against the euro has long been a sore point with Britain's struggling manufacturing sector. "I think the road to Europe may be a bit longer for the UK than for others, but it is the same road," added Lamy, who expects the British to benefit more from joining the euro than from watching it develop.
Countries that remain outside the eurozone are taking initiatives to participate in the process. Denmark and Sweden are expected to hold referendums later this year. For Britain, the situation seems very complicated. Recent polls showed the Welsh and Scottish are in favor of dealing with the euro more than their English compatriots. Blair's Labor government has tried to control the issue by declaring that a nationwide referendum will take place sometime this year.
"If the government recommends UK entry [to the eurozone], it will be put to a vote in parliament and then to a referendum of the British people," said the British Treasury Minister Ruth Kelly.
"The most explicit fact the world should consider is the euro will be a great contender against the dollar in world markets in less than five years," said Munir Hamarneh, professor of economics at the University of Jordan." Over time, more than half of the world's reserves will be valued in euro."
Hamarneh stressed that European nations will feel "addicted" to using the euro, and other European countries will strongly want to join the tender as a way of preserving their sole financial power in global markets.
Today more than 330 million people in 12 countries are dealing with the euro on daily basis. Germany, the EU's largest economy, is expected to fall short in keeping its budget deficit below the ceiling of three percent of gross domestic product.
This is certainly bad news for the euro, as Germany and Italy account for about half the eurozone's economic output and have tended in recent years to suffer more than other European countries because of downturns in the global economy.
On the other hand, the attractiveness of any fluctuating currency grows as its liquidity increases; this will eventually help the euro retain its power and become a natural monopoly in world markets.
British fears from the euro were met with American ones. "The economy of the 12 countries embracing the euro is roughly the size of the US economy, and its financial system is rapidly approaching the magnitude of that in the US," US Federal Reserve Chairman Alan Greenspan said recently.
He added the tremendous growth of bond markets in the euro area over the past three years shows how high the potential is to make the European economy integrate across its borders. Kamal Sharma, a financial strategist at the German Commerzbank, believes the British fears of joining the euro comes from the strength of the pound sterling against the euro, which has long been a sore point with Britain's struggling manufacturing sector.
"The value of sterling to the euro has been in part responsible for the slowdown in manufacturing, but this is also a story of a slowdown in global demand; we are seeing the same picture across the industrialized world," Sharma added.
Hamarneh, meanwhile, pointed out many of the 12 European currencies that changed over to the euro were not known internationally, a fact that made the financial reserves in these countries valued in dollars.
"The euro is taking this opportunity to take over these reserves and is now disputing the power of the dollar in the eurozone," he explained. For Greenspan, the competition between the euro and the dollar is healthy, at least for world markets. "Market pressures toward portfolio diversification are clearly going to play a major role in the future relative positions of the dollar and the euro. The world can only benefit from the competition."