Dreaming of the Euro Already

Euro notes and coins went into circulation on Jan. 1 2001. The so-called eurozone is made up of 12 members among the EU's 15. Denmark, Sweden and Britain chose not to join the euro, though are mulling it now. The 10 new candidates have work in progress to fulfill the strict criteria for joining.

On the one hand, the Euro is designed to improve business conditions for EU companies, by making cross-border mergers easier to complete, improving price transparency and eliminating exchange-rate risks. On the other hand, there is a political element: introducing a single currency will also bring about an ever closer union of its members, so the theory goes.

Euro-zone countries must follow tight and increasingly unpopular common rules, which critics say are stifling growth. The EU's stability and growth pact puts a straight jacket on governments by preventing them from raising or lowering interest rates individually, for example, and the European Central Bank is unlikely to cut interest rates until inflation falls within its target of "less than 2%".

Still, some Central European states would like to make the Euro their official currency even before they join the Union. While no one can do much to stop them, the European Council has given clear guidelines on the procedure for adopting the Euro.

They are to wait until they have joined the Union and then put their national currencies through two years of the exchange-rate mechanism, as well as fulfilling the other criteria, laid out by the Treaty of Maastricht in 1991. Low inflation, low public debt and low budget deficits, as well as exchange-rate stability, are the pre-conditions.

Two candidates, Estonia and Lithuania, have already tied their national currencies to the Euro, but that is about as far as Brussels will let these countries go.

The new currency has dropped in value since its introduction, due largely to gloom about Europe's economic performance. As a result, calls are getting louder to reform Europe's framework for operating its single currency.

Illustration Raimo Bergt