What is it?
The euro is the name to be given to the new single EU currency.
For a long time it looked like it would be called the "ecu", but the Germans thought this was too French, while the French understandably vetoed any idea of the "euromark". The euro was the compromise. And there will be 100 cents in a euro.
When will it come into existence?
continue to exist for a few years, for example, Irish currency notes and coins will still be in circulation. But the euro will be the official currency of the memberstates who join. By 2002, at the latest, national notes and coins will disappear to be replaced by euro notes and coins.
Is there any chance that the project will fall apart over the next year?
This looks very unlikely now, although a year ago the project still looked uncertain. But since then EU leaders have managed to cross the barriers and the political momentum behind the project appears unstoppable. It would now take something quite momentous for the euro project to be delayed.
So how will the euro be used between 1999 and 2002?
Businesses will be free to use euros for paperless transactions from January 1st, 1999. For example, they will be able to pay suppliers or make up their accounts in euros. In practice, it looks like big companies will move their transactions and accounts into euros fairly quickly, while small companies will follow in their wake. Many businesses will have to operate in both national currencies and euros for a period.
What about the public?
An interesting question. Banks are likely to offer euro accounts and services such as euro credit cards, depending on demand from the public. It could be useful, for example, to have a euro credit card for travelling around the EU and financial institutions will market it as a way to avoid currency transaction costs. Then around the start of 2002 there will be a transition period when euro notes and coins and national currencies are in circulation together, before the national notes and coins finally disappear and the transition is complete.
Think back to the changeover to decimal currency, then double that confusion and you'll have some idea what the changeover to euro notes and coins and pricing could be like. It will be a lot easier if, as seems likely, the whole idea of the currency has caught on and people are used, for example, to paying for foreign holidays in euros.
Will the introduction of the euro mean a consumer rip-off?
No doubt banks across Europe will look to charge people for the changeover. Given how much money most of them are making, they should be politely told to push off. The rip-off by retailers in the changeover to decimal currency is now a matter of legend.
But such is the competition in the retail sector these days that many organisations will use the introduction as a chance to win more business.
There will be those trying to make a quick turn, of course, but overall the single currency should add to competition across Europe by making it much more evident, for example, if consumers in one state are being asked to pay much more for something than those in another.
Will it make travel easier?
It should do. Once the single currency notes and coins are introduced, for example, there will be no need to change money when travelling to another member of the single currency. A key question is when will Britain join? Initially it will stay out, meaning it will still be necessary to change money when crossing the Border or travelling to Britain. However, if the single currency is successful, then it will not be long before Britain joins.
What will it mean for interest rates?
This year interest rates will fall in the run up to the final linking of currencies. This is because once the single currency is up and running, Irish interest rates will have to be the same as those elsewhere in Europe, meaning a fall of 1.5 to 2 percentage points from current levels.
Good news for borrowers then, but not for savers. After that, interest rates will be set centrally by the EU central bank in Frankfurt and will depend on economic performance across Europe.
And who will be in charge?
Interest rates will be set by the governing council of the central bank on which all the member-states will have one seat. It looked for a long time as if an affable Dutchman called Wim Duisenberg would be the bank's first president. But now the French have put forward the head of their central bank, the very experienced JeanClaude Trichet. The Germans, however, will not be keen on a Frenchman being in charge. This row will be worth watching.
What will it mean for jobs?
No straightforward answer to this question, but there is no reason why many of the productive and successful sectors of the economy, which have created jobs in recent years, cannot continue to prosper.
Competition, however, will become even tougher. Meanwhile, short-term swings in the value of sterling could provide a serious threat to some parts of the economy. And if you work in a bank's foreign exchange dealing department, start to worry.
