European Central Bank

Achievement of note

PUBLISHED : Tuesday, 01 January, 2002, 12:00am
UPDATED : Tuesday, 01 January, 2002, 12:00am

Today's launch of the euro as the single currency of legal tender across 12 European nations is a crowning achievement. Forty-five years ago, the continent's integration started with the Treaty of Rome and aspirations to build institutions that would bind rather than divide.

The cradle of modernity and scientific progress was also the site of the past century's bloodiest conflicts. The founders of what has now become the European Union sought to prevent such tragedies ever being repeated. It was hoped that countries joined by trade and devolved political power would find common purpose in the passage to prosperity.

Two years ago, the single currency project was launched. Control of monetary policy was handed over to the European Central Bank and rigorous criteria on fiscal management were agreed. As such, real economic and political power has already been yielded by individual European states. Yet, the formal launch of euro notes and coins and the abandonment of national currencies marks the project's coming of age.

Nationalists will find it harder to argue against further political union when countries share the same money. Notions of national identity will weaken further as borderless commerce becomes a reality for the average person. More than any other event in the European Union's development, the launch of the euro emphasises the broad success of the project.

How durable the euro proves depends on the pace of economic convergence across the union. Despite the free movement of goods, money and people, the EU does not share the flexibility of the United States. Differences in language, culture and welfare incentives means intra-European labour mobility remains low. The EU's bureaucracy in Brussels still has a statist and protectionist hue that seeks to defend vested interests. The challenge for Europeans is to open their economies and foster a flexibility that leads the euro to rival the US dollar as a store of value and truly global medium of exchange.