Since the introduction of the euro, this column has not mentioned the single currency since I believed that the facts (and the politicians) should speak for themselves first and our newsletter has reported both on a daily basis. The press conference by President Prodi and Pedro Solbes last week (see bulletin of 10 January, pp 6/7) brought this first phase to a close and confirmed the operation's success. There is currently a tendency to play down problems and risks and Mr Prodi rightfully pointed out some of the catastrophe predictions and the different practices and attitudes to the changeover that had been colossal. Three aspects were indispensable to the operation's success: a) co-operation between the ECB, national central banks, the Commission, governments and civil services; b) banks and commercial networks' efficient distribution and use of the euro; and c) citizens' active co-operation. All three conditions were met; Mr Solbes said the latter was the deciding issue.
Having mentioned the above, I would like to move on to some more important considerations which, while not strictly speaking new, may be useful if taken as a whole.
The impact has already been decisive. The single currency has already had a positive, incalculable, impact for eurozone countries, well before euro notes and coins arrived in citizens' pockets. It's easy for eurosceptics to brush over the problems in the past caused by exchange rate fluctuations. Devaluations and regular reevaluations had serious economic, political and even psychological repercussions; the sadly infamous weekend meetings of monetary committees, followed by Finance Ministers, left a bitter, resentful taste in the mouth - raw feelings and hurt national pride. It made it impossible for the CAP to function and even jeopardised the free circulation of goods (after a particularly sharp devaluation of the lira, France called for import duties to be introduced on Italian cars and textiles). The euro and its internal fixed exchange rates have for the last three years enabled Europe to sail through the recent international monetary crises unscathed - without the euro, there would have been tempestuous problems.
A new culture. The "culture of stability" was not common currency in the EU before the euro. Some countries were used to double-digit inflation and could never have achieved this stability without the strict Maastricht criteria. Without its single currency, Europe could never have become a compact economic zone or even a single market.
Helmut Schmidt's wise words. The dollar/euro exchange rate is not and should not become the main priority of the Community authorities. The media view that the euro has lost a quarter of its value against the dollar since its launch is simply deceiving public opinion since the value of a currency is determined by its purchasing power and annual inflation in the eurozone has remained at between 2 and 2.5%. The former German Chancellor, Helmut Schmidt, said the media had been ridiculous and irresponsible in focussing exclusively on the euro/dollar exchange rate, which is a distorting, misguided view. He said he'd seen the dollar both much higher than now (part way through the 1980s for example) and also much lower. Dollar exchange rates are volatile and this makes good newspaper headings, is irritating at times and makes speculators' fortunes (or ruins them) but has no impact on the price of a cup of coffee or how much it costs to rent a flat. This will also apply in the future, he said, since at times the dollar will fall against the euro and at other times it will rise, but internal price stability in the single market will not be affected by this.
None of this means that the political authorities of the European Central Bank are indifferent to the euro/dollar exchange rate since they also have to take account of the psychological impact and the international currency markets so Valéry Giscard d'Estaing rightly pointed out that the euro has been pretty stable against the dollar for the last three years. It lost value in the first weeks of its launch after being set at an excessively high level for psychological reasons, but had fluctuated very little since then, whether up or down, despite an unprecedented wave of press speculation about a permanently low euro!
How the euro is with us, the EU's prime objective is to achieve balance in the EMU in order to give the word "economic" as much real meaning as the word "monetary". In the past, Jacques Delors' appeals along these lines felt like the traditional voice in the wilderness, but things have started to move in this respect now. More on this tomorrow. (F.R.)