Iowa Public Television

 

Euro Takes Physical Form

posted on January 4, 2002


Hello, I'm Mark Pearson.

American manufacturing activity and employment both shrank last month – hardly trends that signal the economy is about to re-ignite and expand. Even so it does seem the nation's financial community is more optimistic.

Stock indices are trading higher in the early days of the New Year. Analysts believe the economy is stabilizing. The general consensus is another interest rate cut by the federal reserve could prod the economy back into expansion mode.

But, in the near term domestic monetary policy may have less of an influence on the American economy than foreign developments. Argentina is coping with a serious currency crisis, while in Europe the continent is utilizing currency to take a bold stride toward a powerful unity.

 

Euro Takes Physical Form

A decade-old abstraction until now, the Euro took physical form this week with the release of notes and coins in the 12 European countries subscribing to the new currency. Consumers lined up at banks and ATM machines to exchange their francs, marks, and drachmas for Euros. Groceries were bought and paid for with the new currency, which will be used by more than 300 million people representing one-sixth of the world's economy.

Despite some initial confusion over exchange rates, officials report the transition is going smoothly.

Leon Salto, COO, Carrefour, France: "We have to create a lot of confidence. This is the key word now. We want them to do their shopping as usual."

SLUG: Counting dollars

Beyond the so called euro-zone, the Europeans hope a common currency will prove more competitive to the U.S. dollar. The Euro began its life three years ago as a theoretical unit underpinning the exchange rates of various European currencies. Since then, it's lost 25 percent of its peak value against the dollar. But currency traders still view the Euro as a success, primarily because it has eliminated fluctuations in national currencies, encouraged cross-border trades, and pushed some countries to budget more carefully.

Indeed, the physical release of the notes and coins this week caused the Euro to surge against the dollar. A stronger Euro should make U.S. goods, like farm and food products, more attractive to overseas buyers. A cheaper dollar makes American-made goods more affordable to cash-strapped foreign nations.

 


Tags: European Union money news