It was a difficult birth. When the common currency of initially eleven European countries first saw the light of day on 1 January 1999, many Europeans still had rather low expectations. Whether the euro would be a stable currency was one of the most frequently asked questions at the time. Even the then Chairman of the US Federal Reserve, Alan Greenspan, later wrote in his autobiography that he had had great apprehensions about whether the Europeans’ common currency would work. Ten years later, in 2009, all the doubters have grown silent. The euro is undoubtedly a success story that has had a stabilizing effect on Europe’s economies. “The euro is a stable currency and one that is internationally highly respected,” praises Norbert Walter, Chief Economist of Deutsche Bank. Alan Greenspan is now convinced, too: “It was an extraordinary accomplishment and even today I am amazed at what my European colleagues have built,” writes the grand old man of monetary policy. Even in these turbulent times of economic crisis, the euro stands as solid as a rock. More or less consciously, today most Europeans enjoy the benefits of the currency. Thus, for example, the bothersome exchange of currencies is no longer necessary on journeys within the eurozone. Indirect advantages include low inflation and the high debt discipline of the euro countries. The European single currency is also considered a model for similar currency projects in Asia or the Gulf states.
The idea for the European currency came from Germany’s former Federal Chancellor, Helmut Kohl, and France’s former President, Valéry Giscard d’Estaing, in 1986. The concrete plan for its introduction was presented by European Commission President Jacques Delors in 1989 – only a few months before the beginning of the demonstrations in eastern Germany that eventually led to the collapse of the GDR. The introduction of the euro was held up for a while not only by the debates about a single currency in the EU countries, but also by Germany’s reunification. The political and economic framework conditions changed overnight. The euro was preceded by a painstaking process of economic convergence within the European Union. In the 1992 Maastricht Treaty, all the euro countries pledged to meet the “convergence criteria” in a kind of economic fitness programme. The countries had to get their inflation under control and were only allowed to run up moderate debts so that the single currency would not create tensions later.
The European Central Bank (ECB), whose main duty is to preserve the purchasing power of the euro and thereby maintain price stability in the eurozone, eventually came to Frankfurt am Main. Dutchman Wim Duisenberg became the first President of the European Central Bank. The decision in his favour proved to be a stroke of luck, because from the very start he left no one in any doubt that the ECB would steer a course of stability and not allow itself to become a political football of national economic interests.
Duisenberg also steered the euro through its difficult initial period when – despite strict stability criteria – the currency steadily lost value against the US dollar. So far, the steadfast stability policy of ECB President Duisenberg and his successor Jean-Claude Trichet have paid off. In April 2008 the euro even reached a value of 1.6019 dollars.
The success of the single European currency is having an attractive effect. One after the other, Greece, then Slovenia, Malta, Cyprus and lastly Slovakia have decided in favour of the euro. As a result, the eurozone has now grown to include 16 countries and 320 million people, making it larger than the United States. Other countries in the European community want to introduce the euro, including, for example, Romania, Estonia, Poland and Bulgaria. Even the British, declared eurosceptics, are considering whether they should come under the euro umbrella in the face of the current crisis. As a result of the financial crisis, the euro and European Central Bank are confronted by perhaps their greatest challenge, which means there was not much of a party mood on the currency’s 10th birthday. Nevertheless, the success story of the euro indicates that there are very good chances that the European currency will also master this difficult period.
