Brussel evalueert de eerste vijf "euro-jaren" (en)

EUOBSERVER / BRUSSELS - The European Commission on Tuesday (20 July) released an assessment of the first five years of the euro, praising the currency as a success but identifying several challenges ahead.

The euro - which is shared by 12 countries in the EU - was introduced in January 1999 and began to be used as notes and coins in January 2002 replacing old currencies such as the Franc, Deutschmark and Lira.

Its introduction split opinion amongst economists.

Some believed that it would cause economic paralysis in the euro zone, pointing to the lack of flexibility inherent in a currency zone of 12 different countries all sharing the same exchange rate.

Others maintained that the elimination of exchange rate risk and increased trade between the euro zone members would boost growth and raise the EU's profile on the global economic stage.

Positive assessment - with some provisos

In today's report, the Commission gives a mixed assessment, first saying that it has "lived up to the expectations of both its supporters and detractors".

"The euro has also played a key role in accelerating economic integration in Europe, and there is emerging evidence that it has led to increased trade amongst participating countries and has accelerated the integration of financial markets in Europe", concludes the report.

However, Brussels also admits that much work needs to be done, especially in combating the slow growth in the euro zone.

Euro zone growth in 2003 was a sluggish 0.4 percent, compared with 2.1 percent in the UK - which is not part of the euro zone, just over three percent in the US and over nine percent in China.

The Commission also identified other challenges for the euro system, notably preparing for ageing populations and admitting the ten new member states into the system.

Slow growth "not a euro issue"

Katinka Barysch, economics expert at the Centre for European Reform, believes that the euro has had an impressive first five years.

"If you think back to when the euro was introduced, we had predictions of absolute disaster", she recalled. "But what happened? Absolutely nothing".

"The introduction of the euro was about as smooth as the introduction of a currency could possibly be", she said, adding that the European Central Bank now has an excellent reputation.

And she thinks that the slow growth in the euro zone is less to do with the euro and more to do with the effects of German reunification, which has slowed growth in Europe's largest economy.

"Slow growth in the euro zone is not really a euro issue", said Ms Barysch.

Euro brings high unemployment

However, this view is by no means shared by all.

Ian Davidson, a British member of parliament and Chairman of Labour Against The Euro, said, "The Commission claims that the first five years of the euro has been a success, but it has brought low growth and high unemployment to many parts of the euro zone".

He added, "The ECB has failed to boost growth and the fiscal rules are in a mess. Anyone thinking the euro is working must be living in cloud-cuckoo land".