KEY POINTS:
Five years after its appearance in European wallets, the euro has gained new ground, territorially and symbolically.
The Cypriot pound joined the euro yesterday, along with the Maltese lira, taking the number of countries using the single European currency to 15. At least four eastern European countries are
expected to join in the near future.
At the same time, the much-derided euro is gaining new ground as a global reserve currency. According to the International Monetary Fund, the euro's share of the world's foreign exchange holdings has risen to a new peak of 26.4 per cent - 2 percentage points up on the end of 2006. The value of the euro has been hitting new highs against the dollar and threatens to break the US$1.50 barrier in the first weeks of this year. European officials believe that the still largely unloved currency has now become a significant, and permanent, global rival to the once unchallenged greenback.
During 2007, the total value of all euro notes in circulation in the world exceeded those of dollar bills for the first time. The euro also overtook the dollar as the principal currency for issues of international debt.
The euro's triumph is, however, an irony, wrapped in an enigma.
Outside the eurozone, the currency kicks sand in the face of the weakling dollar. It has become increasingly fashionable as a jet-set currency, demanded by rap stars and super-models. But inside the eurozone, the euro remains an uneasily tolerated stepmother. Consumers from Italy to Germany believe that it has increased the rate of inflation.
In France, President Nicolas Sarkozy sees the rise of the euro not as sign of financial virility but as a commercial calamity, an act of American economic sabotage and a failure of management and political will by the European Central Bank. Other European politicians and officials are beginning to agree.
The rise in value of the euro - from its trough of $0.82 in 2000 - has partially cushioned European countries from the rise in oil prices, but it has made exports so difficult that the company which makes the Airbus is planning to move part of its production to the United States. None of this stops other countries from clamouring to join. Slovakia, Estonia, Latvia and Lithuania have already linked the value of their currencies to the euro and the European Commission is expected to produce a report in the next few months setting out a possible target date for full membership.
- Independent
