The Burgeoning Euro

May 25 2008 by Steffan Rhys, Wales On Sunday

THE euro was launched as a cash-less currency for virtual payments in 1999 to claims that it was a “toilet currency” that would not withstand having to cover economies as diverse as Germany, Italy and Ireland.
At the time it was worth about 71p but it dropped to a low point of 57p in May 2000, returning to its initial rates two years later, when it appeared in physical form as banknotes and coins.

Its value against the pound has risen by 15% to 80p in the last six months and the euro has been tipped to replace the US dollar as the world’s reserve currency.
“The euro’s strength has to do with the different policies in the US Federal Reserve and the Bank of England, which have both reacted to the current financial crisis,” says Marco Gundermann, economics lecturer at Uwic.
“The European Central Bank is quite inflexible in its policy making. They can’t take into account employment issues and are only charged with looking at inflation.
“The American bank has to react to employment. The Bank of England is inflation targeting but also has to support overall economic policy, so probably feels more vulnerable at the moment.”

Not all EU member states use the euro. Denmark and the UK agreed an opt-out clause exempting them from participation, while other countries (newer EU members plus Sweden) have yet to meet the conditions for its implementation.

steffan.rhys@mediawales.co.uk

Time to consider a Welsh Euro? Should Wales go it alone and join up? It will be the currency of the future without doubt. The days of the Pound are numbered.