Europe's single 11-nation basket currency, which began trading in January 1999 with a value of about $1.17 to the USD, fell steadily during the first half of the year but was able to establish a footing, albeit short lived, at just above parity with the USD. In economic terms, the Euro's decline could prove to have little short term effect, however, the psychological impact could have longer term implications because it implied shaky confidence in either the Euro or Europe's ability to achieve sustained growth.

The Euro replaced the local currencies of the 12 members as of 1 January 2001, with the existing currencies to be phased out over the ensuring six to twelve month period. To date the other countries that are not to adopt the Euro as its standard currency shall be the UK, Denmark and Norway.

It is by no coincidence that these three countries form the nucleus of the three strongest economies of the EMU and therefore joining the Euro currency is that there financi

¨ Controls On Government Borrowing

The UK in contrast to the other member of the EMU have never replaced their currency where the other major members have, either to replace the old unit or as a member of another currency union.

Many factors affect investment decisions, sharing a currency, and the changes to competition that would result, might affect investment decisions.

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