The Euro is the new single currency for eleven European countries participating in the monetary union. On January 1, 1999, the Euro became the official currency of eleven countries including Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Portugal, and Spain (Peterson 4-5). The Euro is creating an entirely new playing field for global commerce. When this trans-European currency in completely phased in by 2002, it will transform Europe into one of the largest economic blocs in the world.

The exchange rates between the eleven participating countries' currencies have been established, but the Euro will not be used for cash transactions until

January 1, 2002. On that date individual countries' currencies will cease to be used and the Euro will be the legal tender for a

The benefits for switching to a single European currency deal with transaction costs and a certainty in exchange rates. It will help Europe with transaction costs, because there will be only a single currency and there will be no cost in converting it to another currency. This is a great benefit to businesses as well as tourists (Antweiler). There will also be certainty in exchange rates between different countries, which would eliminate any risks or unforeseen change or devaluation (Antweiler). Leading banks say that there will be no additional charges applied when credit card purchases are made for Euros (Castle).

Currently the Euro currency is in a three-year transition period until 2002. Right now European companies are converting their accounts to Euros, and in 2002, Euro notes and coins will be circulated in the different countries. However, there is still discussion of what the coins will look like and whether coin sizes will fit into each countries individual telephones and vending machines which are measured to old currencies. Also, it is still controversial whether the conversion of ECUs to Euros will take place at the market ECU value, or at the ECU value fixed on paper which is calculated from ECU central rates. So far market rates are being used for the conversion.

Recently members of the European Community have proposed the "Euro" as the name of a united currency. The idea for a common currency is not a new one. For years European banks have been using ECUs as the basis for the European Monetary System and it will now be exchangeable equally for new Euros. ECU stands for European Currency Unit, and is defined in terms of pieces of European currencies, making it a composite currency of all European countries. Since its creation, it has commonly used as a currency of denomination for eurobonds and bank certificates of deposit.

Previously, the anchor of the European Monetary System has been the independence of the German Bundesbank and its strong focus on price stability. Even though the new European Central Bank (ECB) will be the nominally independent, it will have to prove its independence. This will at the very least incur temporary costs, as it will have to be extra-tough on inflation (Antweiler).

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