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The Euro: Crucial Step for a Future Superpower?
In January, 11 nations launched the euro, the new European currency. What does this
crucial event mean for the rest of the world?
By Melvin Rhodes
Recently, only four mohnths apart,
I made two trips to England. Harold Wilson, British prime minister 1964-1970 and
1974-1976, noted the volatility of governments, nations and economies when he once
observed, "A week is a long time in politics." Four months, in the political realm,
can be an eternity, as I discovered when reflecting on my second trip.
On my earlier visit, many people in England and on the Continent seemed unaware of
the euro. Today, a few months later, the new currency has obviously gained a much
wider awareness. European journalism is dominated by news of the euro: its launch,
exchange rates, its effect on members and nonmembers of the European Community, its
relationship with the growing world recession, the building momentum for full political
union on the heels of monetary union, and Europe's relationship with the world's
main trading currency, the American dollar.
Newsweek's recent "Euroland" special issue brought up the discussion with
these words: "In January, the world will start getting used to a new currency. Whether
you love the euro or hate it, know this: nothing so big has ever happened before."
The euro may not be big news on American television, but its impact on America could
be greater than any issue currently under discussion. To understand why, we need
to consider the economic and political ramifications of the euro.
Changes in Dominant Currency
Before World War II the pound sterling was the dominant currency of world trade.
Prices of goods traded between nations that had nothing to do with Great Britain
were often quoted in pounds because businessmen the world over knew the value of
the pound. The Bank of England issued the pound. A saying during the last century,
and for much of this one, was "It's as safe as the Bank of England."
After World War II the U.S. dollar became the major trading currency, but the pound
continued as a reserve currency and was the principal monetary unit of trade between
nations of the British Commonwealth (one quarter of the world's countries at the
time) and some others that had close ties to Britain.
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