However, the real situation is more complicated than that. The euro is likely to be just the beginning of wider economic union. Indeed Germany is already calling for the harmonisation of taxes across Europe.

And the launch of the euro has been accompanied by calls for more political co-operation across the continent.

Not an economic panacea

The idea behind EMU is to make Europe's economies more competitive. A single market and a single currency to complement it will help. But experts warn that monetary union will not solve all economic problems.

Eugenio Domingo Solans, member of the European Central Bank's (ECB) executive board, says politicians will have to do their part to get the economy going: "Those who seek the solution to unemployment through monetary policy are looking in the wrong tool box." He and his colleagues contend that the eurozone's interest rates - currently at 3% - are at a historic low anyway and that further cuts would do nothing to boost the economy.

Interest rate quarrels

Not every politician is convinced. Germany's finance minister, Oskar Lafontaine, is one of them. Just on the eve of the euro's launch, he reiterated his call for lower interest rates, saying the cut down to 3% was only a "step in the right direction".

The ECB's constitution allows it to ignore such political pressure and the bank will be keen to assert its independence. However, given the global economic climate it is unlikely that this debate will die away soon.

The political tool box

European economic commissioner Yves-Thibault de Silguy and EU president Jacques Santer

The alternative to interest rate cuts are political reforms across Europe, cutting red tape for example, or liberalising labour markets. Nowhere in the world is it more expensive to employ a worker than in Europe. Industry representatives have long called for cuts in labour costs to make their companies more competitive on the world markets.

But some politicians in Europe's predominantly left-leaning governments suggest other remedies. They want to defend current welfare levels and workers' rights and say that high unemployment is caused by unfair tax competition and "social dumping" - low welfare standards in other countries.

Both sides agree on only one thing: To implement any solution closer European integration is necessary.

Germany calls for more co-operation

Werner Müller, Germany's economics minister, says that "the single currency must be followed by more economic co-operation in Europe. Countries which go it alone at the cost of other member states endanger (the euro's) success." And he warns that unfair competition is in no-one's interest. That means, for example, the code of conduct on corporate taxes must be put into place effectively as soon as possible."

And Günther Verheugen, another German minister, says: "Normally a single currency is the final step in a process of political integration. This time the single currency isn't the final step but the beginning."

Political union

From the beginning the European Communities were all about harmonising policies and integrating economies. For a single market to work, all players have to follow the same rules. Now that eleven EU members share one currency, they will be forced to co-operate even closer.

Critics say that monetary union heralds the slide into a European superstate. And fans of EMU do not deny that the single currency is first and foremost about politics. Carlo Ciampi, Italy's finance minister, says EMU is "a goal without precedent and above all it is a political move."

The question is though, whether monetary union will really lead to a concentration of political power in Brussels. The birth of the euro is accompanied by the launch of a new 34-member Economic and Financial Committee.

It will be instrumental in co-ordinating European economic policy and is not dominated by eurocrats. All 15 EU countries - including those not adopting the euro - will have two seats and will be joined by two representatives each from the European Commission and the European Central Bank.