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EDITIONS
Sunday, 30 June, 2002, 15:02 GMT 16:02 UK
European currencies consigned to history
Euros used to pay for coffee in Paris
Francs, marks and pesetas are for most people a distant memory

If you travel regularly, it's pretty likely that there's a motley collection of assorted coins and notes shoved in the back of a drawer somewhere, just waiting to be dragged out the next time you hop on a plane.

But if they're old European currencies - marks, francs, escudos, lire or whatever - you might as well leave them there.

Better yet, bin them, because from 1 July they're about as much use as an IOU - unless you fancy a trip to that country's central bank, which will still accept the old notes and coins.

Six months on from the grand introduction of the euro as a cash currency - after three years in virtual limbo - its predecessors have finally lost their status as legal tender (although in most countries all retailers and most banks stopped accepting the currency last March).

Quiet revolution

The switch has generally been much more painless than the doomsayers had expected.

Which is not to say there haven't been hitches.

Germany, for instance, has investigated widespread allegations that retailers used the changeover as an excuse to mark up prices by outrageous margins.

But on the whole, the process has passed off with barely a whimper.

Joining up

Whether the UK will ever join its 12 brethren in the Eurozone remains an open question, with polls telling widely divergent stories.

The euro is a hot potato for the Tony Blair's government, and with ministers split between the pro and anti camps any referendum on entry could still be far off.

Whether or not they eventually adopt it for themselves, however, Britons appear to be taking the move to a single currency on the other side of the Channel with remarkable equanimity.

Even more UK citizens now hold euros than dollars, recent research by the Bank of England showed, although predictions that retailers across the country would begin to accept euros as well as pounds - so-called "euro creep", in the jargon of the europhobes - have proved false outside tourist hotspots.

It's a different story in the EU's two other non-euro countries, Sweden and Denmark. There opinion polls are suggesting a steady shift towards acceptance of the euro.

On the way up

But the most interesting story in the euro's six months as a real-world currency is in fact the result of factors beyond the continent's shores.

When the euro first made an appearance in January 1999, it was worth $1.17.

It only took a few months for that strength to dissipate as the US economy continued to power ahead, sucking in spare money from around the globe and leaving Europe looking somewhat anaemic.

But last year's US recession and signs that Japan's decade-long downturn might finally be nearing an uptick have shifted opinion on the dollar, and its strength - a fixture of the last 10 years or so - appears to be ebbing away.

Much of the US economy's powerhouse performance is predicated on huge debt, both personal and corporate.

The overhang means that if the US stops attracting investment from overseas, trouble is likely to ensue. One of the first symptoms is a decline in the value of the dollar as demand for assets valued in dollars tails away.

Almost an equal

The result? Well, for one thing, the yen is accelerating upwards - a source of some worry for Japanese policymakers, who are still hoping that exports can fill the gap left by torpid domestic demand.

But more notably, the euro is within touching distance of parity with the dollar. On Friday afternoon a single euro was buying 99.85 US cents - and without intervention from central banks in Europe and the US at the instigation of Japan, it could well have broken through parity level.

Following central bank action, it fell back to about 99 cents.

Admittedly this may sound like stirring news, but it hardly qualifies as good tidings for all.

Europe is a long way from being a shining example of economic health, and exporters across the continent will suffer if the dollar keeps dropping.

Bad news for industry. Good news, though, for the travelling European.


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26 Jun 02 | Business
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26 Feb 02 | Europe
26 Feb 02 | Europe
01 Jan 02 | Business
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