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Tuesday, May 19, 1998 Published at 18:02 GMT 19:02 UK


Euro: a blessing or a curse?

Anti-euro protestors are being run-over by a giant foam euro coin in a May Day demonstration in Madrid

The euro is coming. On January 1, 1999, the citizens of 11 European countries will be able to hold accounts denominated in "euros" - and a few years after that, they will be able to pay with euro banknotes and coins accounts.

Next January, the euro-land will stretch from the Arctic to the shores of the Mediterranean.

Yet no-one can be sure how well this new currency will work. Our Europe Correspondent David Shukman has criss-crossed the Continent over the last few years trying to gauge opinion on whether the euro will be a blessing or a curse:

The cold rain of an Atlantic gale was battering the hilltops. Streams had formed in the alleyways and the rubbish piled between the little huts was being splashed with mud. Makeshift cables, illegally drawing electricity from the power lines, twitched and flicked in the wind.

This was the shantytown of Prior Velho, one of the worst in Portugal, and about as miserable as you can get anywhere in the European Union. Here, on the very edge of Lisbon, where the Portuguese government proudly talks of qualifying for the single currency, of joining the innermost circle of the world's richest trading organisation, several thousand families endure an existence which is literally Third World.

Our guide in this maze of impoverished dwellings was the local priest, Father Valentin Goncalves. The hood of his anorak, dripping in the rain, was drawn tightly around his smiling face.

Father Goncalves, a tiny but fiercely determined figure, is a champion of the poor. He led us through mounds of rubble, past corrugated iron roofs clattering in the storm, to a whitewashed hut in which a makeshift church had been established.

"Hope is what is needed now"

A simple cross adorned one of the rooms inside. Father Goncalves explained that this was a sanctuary, an oasis of hope amid so much deprivation.

And hope is what is needed now, he said, with Portugal venturing into the unknown waters of European monetary union. His fear is that the euro will make things worse, that the gap between rich and poor will widen.

He drew me to the porch of the little church and, through the heavy rain, pointed out a giant construction site in the valley below us. Dozens of cranes and earth movers were busy in the mud. We were standing in the Third World, but we were looking onto a piece of the First World.

The building site was for the prestigious world exhibition Expo 98, which is being staged this year in Portugal. The event is a chance for a country long regarded as an economic backwater, to prove itself on the international stage.

Suprise pass

Portugal's years of dictatorship, only brought to an end in the 1970s, and its reputation as the pauper of the European Union, led many to believe that it was condemned to remain on the economic edge of Europe.

Yet the coming of the euro has changed all that, because to everyone's surprise, Portugal has passed the test for single currency membership.

Like in so many countries across Europe, Portuguese leaders were determined to make whatever sacrifices were needed in public spending to achieve this goal. For once, Portugal will be in the front-rank of the EU.

Its national bank governor, like those from all the countries taking part, will have a seat on the governing council of the new European Central Bank. He will have a chance to vote on all the most crucial decisions, above all on interest rates.

As one minister put it: "We will have to share sovereignty but we will gain influence." For the poorest countries in the EU, and for the smallest, membership of monetary union is a massive leg-up to the top table of European decision-making.

Irreversible step

The calculation of benefits and drawbacks has been made in all of Europe's capitals. Only in three, in Britain, Sweden and Denmark has it been decided that, for the time being, this project is best avoided. Greece wants to join but hasn't made the grade.

So all the others, like the Portuguese, have concluded that the euro is worth being part of. They may have their private doubts, they may wonder if economic decisions taken to suit the conditions of one part of Europe will also suit their part of Europe.

Yet the step being taken is irreversible. In a few years' time, nearly a dozen national currencies will simply vanish. Nothing like this has been attempted before, and the political will to see it through is undoubted.

People's approval needed

So this weekend in Brussels there will be plenty of confident rhetoric about the euro's launch. The news conferences at which the leaders will confirm the future strength of the new currency will be beamed live across the continent. There will be talk of the euro's impact on growth, its help in the fight against unemployment, its ability to make Europe a powerful entity on the world stage.

But the test will be the readiness of ordinary people to accept the new currency, and to see it as an improvement to their lives.

In the muddy back-streets of Prior Velho, there will be the harshest judgement of all. Father Goncalves will not be convinced by the statements made at the summit.

He hopes he will be proved wrong, but like so many in Europe this weekend, he will be wondering if the euro really will be a force for good, or not.



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