“Mission accomplished,” says Martin Wagner, professor of economics in Klagenfurt who is also chief economic adviser to the Slovenian Central Bank. The Euro is a success story. “Because we managed to get through all the crises in a very heterogeneous environment,” says Wagner. Especially since the European Central Bank was politically established and the currency area has not been perfect.
With the establishment of the central bank in 1998, the struggle between “hawks” and “doves” broke out – which continues today. While the German Federal Bank has taken D-Mark stabilization as a measure, other countries accustomed to devaluation fear hard currency policy. Dutchman Wim Duisenberg wrote the first chapter in the history of the European Central Bank as president. With the euro as the currency of citizens, Duisenberg promised, “they should be able to rely on it while retaining its value.”
But did he? Fact check.
1 Has the euro retained its value? When the euro was introduced, the European Central Bank was convinced that more competition would lower prices. But word of the creation of “Teuro” quickly dominated the discussion. Wrong: In fact, from 2000 to 2021, inflation ranged from just over zero to three percent. Inflation has been rising since the beginning of 2022 – the 2 percent inflation target has not been reached since then. By the way, the ECB can do nothing for inflation, says Wagner. This is imported, due to external shocks.
2 Is the euro a hard currency? First and foremost: the solidity of the euro is not a goal of the ECB. A stronger euro makes imports and holidays in other euro countries cheaper and makes exports more expensive. The first warning came early: in the euro’s first summer, the Austrians earned 10% less money abroad than in the previous year’s shilling.
When measured against the dollar, the euro is quite stable, but fluctuates – between $0.89 per euro in 2002 and $1.57 per euro in 2008. The euro has lost a lot of value against the Swiss franc – from 1.48 francs in 2002 to 0,97 yesterday .
3 Could the euro become the global reserve currency? No, the euro is now number 2 behind the dollar. The share of the US dollar in world currency reserves is 60 percent, and the share of the euro is about 20 percent, ahead of the yen and the pound. However, the US dollar still dominates global trade.
4 Is the euro attractive? Eleven countries participated in the beginning of monetary union; With the accession of Croatia there are now 20. However, all EU member states are essentially obligated to introduce the euro once they meet the convergence criteria.
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