The Euro at 20
The euro’s advocates hoped that the single currency would deliver economic and financial integration, policy convergence, political amalgamation, and global influence. While these predictions were often wide of the mark, the euro has arguably proven to be a wise investment.
PARIS – Twenty years ago, on January 1, 2002, citizens of 12 European countries began using new euro banknotes and coins. A larger-than-life project – emblematic of a time when European leaders were bold enough to step into the unknown – thus became a tangible reality.
This flawless transition crowned an endeavor that was imagined in the 1970s, designed in the 1980s, and negotiated in the 1990s. Expectations were high: the euro’s advocates hoped that it would deliver economic and financial integration, policy convergence, political amalgamation, and global influence.
Two decades on, it is difficult to avoid feeling disappointed about economic integration. Early assessments of the single currency’s trade impact found that it barely exceeded 2%. Recent research by the European Central Bank puts the effect at perhaps 5%. That is still small, and by itself not worth the effort. Two regions within Europe trade with each other on average six times less if they are not in the same country. Because of history, languages, networks, judicial systems, and reluctance to unify regulations, national borders still matter considerably.