The Euro's Troubles

CAMBRIDGE: The script for the euro has become pure improvisation. Everyone remembers the popping champagne corks and pride that greeted the birth of European Monetary Union. At long last the dollar would be challenged; perhaps even dethroned. Europe's great political project - the EU - now had an equal economic project. Today, however, all those dreams seem up for grabs.

Daily, the euro sinks. No longer is it inconceivable that the US Treasury may step in to bail out Europe's new money. What an irony: a currency designed to challenge the dollar for supremacy among global currencies, now needs US assistance to stop its meltdown. But that is where we may be heading.

All this is happening as Europe approaches the introduction of real euro notes in January 2002. Small wonder that, in Germany, the coming disappearance of the D-mark in favor of euro notes is causing deep disquiet. No wonder that the French, who have rarely had a hard currency to call their own, are nervous and want something, anything, to be done. Such anxieties are exaggerated. It is painful for Europe to lose pride in its new currency so fast, but in strict economics terms, no harm arises from the euro's present weakness. Europe's embarrassment is not likely to worsen, nor last very long.

Five questions are useful at this point: