Question: What is the Euro and what impact will it have short-term on European lifestyles?

Investment Life Expert Response:

Europe's single currency made its debut on January 1,1999. This represents the biggest step ever toward uniting Europe into an economic bloc that could rival the United States. Real Euro coins and notes are to replace francs, marks and other traditional currencies in 2002. So Europeans and tourists will be dealing in old money for three more years when using cash, but Euro transactions will be possible through checking accounts and credit cards.

Already, merchandise from industrial products to bouquets sold on the French Riviera is carrying Euro as well as local-currency prices, making cross-border price comparisons among the 11 Euro countries a snap. Britain is the biggest European Union nation not planning to use the Euro. Finance ministers and central bankers from most of the 11 participating EU nations met on December 31,1998 to freeze the relative value of their national currencies -- a move to keep them from fluctuating with each country's financial fortunes.

Banks, bond and stock markets and international businesses are spent the first weekend adapting trading floors and computer screens to include the joint currency. In its first working day Monday, the Euro was expected to trade at about $1.18, 6.58 French francs or 1.96 German marks. The Euro will streamline trade, and could further advance prosperity, in a bloc of 290 million people with an economic clout already rivaling that of the United States. A strong, unified Euro could even level the playing field when it comes to global trade by challenging the dollar's position as the leading world currency.

The Euro, however, also could help U.S. multinationals better plan their strategies in Europe and cover much more of the continent without having to worry about national monetary fluctuations. As Europeans from Spain's Mediterranean beaches to Finland's frozen tundra prepared for the Euro, it was clear some bumpiness was persisting in the historic move toward a single currency:

November inflation figures released recently indicate a 0.9 percent annual inflation rate in the 11 Euro nations - the continuation of a steady decline. Portugal and Ireland, however, have reported significant inflation-rate increases over the past year. Some economists consider that problematic because a low common interest rate that would boost core EU economies such as France and Germany could overheat smaller nations with faster growth.

The Euro will be a fact of life from the trading floors in Tokyo to the smallest bank in the Grand Duchy of Luxembourg. But after years of belt-tightening to meet entry requirements for the single currency, wild celebrations aren't likely to welcome the Euro. Of the 15 EU nations, only Greece failed to make the strict monetary conditions for joining. Britain, Sweden and Denmark opted out for now -- holding on to their rights to set independent monetary policy for domestic reasons such as to boost the economy or improve social conditions.