The leaders of the European Union anointed 11 countries as members of Europe's new single currency early this morning, but only after an unseemly 12-hour wrangle between France and Germany that briefly threatened to throw the euro off track.
Establishment of the currency will create an economic union of 290-million people and a gross domestic product of $5.1-trillion.
"Nine months ago people were saying that this wouldn't happen and yet we have 11 countries that will start it," said British Prime Minister Tony Blair, chairman of the meeting. "This euro, if it is going to succeed, has to be a strong currency and a currency that is run in accordance with the treaty as a result of the decisions we took today it will be."
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain will abandon their own monies and join in the euro. Of the other four members of the European Union, Britain, Denmark and Sweden chose not to join and Greece did not meet economic qualifications in the 1992 Treaty of Maastricht setting out the monetary union.
No international financial project of this magnitude has been attempted. The importance of the euro's creation has been variously compared with that of German reunification, the 1957 Treaty of Rome that kicked off the European Common Market and the postwar Bretton Woods international financial accords.
Such superlatives rang hollow this morning, however, after a lunch-to-midnight impasse Saturday over who should head the European Central Bank, which will oversee the economies of all euro countries. France and Germany, at loggerheads over rival candidates, finally worked out a cumbersome compromise putting both men in office sequentially.
The dispute served as a reminder that these 11 nations locking their futures together still have fundamental differences over policy, outlook, styles and tactics. And it served as a warning that the euro's fate will be determined in part by whether its masters can get along.
French President Jacques Chirac stood alone against the 14 other countries of the European Union in supporting Jean-Claude Trichet, head of the French central bank. German Chancellor Helmut Kohl wanted Dutchman Wim Duisenberg, head of the predecessor institution to the European Central Bank. As the leader of the most successful economy in Europe, Kohl has assumed the right to name the soon-to-be most powerful economic figure in Europe and has campaigned for Duisenberg since 1996.
The summit's elaborate script, which began with the European Parliament approving the 11 countries that will share the euro, went awry swiftly. The European Union leaders sat down to lunch at 12:20 p.m. and were still furiously debating 11 hours later. Alastair Campbell, spokesman for Blair, called the talks "hard-pounding."
The compromise calls for Duisenberg to be nominated for a full eight-year term, as the Maastricht Treaty specifies. Then he will step down voluntarily around the middle of 2002. That is when the euro will be fully in effect, with the cash, bills and coins starting in circulation on Jan. 1. After Duisenberg's retirement, Trichet is to be named head of the central bank for a full eight-year mandate.
The reason for the "voluntary" departure is that any agreement to share the eight-year term would not be legal under the Maastricht Treaty. Even after the deal, European officials warned Chirac was playing with fire.
Asked if the accord breaks the spirit of the treaty, European Parliament President Jose Maria Gil-Robles said, "Yes, I don't have any doubt. This is not good at all for the European Central Bank to begin like that. Let us hope that a baby born in such bad form can recover and become stronger."
The sticking point was over putting Duisenberg's commitment to leave in writing. The Germans and the Dutch felt that to do so would violate the treaty's requirement of an eight-year term. The French were not willing to accept a verbal commitment, but did on the condition it be given in front of the assembled leaders.
Chirac was unrepentant, telling reporters, "I feel satisfied. It doesn't bother me that France gained an advantage." Asked if the flap gets the euro off to a bad start, he said: "The treaty was respected to the letter. The men are respected for their competence and the euro is already anticipated" by the financial markets.
The euro will debut as a financial unit Jan. 4, but for all practical purposes it is here. Some financial dealers plan to begin trading in "gray-market" euros as early as Monday. Government finance ministers were preparing to announce the rates at which their monies will be frozen against when the euro is put in place in 1999. Barring disaster, those rates will prevail for the rest of this year, thus beginning a monetary marriage like no other in history.
The euro will affect not just Europeans but also Americans. Tourists traveling from Paris to Rome, say, will not have to change money. And if the euro becomes a true rival to the U.S. dollar in financial markets, it could influence how much Americans pay for goods imported from Europe, and even, by altering the economic balances that determine interest rates, how much they pay for a mortgage.
The euro, its proponents hope, will lead Europe to a new age of prosperity and competitiveness. Because prices will be easily comparable across borders, retailers in high-cost countries will come under pressure to lower prices. Stock prices also will be easy to compare, leading investors to make their choices based on a company's record, not on nationalism or ease of access to the market.
By some estimates, the stock and bond markets of Europe will quadruple in size as investors here, in the United States and in Asia pour their money into increasingly efficient and productive companies.
The workers of Europe may pay a price for that efficiency, however, with layoffs and restructurings. Their governments are curtailed by the economic criteria of the euro from spending vast new sums on welfare and jobs programs, so the safety net may become less available, too. And governments no longer will have the power to devalue their own currencies to stimulate economies, thus removing another potent lever of economic management.