The conventional wisdom is that the launch of the euro Jan. 1 as the common currency for 11 European nations will transform every person's purse and every company's ledger for the better.

But such a change may not be as quick or easy as its supporters expect. In fact, it might create tremendous stress on the economic structures of countries across the European continent.

This single currency is being widely billed as an important element that will accelerate the movement toward greater competition and freer markets.

From the outset, the relationship between the currencies of participating members of the European Union will be fixed. And it may well advance the prospects of an eventual political union for the nations of Europe.

But the euro may not be all that it is cracked up to be.

History demonstrates that for a currency union to be effective, it must follow a political union, not the other way around. And since political unions usually function best when the units joining together have a common cultural identity, a "United States of Europe" is going to be a long time in coming.

The concept of the euro was formulated in 1993 when the Maastricht Treaty was signed, creating the European Monetary Union. European business and governments saw the conversion to a single currency as a means of establishing a unified economic entity, stemming financial malaise and putting more people to work.

Excitement over this radical change has steadily grown, despite a public battle last spring between France and Germany over the presidency of the new European Central Bank in Frankfurt.

New bills and coins have been designed. Bank, corporate, and other public and private financial transactions can be conducted in the euro as of Jan. 1.

National currencies will be abolished when the transition period ends, on July 1, 2002.

At the turn of the year, of course, 11 sovereign nations will begin the transition to one currency: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. Yet businesses and governments would do well to keep the champagne corked.

Whenever economic difficulties such as recession, high unemployment, or high inflation arise in any of these countries, particularly in the weaker states like Italy, Spain, and Portugal, the countries themselves will have no monetary remedies to employ.

If Italy, for example, were to slip into a recession, it would not be able to increase the money supply to ease the situation.

Opposition political parties are likely to attack the monetary policies of the new central bank, and those attacks will further fan the flames of discontent and mistrust within and among the countries.

Even if the euro gets off to a good start, there are still a number of psychological weaknesses in the basic idea of a single currency shared by many countries.

For example, investors in the area where the euro circulates will no doubt insist on receiving higher interest rates than they would otherwise earn. This risk premium, moreover, will remain in place for at least a few years-until the new currency proves its stability and continental coordination of tax rules takes effect.

Furthermore, many international investors may be reluctant to put any of their funds into the euro for some time to come. With so many investment opportunities throughout the world, money managers have a plethora of choices without turning to an unknown and untested currency.

Indications point to a paucity of institutional and corporate money being invested in instruments denominated in the new currency.

Finally, the debut of the euro will by no means prevent any of the individual countries from going bankrupt. Its inauguration could boost the likelihood of default when a nation's economy moves into recession and political pressure leads to placing the blame on an outside force-i.e., the new currency or the new central bank.

When a participating nation loses control of fiscal policy, it may either ask other EMU states for support or pull out altogether-although no legal way currently exists to do that.

For the governing party in each country, the euro will become a perfect straw man to insulate the leaders from blame.

The overall economic effect of the euro has already been negative, months before its official birth.

In recent months, the American dollar has strengthened vis-a-vis the major European currencies, partially in anticipation of the euro's arrival. There is little chance, therefore, that the dollar will be replaced by the euro as a safe haven in the immediate future.

There is no denying that the euro is a fact of life that Europeans, Americans, and everyone else will soon have to deal with. But it is not the greatest thing since sliced bread-and should be approached warily by investors seeking the most favorable opportunities as the millennium approaches.

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