Ebook: The Euro as a Stabilizer in the International Economic System

The introduction of the euro was an important event for the world economy and the international political system. For the first time in history, a substantial group of European countries-eleven of the fifteen members of the European Union including three members of the G-7-have voluntarily agreed to replace their national currencies with a single currency. The euro area has already become established as the second largest currency area in the world and will therefore become a major player in the international monetary system. The creation of the euro poses a number of interesting questions. Will the euro be a strong or a weak currency? Will the euro challenge the leading position hitherto held by the United States dollar and would sharing of the burdens and advantages of reserve currency status improve or worsen the stability of the international monetary system? How will the euro affect US relations with Europe? Does the formation of the euro intensify European integration in other fields? Is a bi-polar international monetary system viable? These and other issues motivated the Luxembourg Institute for European and International Studies and the Pierre Werner Foundation to organize an international conference in Luxembourg on December 3-4, 1998, on the eve of the birth of the euro. At the outset we were aware that the issue of the euro went far beyond pure economics. Money, after all, is too important a subject to be left to economists.

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This book examines the implications of the creation of the euro, the new European currency unit, for the stability of the international monetary and exchange rate system. Among the central questions addressed are:

• Will the euro be a strong or weak currency?
• Will the euro be a rival to the dollar system?
• How will the euro affect monetary cooperation between Europe and the United States?
• Is the inception of the euro likely to be an historic turning point in the international economic system?

This volume developed out of a conference held at the Luxembourg Institute for European and International Studies. Among the contributors are many of the best-known experts on international monetary theory and policy and international trade. This book contains revised versions of the papers first presented at the conference as well as the text of the conference proceedings, and is organized in five sections: Part I: The Viability of the Euro; Part II: Management of the Euro; Part III: The Euro in the International Economy; Part IV: Conference Sessions; and Part V: Keynote Session. Besides addressing the economic implications of the euro, the book also discusses the euro's political ramifications. This volume promises to be one of the most timely and thorough treatments of the euro and its impact on the international economic system.