The single currency

Fresh produce priced in euros is a common sight in Continental supermarkets

LONDON, England (CNN) -- They come in a variety of sizes, in denominations of 500, 200, 100, 50, 20, 10 and 5.

They are decorated with designs of windows and gateways -- symbols of openness -- on one side, and bridges -- a metaphor for the spirit of communication -- on the other.

All bear the image of a Greek epsilon, bisected by two horizontal parallel lines.

They are the euro. Officially launched in January 1999, they emerged from electronic transactions into the wallets of the 300 million consumers in Europe's single-currency zone on January 1, 2002.

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Eleven member states -- Belgium, Germany, France, Spain, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland -- joined in an initial wave of single currency participants after satisfying a series of economic conditions decreed by the EU. Greece was waved in as the 12th member and joined the eurozone in January 2001.

Britain is still considering membership. Sweden rejected membership in a referendum in September 2003, and Denmark voted against the euro in 2000.

European nations hoping to join the single currency must satisfy a number of strict economic conditions.

Countries must keep their government budget deficit below 3 percent of gross domestic product, maintain low inflation, and produce a domestic surplus. Public debt can account for no more than 60 percent of GDP.

Roller-coaster spectacle

The euro has provided a roller-coaster spectacle since it entered the world's international currency markets on January 4, 1999.

From a launch level of $1.17, the euro dropped to a low of just under 83 cents in autumn 2000 but has since firmed against the dollar.

And for all its early hiccups, some analysts think the euro may have seen its worst. Gone are the days, they say, when every downward blip in the exchange rate sent currency traders racing for the exits.

"All the troubles of the euro have not gone away, but they are largely forgotten," said Nick Parsons of Commerzbank in London.

In June 1988, when the European Council first laid out the objective of binding Europe together in a seamless currency union, many believed it would never see the light of day.

The so-called "Delors Report" -- named after the then-president of the European Commission, Jacques Delors -- proposed a three-stage road to European Monetary Union, or EMU.

A crucial juncture in that road was reached on June 1, 1998, when the EU established the European Central Bank to oversee the introduction of the single currency and set monetary policy across the eurozone.

Virtually overnight, the ECB supplanted the German central bank, or Bundesbank, as Europe's most potent rival to the U.S.-based Federal Reserve.

In terms of influence, the ECB's chief, a former Dutch finance minister, Wim Duisenberg, has already been compared to his U.S. counterpart, Alan Greenspan. But Duisenberg, by his own admission, is still feeling his way in his new post.

Steve Barrow, of investment house Bear Stearns in London, said: "We have teething problems with the new currency and with the new central bank. Everyone had relied on a pretty reliable Bundesbank. Since the ECB, what's happened in euroland is we've seen a transfer of power from a credible central bank to an unknown quantity."

Convincing the public

Anti-euro protesters rallied in Frankfurt in April 1998

Rallying a wary public around the euro has been a gradual process.

Unifying prices for products across the eurozone, the currency's supporters argue, makes prices more transparent and reduces cost differences between identical products from one country to the next.

But old habits die hard -- and currencies are no exception.

For many Germans, scrapping the mighty Deutschmark for the relatively untested euro required a leap of faith.

Older Germans, now living in Europe's largest economy, still remember the ravages of hyperinflation in the 1920s. Devaluation after World War II further decimated savings. For many, the mark is seen as a lynchpin in Germany's post-war economic "miracle."

Richard Hilmer, the managing director of market researcher Infratest, based in Berlin, said German public opinion about the euro tended to divide along generational and class lines.

"The older generation is a bit more sensitive towards the euro and the Eastern Germans are also a bit more sensitive as they had to change in 1990 (the year of reunification) from the East German Mark to the Deutschmark," he said.

Signs of steady euro support

EU officials unveil euro exchange rates on eve of launch in January 1999

Six in 10 EU citizens support the single currency, according to an April 2000 survey by Eurobarometer, a public opinion service that reports regularly to the European Commission.

The findings are nearly identical with those of a survey taken a year earlier, on the eve of the euro launch.

The economies of the eurozone grew 3.4 percent in the first quarter of 2000, compared with the same period a year ago. The 15 EU nations, by contrast, grew at an average 3.3 percent in the quarter.

But the real test of the euro, some economists say, may only come once member states begin to seriously tackle reforms of their tax, labour and pension laws.

Germany took a major stride in this direction in July 2000 when the German parliament approved a sweeping tax reform.