- The Washington Times - Thursday, January 3, 2002

PARIS The euro rose in value against the dollar to 90 cents yesterday, the first day of trading after the new currency was introduced on New Year's Day.

The increase confounded euro critics as 304 million Europeans generally took to the new currency, despite some confusion, with a gusto that has left bankers scrambling to match demand.

The 12 participating nations reported minor glitches, but only in Austria was there a serious problem in what has been termed the biggest logistical exercise in peacetime. Cash machines there sputtered to a halt and refused to dish out the eight varieties of euro notes, after computers were overcome by the heavy flow of withdrawals. The problem was remedied within an hour.

"Everything seems to have gone well," said Audrey Childe-Freeman, an economist for the Canadian Imperial Bank of Commerce. "The market was a bit nervous and we now see that all is well, and the euro is profiting from that."

The euro strengthened yesterday amid promising economic outlook reports for Europe, said Citibank analyst Robert Sinche.

But he predicted the new legal tender would fall over the next few months, as the dollar was expected to be much stronger.

Since it was introduced in financial markets at a rate of $1.17 three years ago, the euro has struggled to match the dollar. It crashed below parity within a year and fell as low as 82 cents late in 2000 before stabilizing somewhat last year.

In Germany, home of Europe's once most powerful currency, the deutschemark, and headquarters of the European Central Bank, the mastermind of the euro rollout said far more euros had gone into circulation across the continent than bankers had expected.

"We have been surprised," said Peter Walter, a senior official at the Bundesbank. "It seems people are really anxious to get the notes in their hands and feel them."

But he said enough notes were already in stock to meet demand for the next few months.

Mr. Walter said he now expects that almost all marks will be replaced within 10 to 12 days of the euro's cash introduction more than a week earlier than the banks and planners had expected. France's finance minister, Laurent Fabius, yesterday made a similar prediction for his country.

Mr. Walter also said the number and severity of bank robberies and heists reported in the first two days was average compared with a year ago. "We had a lot of robberies last year anyway, and today's are just in line with statistics," he said in a television interview.

Lines in some of the 12 euro-zone members were longer than usual, but there was little of the rancor and outrage that skeptics had predicted.

"The queues were not much longer than usual," Mr. Walter said.

But there were some hitches.

Traffic backed up on toll booths outside Athens, on highways in Italy and on the main bridge into Lisbon, Portugal, as drivers tried to get euros as change from attendants. Authorities appealed to drivers to use exact change.

Lines were longer than usual at some banks and post offices. In Naples, police were called when retirees waiting for their first euro pensions got unruly. To help foster acceptance of the new currency, Greek Prime Minister Costas Simitis visited five banks in Athens and asked customers to show patience.

Bank unions in France and Italy tried to stage strikes but drew little support and caused only minor disruptions.

In Ireland, many complained that some pubs were rejecting old Irish coins because it was proving too burdensome to manage two sets of change

Last night, European leaders were responding with something slightly short of euro-phoria. They had been waiting with some nervousness to discern public and market reaction since E-day introduced with much fanfare at midnight on New Year's Eve with continentwide fireworks, operas, and theme-tuned by Beethoven's "Ode to Joy."

In Paris, however, that joy was tempered by the practical complications of making supposedly simple transactions and the temptations of price gouging.

The Bank of France said it would halt until further notice its foreign-exchange service for all currencies except those of the 11 other participating countries. They cited a need to concentrate on the switch to new euro notes and coins.

The euro was actually introduced in 1999, when national currencies were pegged to it at fixed rates and ceased to trade independently, but the paper money first became available on Tuesday. National currencies will continue to circulate side by side with the euro for up to two months.

Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain make up the new euro-zone. Britain, Sweden and Denmark, though members of the European Union, have opted out.

This story is based in part on wire service reports.


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