| D-Mark, Mark Two |
October
2002 |
Euro Proves Its Value
The euro has a rocky start when it was launched back in 2001, dropping around 14% in value against the US dollar in the first year or so of its existence. Since then, it has recovered to the point where it is more popular in Russia than the buck among those who fear holding rubles -- most of the people. Indeed, it is almost as popular as the currency it replaced, the D-mark, in what can only be described as a giant step sideways.
This is not to say that the Eurozone's creation was not progress. In establishing a real, single European market, a common curerncy was a sine qua non. However the world already had a second reserve currency in the D-mark, and in dropping it for the euro, the best the European Central Bank [ECB] could achieve in this field was a draw.
The euro is a less stable currency than the D-mark by definition -- it is the exact same currency plus the political instability of Italy, France, Belgium, etc. When Europeans thought their own political systems were temporarily unhinged, they bought D-marks. Now, they must settle for the less liquid Swiss franc and pray they don't get squeezed when it's time to change back.
September 2002 was the time the euro proved its value as a reserve currency. It had regained its strength against the dollar, and more eastern Europeans wanted it than wanted dollars (according to banking forex sales). The ECB managed to create the eurozone without losing the allure of the currency as a safe haven. It could have been much worse.