After its introduction, the euro was initially used only in cashless payment transactions. It was not until 2002 that it was also possible to pay with the new currency in shops and cafes. On paper, the euro has been a great success. The size of the euro area economy has grown by 72% to €11.2 trillion since 1998. In the Netherlands, growth was even a little higher, so that our economy is roughly double the size it was 20 years ago. The number of European countries where you can pay with the currency has risen from 11 to 19. In this area, three quarters of the population say they are happy with the euro. Moreover, in the Netherlands, we no longer have to be homesick for the guilder. On 8 April 2014, the digital guilder was introduced as a crypto currency.
Difficult times
However, the euro is not an unqualified success story. The European debt crisis several years ago brought the disadvantages of a single currency into full focus. Initially, bond markets lumped the sovereign bonds of all eurozone countries together. This gave Greece the opportunity to run up its sovereign debt to the point where it risked collapsing under this burden. On top of that, it is no longer possible to tackle economic problems at home through its own exchange rate and interest rate policy. That role now falls to the European Central Bank (ECB). In practice, determining the ideal interest rate is a very difficult task. The current rate of 0% is ideal for Italy and Greece, for example. However, for the Netherlands, Germany and other northern European countries, this interest rate is far too low. Many savers will no doubt feel the same way.
Back to square one?
The creation of a European banking union should help protect the eurozone from new shocks, such as the Greek debt drama. Such measures should ensure that the euro will still exist in 20 years' time. The big question, of course, is what the currency will be worth then. If the past is any indication, the difference with the dollar need not be that great at all. On 1 January, you got $1.15 for a euro: exactly the same level as twenty years ago. In the meantime, by the way, that exchange rate fluctuated between $ 0.85 (2000) and $ 1.60 (2008). In view of the rapidly rising US government debt and a possible first interest rate move by the ECB around the summer, the euro could easily gain some ground against the dollar in the near future. How this will be in 20 years' time is a lot harder to predict.
