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Euros pile


’20 years on, it’s clear that the euro has been a force for good’ 

Published 7 April 2022 in Finance • 6 min read

The common currency was a bold experiment, but there can be no doubt that its success has brought prosperity and stability to all who signed up.

I still remember as vividly and if it were yesterday a lunch conversation with my colleagues at the Yale School of Management in late 2001. It was just  a few months before the euro was introduced as the common currency of 12 European countries. The changeover rate between the new currency and the legacy currencies of these countries had already been fixed, on 1 January, 1999, and by then the EUR-USD exchange rate was about 0.85, meaning you would receive 0.85 USD per euro. Laughter rocked the table when someone entertained the hypothesis that one day there would be parity between the two currencies.

But by July 2002, the euro was already more expensive than the dollar. The relative price of both currencies is by no means an indication of which one dominates. Still, it remains interesting to recall the original skepticism with which the new currency was welcomed, especially outside of the euro area.

We are, today, living through the most difficult times in Europe since 1945. How different might history have panned out if Ukraine had been a member of the EU and had it adopted the euro? Perhaps it is also useful to reflect on the reasons why the country’s accession to the EU and the euro is only being considered now that Ukraine has been invaded by Russia. We must learn from the experience of other euro members as we imagine the best possible scenario for a future Ukraine.

“When capital is cheaper, companies are worth more. That is why euro-area stock markets displayed such a strong performance in the years following 2002”

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