It will take three years to convert national currencies into euro notes and coins; the constraint being the supply of euro money. Visualised as a genuine currency like the US dollar, Euro seems slated to remain an accounting unit for some time. It will replace the current ECU on a one-to-one basis. This much is known. What is not known is how the euro will quote vis-a-vis the US dollar. Will the exchange rate be the weighted average of the 11 currencies' quotes against the US dollar? What will be the mean rate around which it will fluctuate in a floating market? These unknowns contribute to the mystique of the Euro.

The 11 nationsadopting it have been able to converge their policies on tight public debt, low inflation and stable intra-European exchange rates. They have achieved low interest rates. All this should make the euro a strong unit. Participating European currencies appreciated in terms of the heavily depreciated tiger currencies. Euro's strength vis-a-vis the US dollar is, therefore, taken for granted in India. Banks are advising (perhaps rightly) a shift from dollars into German marks.

But if the mark is given the weight due to it in the euro, the chances are that the euro will be overly strong. Europe will then lose exports. (Britain faces this predicament in the wake of a strong pound). A big unknown is how euro will be managed to cope with fluctuations in the business cycle.

Euro has been inspired by two principal objectives: to smoothen intra-European trade and investment and to secure Europe a voice in the world economy. From the Indian point of view, euro will help Indian exporters and importers to assess theprices they get from different European countries. This could improve trade. India could also take advantage of the low interest policy (underlying euro) to tap commercial borrowings. But the fact remains that the US is India's biggest customer as it is of China's. Europe will have to be much more open to Asia than it is today--and become the engine of Asia's trade expansion if it is to match US influence in the world economy. Only then will Euro become more visible than ECU and rival the US dollar.