Euroland, with a 19.4 per cent share of world GDP and breathing down the the US with 19.6 per cent, will emerge as another major trading block, said Economic and Financial Affairs Unit (DGII-D) head in Brussels Peter Bekx.

"Even if we exclude the European countries' trade among themselves, the euro area will still be the most important commercial block in the world with a share of 18.6 per cent of trade against 16.6 per cent of the US," he said.

The sheer size of the eurozone with around 300 million people makes it evident that the euro will play an important role in international trade. World trade will see major changes through trade-creation and trade-diversion effect, said Bekx.

Apart from profiting Europe, theeuro will give a fillip to international trade. Countries must follow the policies based on low inflation, stable monetary conditions and healthy public finances. These, being the recipe for lower interest rate, will encourage investment and economic growth. Good growth will increase the import potential of the European countries which means higher export opportunity for non-European nations.

There, however, may also be some adverse effects from the trade diversion. "The reduction of transaction costs in the European union, elimination of exchange rate risk in the Euro area, will increase competitiveness of European companies and countries," said Bekx. This, he added, may divert certain trade flows which presently come form outside the European Union to be replaced by the trade flows between European countries.

This trade diversion may be more prominent in some sectors and may affect certain non-European countries more than others, he said, adding that the Asian electronic industry may be hit.

However,research done by various international institutions indicates that the effect of trade-creation will be much larger on world trade than that of trade-diversion.

Though the euro will also play a major role in trade and economy, its influence will be apparent in those countries which have closer ties with Europe such as the CIS and Mediterranean countries. Latin America may not be significantly affected in initially and the dollar will remain the main currency, at least initially, in its own zone. The region is the second largest trade partner with Europe after the US and the impact is expected to percolate slowly.

The implications of euro for Asia is still unclear. "It is yet to be seen how the recent financial crises in the region will affect foreign currencies," said Bekx.

However, there is a clear indication from Asia that it would like to reduce its dependence on the dollar. "They have a choice between the yen and euro," Bekx said adding that "the Bank of Japan has already started giving a favourableresponse. Initially we may see the euro competing with yen for second place in the Asian region."