Twenty months from now, Europe will have to learn to do without DM and FFR on its supermarket price tags. At least 15 currencies, all well-entrenched for half a century, will begin to vanish from cash tills, taxicab changers, metro ticket machines -- and money markets. The national currencies will be tolerated for three more years, of course, but their usage will be actively discouraged. Central banks will call them in, as and when found. And in 2003, if you are still holding Francs or Escudos, you could try papering the walls with them. There is a precedent, after all. A number of homes in Berlin were found slathered with Deutschemarks after the fall of the Reichstag. In 1945, when Europe finally got down to calculating the profit and loss and found that war was mostly about the latter, a couple of inspired people suggested a unified Europe, a place where the factors of production that fed the war machine could not be controlled by a single nation. They said that the steel and coal industries of the Continent ought to be made supranational assets. Give Paris some say in deciding the production schedules for the Ruhr, and France and Germany would never be able to go to war with each other. Naturally, they were dismissed as madmen.

But in this decade, the mad dream is coming true. As is now widely realised, unification even political unification begins in the marketplace, in border duty posts and central banks. It has to take over bourses and money markets before it can win hearts and minds. No noble sentiment can be more compelling than a sensation of warmth in the region of the pocket. European unification was and remains a political initiative, but economics will always be its chosen mode of expression. It began with a common post-war policy on steel and coal. Today, it is equalising deficits before locking all its currencies onto the euro, the common coin, in January 1999. Most Europeans appreciate that the opening up of borders has made life easier for them. Already, the borders of the 15 constituents of the Union are porous to goods, services, capital and people. Trailer rigs no longer stop at customs checks. The posts are still manned, but the officials have no perceivable function. Possibly, they are still there because the Continent takes its history seriously. And nobody checks passports at rail stations, depriving European cinema of one of its stock dramatic sequences.

The Monetary Union will be another labour-saving device. Today, most Europeans keep change in at least four currencies, of the countries that they have to visit every few months or so. Long-haul drivers have to be especially careful, or they would find themselves stranded at toll machines on foreign shores. To appreciate the problem, assume that you are travelling by train from Delhi to Madras. You would have to be holding coin in up to four currencies, just to buy a few cups of coffee along the way.

Of course, the single currency has wider implications. It will allow Europe to become an economic entity on a par with the United States. Or, going by last year's figures, exceeding it. In 1996, the external trade of the EU countries setting aside the trade conducted among them constituted 20.9 per cent of world trade. The US and Japan were trailing with 19.6 per cent and 10.5 per cent. The Monetary Union will bring European markets the sort of clout that should go with those figures, and which they have always been denied. As the European Commission noted last week, "The conversion of sovereign debt into euros will create a single market in which bonds issued by different national authorities are virtually interchangeable. The euro-denominated market will soon become one of the world's largest markets."

Besides, European economies are heavily influenced by international exchange rate movements, because exports account for 30 per cent of European GDP. The brunt is now borne by relatively weak currencies, none of which, with the exception of the Duetschemark, can be expected to stand up to the might of the dollar, which defines 80 per cent of financial market transactions. The euro should help damp out the roller-coaster ride that plagues most European players. Of course, the pre-eminence of the dollar has been declining since the early eighties. Today, more and more money market transactions are done through the DM and the yen. Private investments in dollars have fallen from 67 per cent to 40 per cent in the meantime, while savings in European currencies have risen from 13 per cent to 37 per cent. The European Commission finds some relish in the hope that the euro will hasten this process and ensure the downfall of the dollar. Indeed, OPEC and Airbus Industrie are already preparing to issue their prices in euros in 1999.

But despite the obvious advantages of the euro, there is a fair amount of scepticism in the air in some of the constituent countries. First, there is the cultural problem. A national currency is one of the most visible expressions of national sovereignty. To the British, the act of handing over the right to coin money to the European Monetary Institute in Frankfurt looks like abject surrender. They want the Queen's mug on their notes, and cannot bring themselves to believe that Threadneedle Street may not remain a hub on the world financial map for very long.

Most Europeans, inured as they are to juggling several currencies, have no qualms on that count. But they have now been confused by the ecu, the notional money that is the precursor to the euro. People have part of their savings in ecus, a currency they will never see, which bears no reassuring signature from a central bank governor, which will never be counted out to its rightful owner by any bank teller. It's enough to make hardened speculators go queasy all over. Besides, there has been a very understandable fear that the constituent nations will be found wanting in May next year, when they will have to qualify for the Monetary Union. Even Germany, which has the strongest case, voiced reservations some time ago.

But European finance ministers assured this week's G7 meet in Washington that the countdown to the euro was irreversible. In fact, even little Portugal, patronisingly dismissed by northern Europe as a poor `Mediterranean' country, is slashing its deficit to 2.6 per cent of GDP this year. Countries need only 3 per cent to join the EMU. The euro is obviously inevitable. For the moment, it exists only as large chocolate coins wrapped in foil, which are served with coffee at the Union offices in Brussels. But just 20 months from now, it will be out in milled metal, and world markets will have to come to terms with a powerful new player.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.