The euro, according to its supporters, is the first serious challenge to the dominance of the dollar in the global economy. The Eurozone or Euroland will, they say, benefit from the advantages of a large trade area and will become an attractive destination for inward investment.

Businesses in countries like Britain and Sweden which have remained outside, say that they stand to lose a great deal through continued foreign exchange transactions costs, and the investment and economic stability the euro is expected to bring.

Trade Unions in Britain also agree saying that joining the euro will be good news for jobs. Detractors of the euro, however, say that it willimpose destructive constraints on the relatively worse off participating economies creating greater unemployment and political pressure to opt out. They say that political and social convergence must come before economic convergence. That individual Euroland countries must first arrive at a formula for putting interests of all Euroland countries at par with their own.

Whatever the arguments, this morning financial markets, starting with Finland, the eastern most member country, will be buzzing as trading in the euro begins. The value of the 11 currencies to the euro was set, on 31 December in Brussels, by the finance ministers of the participating countries. These conversion rates will be fixed permanently, until the currencies cease to exist in 2002.

This is how it works: The euro equals one Ecu (a basket of participating Euroland currencies and the pound, used to calculate EU budgets). When the Euro comes into existence at 00.00 hrs on January 1, 1999, it will be traded at the equivalent value of theEcu at that moment. The Ecu will cease to exist and the Euro will be born.

From today most banks and companies and all stock markets in Euroland will do their accounting and transactions in euros. Euroland governments will issue debt paper (like gilts and treasury bonds) in euros. But for the person on the street, the transition will make little immediate difference. They will continue to use their local currency as euro notes and coins (cents) will come into circulation only in 2002.

The only discernible difference will be the two prices marked on all retailed goods, one in the local currency and one in euros. This has already happened in some of Euroland countries. One foreseeable impact of this will be the ability of consumers to compare prices of high value goods, like cars, across national borders and restrict differential pricing used by manufacturers.

Central to the administration of the EMU and the success of the euro is the European Central Bank (ECB). The bank is modelled on the GermanBundesbank, giving it autonomy and independence from political influence. The ECB will work with the national central banks of the Euroland countries, which will continue to be in charge of banking supervision.

The ECB's job will be to set interest rates (currently around 1 per cent), maintain inflation at an acceptably low rate, support economic policies of member states so long as they do not affect the inflation rate. The ECB will, among other things, also look after the foreign exchange reserves of Euroland countries. This structure was put in place over the last 15 years by governments that set ideological store by deflationary monetary policies, enshrined in the criteria needed to qualify for participation in the euro (see box).

Europe has come a long way since then and on the eve of the euro's advent the majority of member countries are governed by centre-left parties which are sceptical of a purely monetarist approach to economic policy and do not, in principle, accept unemployment as a cost ofmaintaining price stability. They would like the ECB to be less obsessed with price stability and more concerned about unemployment. Germany's Finance Minister Oskar Lafontaine voiced the change in view succinctly. He said: ``I don't want to put anyone at the European bank under pressure. The only ones under pressure are those without jobs.''

All sorts of questions remained to be answered. Within the Eurozone countries and the EU countries that have remained outside it, there are varying internal political pressures, country-wise macroeconomic concerns and the uncertainties of the market to be contended with. The prime question is: Whether political convergence will actually follow from determined economic harmonisation may be the key to low the euro will do.

What's Euroland?

Euroland comprises 11 of the 15 European Union countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Spain and Portugal. Four have remained outside it: Denmark, Sweden and the UnitedKingdom, which have opted to postpone the decision to join, while Greece which wanted to join did not meet the stringent economic criteria. The `Maastricht' criteria, named after the treaty that set the timetable for EMU, requires participating countries to have: