Part of VOA's Year End Series

The European Union's new currency, the euro, has had a tough start since it was launched one year ago. For most of the year, currency dealers sharply marked down the value of the euro against the U.S. dollar.

The euro went as low as $0.83 to the dollar in 2000. Analysts gave many reasons for the decline, including a surge in oil prices and the booming American economy.

The European economy is heavily dependent on imported oil. When oil prices hit a 10-year high, this sent a shock wave through Europe, prompting strikes by truckers and complaints by consumers about high fuel costs.

The American economy continued to boom through most of 2000, keeping the dollar strong, and this put further pressure on the euro -- although at year's end the euro rose to about $0.94 to the dollar.

While circumstances may change, there are key fundamental differences between the euro and the dollar. Usually a strong currency is backed by a strong central government. But the euro is backed by 11 governments -- 12, as of January 1, when Greece joins the European Union. The currency does not speak with a single voice, and this creates uncertainty.

Traders in Luxembourg, one of Europe's banking centers, follow currency markets closely. Lucien Thiel, general manager of the Luxembourg Bankers' Association, says the multi-national aspect of the euro is a problem. "Europe itself, and the currency, the euro, doesn't have a face," he says. "Although you have one face for the currency -- that's of course the head of the European Central Bank, Mr. [Wim] Duisenberg -- you have at least 11 ministers of finance and prime ministers who are also talking about the euro."

Mr. Thiel says the U.S. dollar does not suffer from this multiple-personality disorder. "If you are talking about the dollar, you have a face for the United States -- that's the president. And you have the face for the currency, that's Mr. Greenspan," he says.

Alan Greenspan is chairman of the U.S. Federal Reserve Board.

There are also psychological factors that distinguish the euro and the dollar. At present, the euro is only a theoretical currency; people do not have euros in their pockets. The currency is used only on a business-to-business basis, and for some banking transactions.

Euro bank notes and coins will be introduced in January of 2002. The currency was officially launched in January 1999.