Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

EU Gives 11 Nations Green Light On Euro




BRUSSELS, Belgium -- Europe's quest for a continent-wide currency got a big boost Wednesday when the European Union's executive body gave the go-ahead for 11 nations to adopt the euro at the end of the year.


The choice of Germany, France, Italy, Spain, the Netherlands, Belgium, Portugal, Finland, Ireland, Austria and Luxembourg is expected to be confirmed by EU leaders in a final decision at a summit May 2.


When the euro is launched Jan. 1, the 11 countries will form an economic powerhouse accounting for almost one-fifth of global economic output and trade. When euro banknotes and coins hit the streets two years later, 290 million Europeans will be using the same currency.


"This is an important epoch that will decisively influence our country, the European Union and the world," said German Chancellor Helmut Kohl, the architect of Europe's economic and monetary union.


"It is the beginning of a new era,'' French President Jacques Chirac proclaimed in Paris.


The selection of the EU's financial first 11 nations was widely expected. Greece had no chance of passing the economic tests set for euro-zone membership. The other EU members, Britain, Sweden and Denmark say they want to hang on to their national money, at least for now.


The only lingering doubts had been over Italy, whose 2,372 trillion lire ($1.327 trillion) public debt was seen by some as a potential threat to the euro's stability.


Low public debt is one of the five criteria the EU set as a requirement for joining the euro-zone.


According to the commission's forecasts, Italy will take until at least 2016 to get its debt down from 121 percent of gross domestic product to the EU's target of 60 percent, but Rome's commitment to intensified debt-cutting was sufficient for it to sneak in.


"We can celebrate now, but we cannot drop our guard,'' Italian Prime Minister Romano Prodi told reporters in Rome. "Forging a united Europe is the start of a grand historic process.''


In a warning that Italy was not yet in the clear, the Dutch central bank released its own report on the EU countries' readiness to join.


"The current debt and deficit levels [in Italy] are very vulnerable,'' the Dutch bank said. It added that Italy should make a special commitment at the summit in May to balance its budget and quickly slash debt.


In a separate report, the European Monetary Institute, which will become the euro-zone's central bank, endorsed the choice of 11 nations. However, it cautioned the euro's long-term stability was dependent on some countries -- notably Italy and Belgium -- cleaning up their finances.


There was a cautious reaction to the commission's list in Germany, the EU's strongest economic power.


Finance Minister Theo Waigel said in Bonn the commission's decision was an "important basis'' for the leaders' decision in May. He stressed nations must show the durability of their deficit and debt-cutting efforts so the euro can become as stable as the mark. Germany's influential central bank, the Bundesbank, plans to issue its own euro readiness report Friday.


With parliamentary elections scheduled for September, German politicians have to overcome deep public misgivings about giving up the rock-solid Deutsche mark for the uncertainties of a currency shared with Italy and other nations without post-War Germany's long tradition of financial discipline.


The commission's figures showed the EU economy continuing to pull out of the doldrums of the early 1990s, despite a slight dampener caused by Asia's financial turmoil. The forecasts showed the economy of the 15 EU nations will grow 2.8 percent next year and 3 percent in 1999.


The revival that started last year helped all the EU nations except Greece meet the key requirements of euro-zone membership that include budget deficits no higher than 3 percent of GDP; low inflation and interest rates; stable currencies and debt falling towards the 60 percent target.


Greece hopes it can join the currency union in 2001. Britain, Denmark and Sweden could have met the criteria, but decided to stay out, largely because of public fears that ditching the national currency will erode national independence.