Euro still invisible
Everybody knows the all-European currency the "euro" made its debut in the world on Jan. 1, 1999, but nobody has ever seen a euro banknote or coin.
Three months have already elapsed but the euro remains invisible, although it has been touted as the counterbalance of the mighty U.S. dollar. Indeed, if and when the euro is used, then the whole world is no longer dependent on the U.S. dollar alone, because transactions with European countries will be done in euro, and thus banks in Asian countries have to open a euro foreign exchange reserve account with their counterparts in Europe when they open letters of credit for trade transactions.
So I cannot understand why the euro is not yet actively used, although even the exchange rate of one euro to US$1.0736 on March 29 was reported by the Far Eastern Economic Review in its April 8, 1999, edition, and Bisnis Indonesia in its March 27, 1999, edition quoted one euro at Rp 9,582.19.
Nevertheless, the appearance of euro will have an advantageous impact on the world. The world demand for the dollar will be greatly reduced. Up to now, Uncle Sam is economically in a superior position, because every country needs dollars as the mode of payment for its trade transactions. Uncle Sam can freely print greenbacks for his purchases, so to speak, because there is virtually no limit for its demand in the world.
All the present miseries in Indonesia stem from the devaluation of the rupiah against the dollar, which reached Rp 17,000 per dollar in 1997. However, I believe that until the euro is actively used, many difficult problems have to be solved.
It reminds me of the time when East Germany was merged with West Germany and the East Deutsche Mark (DM) was equal to one West DM; so the East Germans had a good time spending their currency. It was quite a windfall for them, because the intrinsic value of their DM was far lower than the West Germans'. Undoubtedly they began a spending spree by buying prestigious Mercedes Benz or Porsche cars or other valuable and expensive commodities.
Now in the case of the euro, if the currency of a poor European country is evaluated at a 1:1 ratio with that of a rich country, problems are bound to appear.
A. DJUANA
Jakarta