[EDITORIALS]Are we ready for the euro?At the beginning of the new year, the 12 member countries of the European Union will switch to a new uniform currency, the euro. The event will mark the beginning of a unique region representing 16 percent of world production and 20 percent of international trade. It is the culmination of an effort to merge the European continent that began in 1957, which also involved through the years agreements for freer cross-border trade in goods and services.
Short-term problems will arise. There will be some confusion, and inflation could become a problem. Synchronized prices may reduce business profits and prolong Europe's economic problems. But the removal of the last obstacle － the costs of intercurrency transactions － in commercial activities will ultimately reinvigorate the EU economy.
The single currency and the single market will create new challenges for other economies. There will be pressure on prices that continue to reflect intercurrency transaction costs, and the "otherness" of the non-European economies will be modified. The challenges require urgent adjustments to make European operations of our multinational businesses more effective. A realignment of investment, production and marketing activities is inevitable.
Production bases in Europe will move to regions that offer lower costs and better productivity. The continent's diverse consumers must be studied to reorient marketing strategies and raise our products' competitiveness there.
The euro now has only about a third of the U.S. dollar's acceptance for international transactions, but it will not be long before the euro matches the dollar in international trade and in national reserves. We should recognize the euro's potential importance in the global exchange rate mechanism. Reserves and liquid holdings of the currency should be increased, and hedging will be needed to cover that increased exposure.
The launch of the euro is a step further toward the creation of economic blocs. We should not be a bystander. We cannot stand alone in the world, so it is imperative that we develop a northeast Asian trade grouping.