| Research guide to European Monetary Union The euro's launch date is drawing nearer. As shown, not least of all, by the striking convergence of interest rates, the financial markets are still expecting that Emu will be established, as scheduled, on January 1 1999, but it is getting increasingly difficult, even for Germany, to fulfil the Maastricht criteria. Assuming that the euro will get off the ground, it is likely to become a serious competitor to the dollar, the world's leading trading, reserve and investment currency. The United States' unique position within the international monetary system is evident from the fact that no less than $310 billion, or 55%, of its current account deficit in the 1990-1995 period was funded with dollars rather than foreign currencies. The surplus countries ultimately invest these dollars in US Treasury securities, which are then held in the countries' monetary reserves. Due to its reserve function, this part of the US debt is "frozen". The ability to incur debt in its own currency, while still being able to conduct an independent monetary policy, and to bill its foreign trade in this currency, which gives it a reliable basis for pricing, are important advantages for a key currency country. |