Euro Challenge

The New Year began with an ambitious currency experiment. In theory, the euro had already been around for two years. But until January, currencies like the legendary DM, French franc and guilder continued in circulation while accounting was done in the virtual currency.

A single currency will improve efficiency across the region. Of course, imbalances will remain. Compare Bihar and Gujarat after centuries of currency union if you wish to understand why Holland will still outrank Portugal in 2050.

Indian trade with the euro region exceeds its trade with USA. But European trade is also often dollar-denominated. The Indian forex market does 80 per cent of trade in dollars with less than 5 per cent of volume in euros.

Those numbers will change. Euro-denominated transactions will naturally increase and it is likely that trade with the euro region itself will grow because of the currency union.

A simple hypothetical example: Infosys used to log European billings in dollars, marks, and francs. A Dutchman can now ask the Frankfurt office of Infosys for a job-quote in euros. What