EMU and the EURO: Current and Future Prospects--Introduction

This paper argues that the inception of the euro itself, with its restrictive monetarist institutional structures, to an area which is in a divergent state, which has recently been widened by a process of divergence, is ample reason for long term investors, and, indeed, post-"euphoric", short term speculators, to regard the euro area as structurally weaker since January 1999. It is difficult to predict the fixture course of the euro; once portfolio investors have shifted fully back to their pre-"euphoria" level of holdings of euros, then any number of contingencies may come into play.