Europe's new single currency, the euro, slid to near parity against the U.S. dollar today. It was the latest tick down in a relentless plunge since the euro started trading last Dec. 31.
On its day of birth it was worth $1.1667. By late today in New York trading, it was worth $1.0170, a slide of 13 percent.
European finance ministers meeting here today were so nervous about moving markets any further with their words that they responded to the drop with an orchestrated no comment. "I will talk about the euro when I decide to. I have not decided to," said French Finance Minister Dominique Strauss-Kahn.
Politically, the euro's decline is humiliating for a continent that wanted its new money to rival the U.S. dollar as the world's most desirable currency, the main medium for global commerce, the "reserve currency" held by central banks to bolster confidence in their economies.
Instead of craving the euro, traders are selling it, which is what drives the price down. The activity demonstrates not only a lack of confidence in the euro now, but also a gloomy outlook for the euro in the near future.
On the other hand, the falling euro is producing beneficial economic effects, on European businesses in particular, whose exports are suddenly more affordable in non-euro countries. European officials hope that eventually the benefits of the bargain basement currency in the form of improved economies will help elevate the euro. It also has made American tourists in Europe happy, as their dollar goes at least 13 percent further in the euro countries than it did just a few months ago.
The cause of the decline relative to the dollar is principally the good health of the U.S. economy and the relative weakness of the economies of Europe, particularly that of Germany. The disparity has meant that investment has continued to flow into the United States over Europe, causing the dollar to rise and the euro to fall.
"The U.S. has a strong economy and decent growth -- you have to be in the dollar," currency trader Christoph Benz of HypoVereinsbank told Bloomberg News. "The euro's still a sell."
Today's decline from $1.0196 Friday in New York trading was triggered by weaker-than-expected industrial production figures from Germany. As Europe's biggest economic motor, the sick German economy probably is the leading factor inducing investors away from the euro.
But in past weeks other shifts down in the currency's value have been blamed on Italian budget deficits, or France's Socialist government. European nations are learning the price of being linked into the same monetary chain.
The war in Kosovo also gave rise to doubts about Europe's political stability and the ability of the European countries to finance the NATO military action without excessively raising their budget deficits. But the peace has done nothing to halt the slippage of the euro.
The euro was conceived as a way to further integrate the economies of the free-trade zone that is the European Union by facilitating cross-border trade and investment. A single currency removes exchange-rate risk -- a truck manufacturer in Germany now can take orders from a shipping company in France confident that the price on delivery will be the same as the day of the order was placed, just as Americans in one state can order goods from those in another without worrying about a change in the actual cost.
The euro countries are Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain. Euro cash -- in the form of paper and coin -- has not yet arrived in member countries; that won't happen until 2002. But it is an accounting unit that is a currency in every way but cash. Stock prices here are quoted in euros, and many stores and restaurants in the euro countries quote their prices in euros as well as the national currency.
Four members of the European Union -- Britain, Denmark, Greece and Sweden -- for different reasons, are not euro members and their currencies float against the euro on international financial markets just as the dollar does.
Though they rarely said so explicitly, European politicians also hoped the euro would challenge the supremacy of the U.S. dollar as a global reserve currency; that is, that other nations and businesses would hold their financial assets in euros.
The integration aspect of the euro has come to pass to some degree, but the euro's weakness has made ridiculous the idea that it could challenge the dollar any time soon. When it began life worth $1.17, analysts at the time cheerfully forecast it could rise to $1.22 by spring.
It's been downhill ever since.
Many experts predict the falling euro will help turn around the European economy later this year as French, German, Italian and other European exporters sell more to other parts of the world because their prices in other currencies are lower. A pickup in European growth is forecast for the second half of the year.
And the low euro is helping the European economy by encouraging tourism. France and other countries are expecting record numbers of tourists this summer, especially from the United States, and those people stimulate the economy by spending money in hotels and restaurants.
In addition, as the euro's value approaches that of the dollar, American tourists can finally figure out what everything over here costs.
"Whatever we purchase, when we see the price tag in euros and know it's about the same as in dollars, well, it just makes it a lot easier. It sure is less complicated than dividing by six," the French franc-dollar exchange rate, said Ann Osborne, visiting Paris from Dallas. "This is my third trip to Paris, and I can tell you, it's easier with the euro."
Her purchases on this trip told the story: linens, antiques, clothes and shoes, all cheaper in dollars than they would have been a few weeks before when the euro's value was higher.
European tourists here did not seem worried
"It goes up, it goes down. You just have to wait," said Luxembourger Jean Schmit. "We are not against it."
"If it means I can buy more, then I'm happy," said American tourist Mary Galbraith of Seattle as she visited Paris.
Asked if she had observed the euro prices along with those in francs, she said: "It's like in Canada where you see the kilometers and miles indicated on road signs. You see both and just don't pay much attention to either. Like it goes in one ear and out the other."
Researcher Gretchen Hoff in Paris contributed to this report.
CAPTION: (This graphic was not available) The Tumbling Euro