LONDON -- Europe gave birth to the euro, its new common currency, at midnight, ushering in one of the biggest changes in the world's money since World War II and presenting the almighty dollar with its strongest challenger to date.
"We are turning a page that can never be turned back," Portuguese Finance Minister Antonio Sousa Franco said as ministers of the 11 participating nations met in Brussels, Belgium, to fix the euro's value against existing European currencies such as the mark and franc.
These old currencies will continue to be used until 2002, when euro bank notes and coins come into existence, but will henceforth be regarded as units of the euro.
The euro, which initially will be used only by businesses for invoicing customers and by banks and stock markets, came into existence first in Finland, which is in a time zone an hour ahead of the rest of the European Union's continental states. Ireland, an hour behind the continent, was the last nation to welcome it.
At the Brussels finance ministers' meeting, telecast live to much of Europe, ministers toasted the birth of the euro with champagne while outside 3,000 yellow and blue balloons bearing the euro symbol were released into the city's leaden skies.
Britain, Sweden and Denmark were watching from the sidelines, having declined to join the euro zone at this stage, as was Greece, which did not qualify.
In London's financial district and in other major cities across Europe and other parts of the world, an army of bank employees began what promised to be a long weekend of work preparing for the first transactions in euros Monday after the holiday weekend.
They will have to convert cash balances, redenominate bond and derivative portfolios and make final changes to computer systems which have been given new software to cope with the change.
The decision to adopt a single currency was taken at a European Union summit in Maastricht, a small Dutch city, in November 1991.
The purpose was primarily political, to advance the cause of European unity, but the euro will have profound economic effects if it works as intended.
Businesses will be relieved of the costs of currency exchanges in their export operations. Travelers will be spared the cost of changing their money each time they go to a different country.
Consumers may find prices falling in some countries as the differences now masked by different currencies are made plain. The euro, serving an area of 290 million people, also is expected to become a rival to the dollar as the world's principal reserve currency.
The euro zone of Germany, France, Austria, Belgium, Finland, Ireland, Italy, Luxembourg, the Netherlands, Spain and Portugal will account for nearly one-fifth of world economic output and trade.
"Today is a great day for Europe, a great celebration, because Europe has shown it can pick up the challenge of the future," European Commission President Jacques Santer of Luxembourg said.
Yves-Thibault de Silguy, European Union monetary affairs commissioner, said: "Europe, the greatest trading power in the world, will have its own currency and be able to reshape the international monetary system with the aim of achieving greater stability and growth in the world."
French Finance Minister Dominique Strauss-Kahn announced that every baby born in France today would receive 100 euros in a savings account.
An electronic billboard showing the value of 11 national currencies in euros was unveiled at the Brussels meeting.
The euro will be worth 1.95583 German marks, 6.55957 French francs, 1,936.27 Italian lire, 40.3399 Belgian and Luxembourg francs, 2.20371 Dutch guilders, 166.386 Spanish pesetas, 200.482 Portuguese escudos, 13.7603 Austrian schillings, 0.787564 Irish punts and 5.94573 Finnish markka.
The euro's value against the dollar is expected to be highly volatile, but experts believe that it will strengthen against the dollar in the medium term.
Despite the celebratory mood in Brussels yesterday, there was an undercurrent of friction involving France and the governor of the new European Central Bank, Wim Duisenberg of the Netherlands.
Last spring, France tried to have its central bank governor, Jean-Claude Trichet, appointed to the post over the opposition of most EU states.
The issue finally was resolved when Duisenberg agreed that he would not serve his full eight-year term, leaving it to Trichet to complete it. Most officials understood that Duisenberg would serve only four years.
But he told the French newspaper Le Monde on Wednesday that he would not quit after four years. He said he might even stay on for eight.
Strauss-Kahn accused Duisenberg of threatening to renege on "the commitments which he made."
Luxembourg Prime Minister Jean-Claude Juncker expressed regret that the issue had been reopened.
"It's not of overwhelming political intelligence to reopen the debate," he said.
The Central Bank will oversee the operations of the euro zone and will set interest rates for the 11 member countries.
Pub Date: 1/01/99