The unmighty Euro: one view on why the pan-European currency is good for the pioneers of the profit culture--American CEOs. (Essay).

The dollar has never looked so good--literally. Since Jan. 1, when the euro replaced the currencies of Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain, the greenback, that arriviste currency, suddenly looks like it actually stands for something. The quaint symbols of freemasonry on one side and thrifty American patriarchs on the other invoke a sense of history and tradition--two attributes rarely associated with the New World.

It's the euro that appears flimsy, with what look like new-fangled video-game images designed by a 20-something and hastily downloaded onto brittle paper. Oh, supporters will tell you there's a good reason for all of this: The bills feel the way they do because they're printed on pure cotton paper. Their bumpy quality comes from the raised relief so blind people can identify different bills by feel; iridescent stripes and special inks that give the bills their shimmery, play-money look are designed to make them harder for crooks to counterfeit.

But something still feels, well, not quite right. For one thing, the monuments featured on the bills are fake, so as not to highlight any one European country's landmarks. And while all this high-tech wizardry supposedly makes the euro the state-of-art currency, it somehow undermines the one thing a bill or a coin is supposed to do: inspire confidence in the governments that issue it. Rather, this currency has a New Age-y feel that makes you think you've stumbled into the central bank of the Star Trek Federation.

Euro all wet

Which isn't a bad metaphor for the currency that came into the world with the stated ambition of knocking off the dollar as a reference currency, or at least rivaling it. For any U.S. chief executive who has wondered whether the euro would change the competitive landscape--and it's hard to imagine that anyone did not, if only briefly--the new bills show the euro for what it is: a paper tiger.

Two years ago, everything looked different. Spirits on the continent ran high. The mood was bellicose. "We will no longer be subjected to economic domination," thundered Dominique Strauss-Kahn, then France's finance minister when the euro first launched in January 1999.

Even the Japanese liked that idea. "Topple the dollar's dominance!" ran the headline on Japan's Mainichi newspaper when the euro entered the world market.

Instead, the currency came in with more of a whimper than a bang. The euro opened with a value of $1.17, crept up to $1.19 on its first morning of trading, and promptly started its long march south. In three years, the euro has lost more than 25 percent of its value against the dollar, hitting a low of 85 cents.

Dollar undaunted

Since its rollout as the currency of everyday consumption this past January the euro has headed down once again, flirting with its historic lows by the beginning of March. Le Monde lamented "a new error in prognostication, after the initial error at the end of 1998, when the experts prematurely claimed the end of the dollar's hegemony on the international financial scene."

True, the dollar is undoubtedly overvalued against the euro. But that's due, in part, to the market's judgment that the European Central Bank, which sets interest rates for the 12 euro nations, has less freedom to maneuver than the American Federal Reserve. It has already kept interest rates considerably higher than many think necessary to stop Europe from stumbling into a recession.

Not exactly the conduct of the dollar's rival. The euro has managed to make itself the second most-used reserve currency in its three years, displacing the Deutsche mark and well ahead of the yen and the pound. But the dollar still has five times the presence of the euro as a foreign reserve currency, which is a pretty good indication of how the two currencies stack up against one another. The reason for the dollar's continued dominance? People just are more comfortable with it. It's that simple.

Continental shift

That said, the euro might well help make European concerns more formidable as competitors in the long run. Harry Kamen recently retired as CEO of Metropolitan Life and now sits on the board of Bethlehem Steel. Kamen pointed to the recent merger of steel makers from Spain, Luxembourg and France to create a powerhouse called Arcelor. Arcelor produces 40 million tons of steel annually, compared to around 10 million tons from Bethlehem and other big U.S. steel makers. "Does a single currency help facilitate mergers like this and make the Europeans tougher?" wonders Kamen. "Probably."

But Kamen is hardly losing sleep over this, and other U.S. chief executives would do well to follow his lead. The way he sees it, the euro is advantageous to American firms. "If you're an American company with any kind of a pan-European business, working with a single currency helps an awful lot," he points out.

Oddly, the euro may end up helping U.S. firms more than European ones, but for reasons that are more philosophical and emotional than economic. By breaking down currency and trade barriers between their states and trying to achieve economies of scale, Europe is playing America's game. But we did it first--in 1776--and it's a game we will always play better.

American iconoclasm 

American companies are simply more comfortable with the idea of knocking down walls and marketing to the greatest possible mass of customers. We do it naturally --promotion of interstate commerce is embedded in our constitution, after all. For Europeans, this is still an artificial process and one that makes them jumpy. Euro or no euro, Europe is used to thinking small. They tend to throw up boundaries where none exist. American CEOs, meanwhile, are best poised to exploit the knocking down of borders -- they're used to that.

Le Monde admitted as much in February, and it's quite a striking admission. "No one would argue that the profit culture is more developed on the other side of the Atlantic, that financial success is more highly valued and that inequality is less decried. The people who operate the financial markets appreciate the values they recognize in themselves--and those are the values of economic liberalism, which the U.S. offers the best example of today. It would be difficult for them not to prefer the dollar to the euro." Amen.

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