Europeans will be able to pay bills using their single domestic currency in all twelve member states of the Eurosystem. For the man in the street, this is a sea-change. In economic terms, however, the cash changeover is virtually a minor-event. Europe has de facto had a common currency and a single monetary policy for nearly three years now.
The main risks relate to the possibility of a renewed increase in oil prices, fears of a rise in protectionist pressures and concerns about possible disorderly developments owing to global imbalances. Concerning the outlook for prices, last year’s volatility in energy prices will lead to significant base effects, affecting the profile of annual inflation rates in a slightly U-shaped way.