And currency traders are voting with their feet. The big question now is whether the euro is going through normal growing pains -- or facing a major crisis. The answer may be a bit of both.

"There was extensive debate before EMU that it would be difficult to have a single currency for this region, that the euro-11 was not the optimal number, and that the different countries would react differently to different asymmetric shocks," says Thomas Mayer, European economist with Goldman Sachs & Co. in Frankfurt. "This has just all become clear much earlier than expected."

Despite its bold debut, the eurohas certainly had a rough ride so far: Oskar Lafontaine's turbulent five-month tenure as German finance minister, the resignation of the entire European Commission in March following a report detailing widespread cronyism and nepotism, sputtering economic growth in key countries like Italy and Germany, and the war in Kosovo. Add it all up, and you get a currency that has fallen by 11 per cent since its Jan. 4 launch.

To be sure, a low euro that boosts exports and doesn't appear to be stoking inflation may be welcome in the euro-zone's lagging economy. Plus, trading at $1.0455 late Tuesday in Europe, the euro still hasn't touched the bottom set by the mark this decade, which equates to a level around $1.0350. The euro hit a low of $1.0396 on Friday. And some observers think the fledgling currency deserves a break. "It's all a learning process," says Michael Clauss, European economist in the London office of Credit Suisse First Boston. Europe "now has to show joint responsibility for the euroin monetary and fiscal policy, and that can't be expected to take hold over a few weeks or months."

But the world is watching, and not everyone is pleased. Last week Eddie George, governor of the Bank of England, said the U.K.'s participation in EMU would be a leap of faith -- a sign that Britain's entry may be further off than expected. A recent poll in the Guardian newspaper found that 63 per cent of Britons said that they were "happy" Britain had stayed on the sidelines.

US officials are also growing impatient with Europe's bickering -- and with the region's inability to help share the burden of driving the world's growth. William McDonough, president of the New York Federal Reserve Bank, on Tuesday said Europe's central bank leaders need to form a clearer euro policy, contrasting it with the U.S. example where "we continue to have a policy based on (U.S. Treasury Secretary) Rubin's view that a strong dollar is in the best interest of te United States." But the immediate trigger of the current round ofacrimony has been the European Commission's decision to sign off on Italy's request to ease its budget deficit target for 1999.

The controversial decision reopened plenty of old wounds. German monetarists, after all, had repeatedly warned that the euro would only be as strong as the determination of countries like Italy to shun their old free-spending ways. Economists fretted one-size-fits-all rates would not accommodate the varying rates of growth of euro member countries.

(The Wall Street Journal)