Euro Tumbles Below $1

Europe's fledgling single currency, the euro, tumbled to $1 and below for the first time ever on Thursday.

By breaching the psychologically important barrier, the euro heightened concern about its long-term viability. Eleven European nations formed the euro on Jan. 1 in an ambitious effort to create a regional economic and monetary union.

The euro reached parity at 3:47 p.m. EST and then slipped to 0.9995 cents. Its previous all-time low was $1.0039, reached Friday.

The single currency now has plunged 16 percent from its first day of trading, Jan. 4, when it quickly rose to an all-time high of $1.1886.

On a more practical level, a weaker euro increases the risk of inflation. A weak euro makes imports, including crude oil and other necessities, more expensive for European consumers.

As a result, the European Central Bank might come under more pressure to raise interest rates, a move that could discourage borrowing, throttle Euroland's gathering economic recovery and aggravate chronically high unemployment.

ECB president Wim Duisenberg said Thursday that he wouldn't rule out intervening to support the euro. The European Central Bank could sell its dollar holdings and buy euros, though Duisenberg gave no details about if and when that might happen.

Further erosion in the euro's value could undermine public confidence in it as a hard currency. In the worst case, a debased euro might even lead to calls for member countries to junk it and revert to their individual national currencies.

The euro is used now mostly for accounting purposes. Although it can be traded electronically and used for purchases by credit card or traveler's check, euro notes and coins won't become available until Jan. 1, 2002.