The euro's exchange rate to the U.S. dollar rocketed in 2007. And with Malta and Cyprus becoming new members of the eurozone on January 1, 2008, the enlarged area will play a bigger role in shouldering the economic growth in the eurozone.

The eurozone now includes 15 members, whose total population exceeds 318 million. The EU expects several other countries to join the eurozone in the coming years. Slovakia is set to adopt the currency in 2009, and countries in the Baltic Sea region-Estonia, Latvia and Lithuania--will enter the zone in 2011 and 2012.

Several non-eurozone economic communities such as Kosovo and Montenegro have already started using the euro as their legal currency as early as in 2002.

By now, there are altogether 11 billion euro notes and 70 billion euro coins in circulation throughout the world, with a total value of at least 645 billion euro (about $952.82 billion).

In recent years, the euro's exchange rate to the U.S. dollar has increased with the expanding of the eurozone. On December 28, 2007, the exchange rate reached 1 euro to $1.4714, about 80 percent higher than the level in October 2000, which was $0.82. In 2007 alone, the value of the euro increased at least 10 percent. Alan Greenspan, former Chairman of the U.S. Federal Reserve Board of Governors who has impetuously criticized the euro, said in his biography that he was surprised at his European counterparts' great achievement with their new currency.

What makes the euro such a strong currency? Experts cite two reasons: First, the continuous devaluation of the U.S. dollar has forced some countries to unpeg their national currencies from the dollar and change some of their dollar-denominated foreign exchange reserves into euros. For example, in May 2007, Kuwait announced that its national currency, the dinar, would no longer be pegged to the U.S. dollar. Because of the rapid devaluation of the U.S. dollar, Saudi Arabia and Russia have changed some of their foreign exchange reserves into the euros. Many newly rising developing countries also said they would implement a foreign exchange policy that includes more international currencies to decrease possible financial risks resulting from a further devaluation of the U.S. dollar.

According to the International Monetary Fund, about 25 percent of the world's total foreign exchange reserves are euro-denominated; in 1999, the figure was only 17.9 percent. In the meantime, the U.S. dollar's predominance in global foreign exchange reserves has decreased from 71 percent to 65.7 percent. Deutsche Bank predicts that by 2010 the euro will account for 30 percent of world's total foreign exchange reserves. Some economists at Harvard University, forecast that the euro would become the most popular currency in the world in 15 years. Hans Tietmeyer, former central banker of Germany, believes that the strong euro reflects the world's high expectations for the currency.

The second reason that experts say the euro has become a strong currency is that the U.S. Government gave up its strong dollar policy when the country's economic growth started slowing down, prompting the euro to play a more active role. In recent years, the U.S. Government, based on the demand of its own economy, has practically abandoned its strong dollar policy. It iterated that the market should determine the exchange rate of the U.S. dollar. This policy has led to new lows in the dollar's exchange rate.

Moreover, it is uncertain whether or not the U.S. economy can continue to grow, because of the severe blow of the subprime mortgage crisis since last year. This also is why investors prefer the euro to the U.S. dollar. In 2007, the U.S. Government had to continuously revise its forecast for economic growth downward. The U.S. Federal Reserve lowered the previous growth rate forecast from 2.75 percent to 2.5 percent, and later to 1.8 percent. Based on that, the U.S. Federal Reserve might further cut bank interest rates to stimulate the American economy. But the country's huge trade and budget deficits, its credit crunch and its financial market turbulence will further weaken the U.S. dollar.

Comparatively, the economic growth of the eurozone will slow down in 2008 too, but there will be no rapid decrease, thanks to the zone's high employment rate and the high profits of enterprises. The EU lowered the previous economic forecast it had published in the fall of 2007, in which it estimated the eurozone's economic growth rate would be 2.2 percent in 2008, slightly lower than the 2.6-percent growth rate it predicted in 2007.

Klaus-Peter Muller, President of the Association of German Banks and Chief Executive Officer of Commerzbank AG, made an optimistic prediction about the euro's future in Der Spiegel, saying that the euro would remain strong during the next 12 months and its exchange rate to the U.S. dollar would continue to increase.

About the Eurozone:

The euro was formally launched on January 1, 2002. Fifteen of the current 27 EU member countries use it as their national currency. The countries are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Slovenia, Malta and Cyprus. Some non-EU countries, such as the Vatican, San Marino and Andorra, also use the euro as their legal currency.

According to an EU law in 1997, member countries that wish to join the eurozone must convert their national currency into the euros at a certain fixed rate per unit. They also must have a transitional period, during which shops, banks and companies must display prices, rates and pay stubs in both currencies.

The European Central Bank (ECB), formally established on June 1, 1998, is part of the European System of Central Banks together with the EU members' national central banks. The ECB's main task is to maintain price stability. It also must define and implement monetary policy for the eurozone, conduct foreign exchange operations and hold and manage the official foreign reserves of its member states.

There are seven euro notes, each a different size and color. They come in denominations of 5, 10, 20, 50, 100, 200 and 500 euros. The currency has eight coins in denominations of one and two euros and 50, 20, 10, 5, 2 and 1 cents.

EU Big Family

EU member countries: Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia,

Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom

EU candidate countries: Croatia, the Former Yugoslav Republic of Macedonia and Turkey

The author is a Xinhua News Agency correspondent based in Berlin