There is a popular view that something dramatically new will happen on New Year's Day 2002.

True, the pieces of paper and bits of metal we use to finance day-to-day transactions will look different but we will not have a new currency in any meaningful sense.

That happened three years ago, in January 1999, when exchange rates in the euro zone were irrevocably fixed and responsibility for monetary policy passed from national central banks to the European Central Bank (ECB).

Since then, the euro has been the Republic's currency and each time we spent a pound we have been in fact been spending €1.2697. The only thing that will happen in a week's time is that we will no longer be under any illusions as to what is actually the Irish currency.

But this is not the only or indeed the most important misconception about the euro. Much more important are the benefits claimed for the new currency. Unfortunately, the first three years of the euro's life have shown these benefits to be largely mythical.

The first myth is that the euro would emerge as a strong international currency to rival and even replace the dollar's role in international finance.

This prediction was, of course, exploded within months of the euro's launch. Since then, the fledging currency's prospects have not improved.

Despite a series of adverse shocks - including the political turmoil that followed the US presidential election, the downturn in the IT sector, a now-established economic recession, the aftermath of September 11th and the subsequent involvement in a major war - the dollar still remains in pole position and its value against the euro is still 20 per cent higher than in January 1999.

The second myth is that the euro guarantees price stability and low inflation.

Of all the euro-zone countries, the Republic is most acutely aware that the opposite may be closer to the truth. In 1998 Irish inflation was running at just over 2 per cent. By 2000 it was close to 6 per cent and is expected to exceed 4 per cent in 2001.

The prime reason for this inflationary surge was, of course, the euro. Given our high trade dependence on non-euro currencies, which account for approximately 70 per cent of Irish imports, movements in the dollar and sterling exchange rates have a highly asymmetric effect on Irish inflation.

Over the long run, we can be reasonably confident that the ECB will deliver price stability and Irish inflation will, on average, converge to that in the euro zone. However, our exposure to the dollar and sterling means that Irish inflation will remain vulnerable to short-run movements in the euro's international value, leading to considerable volatility in the inflation rate.

The third myth is that the euro will promote trade and investment, leading to further job creation and economic growth.

There are several problems with this argument.

First, to my knowledge, empirical research on Irish trade has so far failed to find any significant link between the currency regime and trade patterns.

In particular, the diversification in Irish trade away from Britain and towards Germany, France e.t.c. is most likely to be a consequence of trade liberalism rather than a switch from the sterling link to the ERM and from the latter to the euro.

Second, if the euro is growth promoting, how can we explain the apparent strength of the British economy? Not only does Britain continue to out-perform most of the euro zone but it also remains the most favoured location for US multinational investment, despite retaining a sovereign currency.

The final myth is that we had no choice. If, as is probable, the international monetary system becomes increasingly dominated by the dollar and the euro, then small countries may have to choose which form of currency union they prefer.

For countries such as Belgium and Austria the choice is clear. However, for the Republic, with significant trading interests in each camp, the choice is more difficult, especially if Britain continues to opt out of the euro-system. Unfortunately the Republic has already decided.

We can only hope that future generations will not have to suffer the consequences of a political decision that, as things stand, offers dubious economic benefits.

Rodney Thom is Jean Monnet Professor of Economics at University College Dublin