At midnight tomorrow the pound will cease to exist as an independent currency. When the shops open again next week for the January sales, the public will still be paying in the familiar pounds and pence.

However, the Irish currency will no longer be an independent entity and will merely be a sub-division of the new single currency - the euro. It may be three years before we can start paying in euro notes and coins, but the single currency will be born along with the new year as we take the historic step of entering a monetary union with 10 of our EU partners.

For years, monetary union has been a dream on the drawing board of those supporting European integration. The final push has taken 10 years - starting in 1988 with the commissioning by the EU governments of a report by their central bankers under the then Commission president, Jacques Delors.

This proposed the establishment of the European Monetary System; when it was torn apart by the markets in late 1992 and early 1993, the plan appeared destroyed. This weekend is thus the end of a difficult journey. But it is also the beginning of another one which will bring many changes.

Foreign exchange transactions costs will be cut and eventually disappear, a giant step will be taken towards a genuine single market and huge efficiencies will spring from the creation of a single financial market. If it works, the euro will be a zone of low inflation stability, with no more disruptive exchange rate swings.

However, monetary union will inevitably establish a new dynamic in the political and economic affairs of Europe. There is a strong argument, for example, that it should inevitably lead to closer political union and - as shown in the recent rows on tax across Europe - to deeper economic integration. Equally, if things go wrong, the single currency could create fresh political and economic tensions across the union.

The first year or two of the new currency will reveal a lot. All the signs are that it will establish itself quickly, led by big business and financial dealers. Most businesses here - and in the other states of the euro zone - will continue to trade primarily in their national currencies next year. However, many who have been working on the project believe the momentum will build and that some time in 2000, or 2001 at the latest, the euro will become the predominant reference for business across Europe.

Inevitably, the public will not be fully "eurofied" until it gets its hands on notes and coins at the start of 2002. The euro translations on bank statement and grocery bills will be useful, if not particularly significant, for many. But of immediate consequence will be the setting of our interest rates from Frankfurt. In future, the cost of borrowing and the return on saving will be determined not by factors such as house price pressures in Ireland, but by the state of the core euro zone economies which will dominate the new union.

From being a national economy, Ireland will move to being a regional economy in a larger union; much like a US state looks to Washington for policy, we will look to Frankfurt.

We will have a vote at the policymaking table and how we use it - and build alliances with other members in trying to influence policy - will be important. But the parameters of Government economic policy will change irrevocably. Pooling our monetary sovereignty and accepting controls on our budgetary affairs will mean the key focus of policy will move to ways of making the economy more efficient and productive. In a monetary union there is no way out through devaluation.

The introduction of the euro will have immediate impact in areas like financial services and the money markets. Those buying and selling shares will see prices quoted in the new currency.

The introduction of the euro will change most of our familiar economic reference points. We will become just as concerned with inflation in Germany and France as in Ireland - as price pressures in our big partners will determine our interest rate levels. We will examine not just how tax changes will affect our economy, but how changes compare with what is happening elsewhere in the euro zone. We will watch much more closely the interplay of the main EU players - what they say and do will affect us much more than in the past. And we will, over a period, wean ourselves off the pound and get used to our new currency - the euro.