EVEN watching from the outside, it is a nervous business watching the birth of the new single currency in 11 EU countries.

For this is one of the greatest economic and political gambles ever and, despite its decision to stay out and wait and see, Britain is not immune to the risks.

The sheer size of so-called Euroland, where the new currency now prevails - stretching from the Arctic to the Mediterranean and with a population of almost 300 million - illustrates the immensity of the venture.

For the diversity of the economies within that vast area, ranging from those of the deeply-depressed former parts of the derelict Soviet bloc to the thriving, super-rich centres of European business, beg the question of whether they can be realistically and safely covered by a single currency and a common interest rate.

The paradigm, of course, is the US dollar which both stays secure domestically and reigns as the supreme international trading currency even though its value and integrity are based on an economy that has equally rich and poor sectors and is as vast as it is diverse.

But, unlike the dollar, the new euro is not a federal currency backed by a common EU-wide tax system - though its opponents see it is the vehicle for just such a political and tax structure to emerge in Europe - and the big question is whether the single interest rate in Euroland and the adjustment of it can be successfully divorced from the "national" economic demands of member countries. For instance, if the economy of a particular country hits downturn, it will no longer have the power to lower interest rates or devalue in order to protect exports and jobs.

Will such underlying tensions impact on the new European Central Bank's control of interest rates and on the international money markets' view of the euro's worth?

Certainly, such concerns suggest that the euro may be subject to volatility as, inevitably, may the value of the pound against it.

And the leeway given to some of the countries over meeting the criteria for membership of the single currency suggests that, in addition to the undermining influence of the 'poverty pockets' in Euroland, the underlying robustness of some of the economies underpinning it may not be as great as implied.

The money markets will, ruthlessly as ever, determine whether this great gamble pays off and whether the euro emerges, as is the dream, as one of the world's great currencies or whether it ends in disaster and economic horror across and beyond Europe.

But now there is no turning back, Europe embarks on the hope and nervousness of the euro's infancy - and as spectators in Britain we can be neither aloof nor immune.

Converted for the new archive on 14 July 2000. Some images and formatting may have been lost in the conversion.