For the first time since the Roman Empire nearly two millenniums ago, much of Europe has a single currency. While euro coins and bills won't rattle around in pockets for another three years, the advent of a common currency - at least on paper - carries important symbolic and practical implications for the world. For Western Europe, it is an attempt to foster a new sense of economic unity and strengthen the region's role in world affairs. For the United States, it will change the way banks and brokerage houses - and eventually tourists - conduct every financial transaction with the Continent. More important, it presents the US with a new - and potentially potent - trading competitor and may challenge the imperial dollar as the dominant medium of exchange in the world. "If it leads to a Europe more confident and more comfortable as a partner of the United States, it is a good thing," says Jeffrey Gedmin, a political scientist at the American Enterprise Institute, a Washington think tank. But should the new currency stimulate a new nationalistic arrogance in Europe, relations with the US could become more difficult, more prickly, he warns. In terms of value, Germany, France, Italy, and eight other nations locked their individual currencies into a common currency at the stroke of midnight last Thursday. Today paper financial transactions in what is being dubbed Euroland are being denominated in euros. For the US, the initial impact of the move will be subtle. The mark, franc, lira, and other currencies will remain in use the next three years. But they will be tied so firmly to each other in value that they are, in effect, pseudo-euros. Investors buying the stock or bonds of many European companies, for instance, will today find them priced in euros. American business people may see their purchases on the Continent invoiced in euros. Bank accounts will be reckoned in euros, though in local currencies as well for the convenience of customers. New generation of leaders The euro arrives at a time when a new generation is taking over governments in Europe - which is adding to some anxieties on this side of the Atlantic. Most of these politicians are center-left or socialist. These are leaders who may think of America in terms of the Vietnam War, Watergate, and Monica Lewinsky. They don't have the older generation's memories of the Berlin airlift and the Marshall Plan. Mr. Gedmin dined three weeks ago with Helmut Kohl, Germany's chancellor for 16 years before his defeat in an election last fall. Mr. Kohl recalled the American CARE packages his family received after World War II. Gedmin wonders if the new leaders will think that America is manipulative and bullying, rather than principally benevolent in its intent. To some extent, the euro is expected to challenge the US dollar as a reserve currency. Currently, about 57 percent of foreign-exchange reserves of nations around the globe are held in dollars. The deutsche mark accounts for 12.8 percent, the Japanese yen for 4.9 percent. C. Fred Bergsten, director of the Institute for International Economics in Washington, predicts the dollar and the euro are each likely to wind up with about 40 percent of world finance. Other economists suspect the euro will have a harder time dethroning the dollar. The yen has not succeeded in besting the dollar, even in the 1980s when Japan was regarded as "the Juggernaut of the 20th century," notes David DeRosa, an economist at the Yale School of Management in New Haven, Conn. Further, he notes, German Finance Minister Oskar Lafontaine has been calling for the new European Central Bank to cut interest rates further, raising doubts about the stability of the euro. Whatever the extent of the challenge, the euro will immediately take over the reserve role of the German mark and French franc. Gradually, some foreign central banks are expected to diversify their financial reserves further with euros. It is also likely that over time more securities, such as bonds, will be denominated in euros rather than dollars. But Wall Street firms are well established in Europe and may well benefit from underwriting such issues. Should there be a large shift into euros, the dollar would fall in value somewhat on foreign-exchange markets. It could also nudge up interest rates, because foreigners will be investing less in US securities. Perhaps 0.25 percentage points on long-term government bonds, guesses Peter Kenen, an economist at Princeton University in New Jersey. When the euro becomes available in 2002 as a paper currency, it may replace some US greenbacks that circulate widely in Eastern Europe, Russia, and elsewhere. If so, that could cost the US real money. Robert Solomon, a Brookings Institution scholar in Washington, notes that between $200 billion and $250 billion in US currency circulates abroad. The US federal government saves about $10 billion to $12.5 billion a year in interest on this cash, he notes. Encouraging mergers Economists suspect the euro will encourage more trade within Europe and more mergers of industrial and financial companies. If so, trade with the US may grow slower and American companies may face tougher competition in world markets. But Professor Kenen sees the birth of the euro as "no huge threat or challenge to the US economy or investment community." One problem for Washington could be a new vagueness as to who is in charge in Europe. "Whom does the US Secretary of the Treasury call when there is a financial crisis?" asks Mr. Solomon.