On January 1, 1999, 11 EU currencies became linked together by a set of fixed exchange rates. The resulting elimination of currency risk has led to several benefits. Ever since the launch of the euro, a manufacturer in Paris has been able to buy raw materials from a Dutch supplier to sell products to an Italian client without having to worry about currency fluctuation's effects on profit margins. Another benefit has been the expansion of the investment universe for eurozone pension funds from within their respective local markets to securities across the entire zone.

The question is whether the elimination of currency risk has also eliminated country risk. The answer directly affects investment strategy. In the absence of country risk, asset managers would no longer have to forecast country returns: an auto company could be valued on its merits, regardless of whether it was Italian or German.