In May 1998, European authorities decided to fix in an irrevocable way the bilateral parities for the currencies of the 11 countries that have adopted the euro. The study of European bilateral exchange rates against the Deutschmark shows that in most cases these parities are very close to the rates of Purchasing Power Parity (PPP) defïned by general price levels (consumer price or Gross Domestic Product price). Yet, these parities are not consistent with labor unit cost parity. More important, the entry in the euro was made at exchange rates levels that reinforce costs differences between the European countries up to 40%. Furthermore, a causality analysis concludes that the cost divergences are more significant than price divergences in explaining the internal and external disequilibrium. These results lead to important doubts regarding the aptness of referring to a general price level PPP and invite to better take into account labor unit costs in fixing the equilibrium parities.