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New Year Brings New Currency for Many Europeans - 2001-12-28


January 1 is E-Day in Europe. That is when the euro, the new single currency adopted by 12 European nations, begins circulating among 300 million people in the largest monetary changeover in history.

The introduction of the euro is also the biggest single step that has so far been taken toward European integration.

From Portugal to Finland and from Ireland to Greece, Europeans are gearing up to relinquish their hard-earned national currencies and change them for untried euro notes and coins.

EU leaders are hoping the euro will boost the European economy by eliminating currency exchange costs and thus make it cheaper and easier to do business in the 12 nation euro zone.

The new currency is also expected to fuel competition and hold back inflation by making it easier for shoppers to compare prices across the continent.

But there is also an ambitious political goal behind the introduction of the euro. Jerome Sheridan, who heads American University's Brussels Center, says the euro is aimed at creating a genuine pan-European identity among EU citizens. "The euro is a real, physical, and existing symbol of the EU that people are going to carry in their pockets on a day-to-day basis," he said. "And that's going to have a very profound impact psychologically on European citizens and begin to create more of a European identity."

The path to E-Day was laid out by the 1992 Treaty of Maastricht. Besides creating the single currency that begins circulating next Tuesday, it set limits on EU nations' debt, budget deficits and inflation rates.

Meeting the Maastricht Treaty's criteria on such limits so they could join the euro-zone was a long, hard slog for many countries. Britain, Denmark and Sweden opted out of the euro because most citizens of those nations see the single currency as a step toward a European super-state, which they reject. But Greece, as Economy Minister Nikos Christoulakis recounts, felt it could not be left out. "It required a lot of political will and very careful planning and implementation of budgets. It was a difficult political and social task. But the imperative was that Greece should join," he said.

Technically, the euro has been in existence for the past three years. Big companies and banks use it for accounting, and many stores include the euro value of goods on price tags. But small and medium-sized businesses have had problems meeting the demands of the changeover to the new currency.

Lionel Barber, the editor of the Financial Times' European edition, says readiness for the euro varies across Europe. "You have to remember that the euro has only been a virtual currency. It's been handed around on sheets of paper in the financial markets, in the big banks," Mr. Barber said. "But when it comes down to that small retailer in Bologna, or outside Athens, or even up in the wild wastes of northern Finland, these people have had no contact with the euro and certainly no contact with the coins."

Unfamiliarity with the euro, despite massive information campaigns, is probably going to mean that some transactions will take longer after January 1, especially in Italy, Spain, Portugal and Greece, where 90 percent of customers pay in cash.

Ted Antonokopoulos, president of the Greek Federation of Industries, says smaller companies in his country are just beginning to catch up. "You have to bear in mind that the concept of time in the south is a bit different than what you have up in the north. But gradually we're picking up momentum, and the information and realization [on the part of] small and medium sized companies is getting higher now," Mr. Antonokopoulos said.

Mints and printing plants across Europe have churned out 50 billion coins and about 14 billion crisp new euro bank notes ahead of the cash launch. This month, Europeans picked up their first sample of euro coins, which were sold in so-called starter kits. The coins have one side common to all 12 countries and the other specific to each country.

And in Ireland, as Mark O'Connor, a banker in the town of Dundalk says, the kits were snapped up enthusiastically. "People are anxious to get to see the coins and get to see the notes and see what they look like," he said.

Mr. O'Connor thinks that, by the end of January, the Irish punt will be all but forgotten. But the old currencies can, in most cases, still be used until February 28, as Financial Times European editor Lionel Barber notes. "That was necessary simply because of the sheer amount of coins and notes that were going to suddenly enter circulation. And you need, then, to also withdraw [the old currency] and give time to the withdrawal. So we have this two-to-three month transition period, which is really where the pressure will lie," he said.

Many citizens fear shopkeepers will use the changeover to the euro as an excuse to boost prices. Consumer organizations say they will be watching for any sign of that. But the euro has deeper credibility problems. Polls show that only about 50 per cent of Europeans are wholeheartedly in favor of the new currency. The Germans, especially, are loath to give up their cherished mark, which they see as a symbol of economic stability.

Still, Financial Times editor Lionel Barber says there is no turning back. "Everybody has been building up for this," he noted. "It's three years that they've been in preparation for the introduction of the launch of notes and coins. And the euro itself has been planned for 40 years. We locked exchange rates on January 1, 1999. And I think, actually, technically and politically, it's a very big success story for Europe," he said.

Euro-skeptics respond to euro-boosters like Mr. Barber that the euro has fallen shy of some of the grander ambitions European leaders had envisioned for it. The euro has not, for example, eroded the global dominance of the American dollar. In fact, it has lost about one fifth of its value against the dollar since 1999. And, the skeptics say, the euro has failed to insulate Europe from outside economic shocks, like the recession in the United States. Nobody expects the arrival of cash to boost the euro's exchange rate. But many believe its practical advantages will, over time, transform Europe.

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