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Monday, 25 September, 2000, 17:06 GMT 18:06 UK
Business and the euro
Woman with notes
Take note: This currency could change your business
It walks like a currency, it talks like a currency and soon it will look and feel like one too.

But until consumer's purses are full of loose change, it is unlikely they will take the euro that seriously.

Most European businesses don't have the luxury of that complacency. The single European currency, the opening up of markets and the internet have proved to be a competitive triple whammy for business.

While some companies and sectors have had their worlds shaken already, for much of European business the change is only beginning.

Force of the euro

One currency across Europe increases the urge for companies to do business across the continent.

For a start, it is easier to raise the cash to do a deal.

Secondly, the fact of the single currency makes it easier to do business in other European countries, encouraging companies already lured by the prospect of boosting their revenues by entering new markets.

Banks have felt the force of the euro hardest. In Belgium, France, Spain and Italy, there have been mergers to create national champions.

This offers some protection from the bigger fish now eyeing the European market, attracted by the ease of trade in the new single market.

Cross-border mergers have been thinner on the ground, with cultural differences making agreements difficult.

The one that shocked markets with its audacity was Vodafone's bid to take over Mannesmann. The first successful hostile takeover in Germany, it shook up German corporate culture.

"It is a single market, there is a lot of potential for the market, it could be bigger than the US, so there will be more competition... That could be perceived as a threat, on the other hand you could see it as a great chance," Ton Ruhe, co-ordinator of euro preparation at Philips Electronics said.

"The euro creates fantastic opportunities if you look at e-commerce and the internet because of the ease of using one currency," he added.

Cheaper money

One clear advantage of the euro is that it is now cheaper for European companies to borrow money.

euro trader
Investors are more willing to invest in companies
The junk bond market has boomed since the launch of the euro. When Europe consisted of 12 currencies, investors had a choice of assets to buy. With one currency, they choose to balance their portfolio by investing in different credits.

This market is still nowhere near as big or as sophisticated as the US junk market but companies who once had difficulty raising money in the markets now find investors prepared to listen to their story.

Away from the bigger pictures of strategy, the euro can mean a logistical nightmare for businesses.

Making sure that a product carries the same price ticket in twelve different countries is no mean achievement.

The likelihood that companies introduce single pricing depends on market conditions as well as how aggressively their competitors are on the euro, Philips' Ton Ruhe said.

For consumers it may drive down prices, as regional differences disappear - or they may go up, if firms try to use the conversion to the euro for hidden price increases.

Costs and savings

Changing your accountancy systems to handle euro notes and coins could take months and cost large companies millions of euros.

But German chemical giant Bayer is one of those that says the millions spent on preparing for the euro are more than offset by the money saved by using a single currency.

Electronics giant Philips saved cash by creating a pan-European cash management system and an electronic procurement system - cheaper and easier to use with one currency than with 12.

Not all companies have risen to the euro challenge.

Euro fatigue and the millennium bug encouraged some companies to put the euro on the back burner.

These companies may regret this laid-back attitude next year in the run-up to the introduction of the euro as a cash currency.

Changing over to notes and coins - and the change to accounting and reporting systems alone is thought to take a company six months.

It is not yet clear how many companies - particularly small and medium-sized enterprises - have done this.

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