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Monday, 25 September, 2000, 17:05 GMT 18:05 UK
Euro and the consumer
Euro coins
Consumers won't have coins and notes to play with until 2002
What difference does the single European currency make to consumers?

Since the euro was but a glint in the eye of a Brussels bureaucrat, politicians have proclaimed the advantages for the consumer.

Falling prices, fewer charges for foreign currency transactions and a wider choice of investments are all possible consequences of a single European currency.

But some consumer groups argue that unless governments act to raise awareness of the currency, some of these benefits may not be realised.

How much is that in euro?

Since the currency was launched at the beginning of 1999, many people in the participating countries have received bills and receipts denominated in euro as well as in their local currency.

This will likely be the limit of their experience until notes and coins come into circulation on 1 January 2002.

Some shops have dual pricing displays
As cross-border shopping increases, consumers will become aware of price differences between member states.

The logical conclusion is that this will lead to greater competition - as in the case of cars in the UK and Europe - and prices will start to head lower. This trend should be accentuated by falling costs of production and distribution, which will feed through to lower prices in the shops.

But more than half of European consumers fear they will be cheated when notes and coins are introduced, a European consumer group, Le Bureau Européen des Unions de Consommateurs ( BEUC) warns.

The reason for this is that not enough companies have adopted dual display of pricing, so awareness of the new currency is still low.

"There is a big issue regarding price transparency because the dual display of pricing is still voluntary at a European level. In 30% to 40% of industry you have dual display," BEUC economic advisor Dominique Forest said.

"There is a concern that by 2002, the consumer will still not be used to calculating in euro," he added.

Sangria, por favor

At first glance holiday makers look set to gain the most from the single currency.

Since the euro came into force in 1999, the constituent currencies should basically be seen as subdivisions of the euro. So, cross border transactions shouldn't cost more than national transactions.

With fewer commission charges to pay on currency transactions, tourists will have more money to spend on sangria and miniature replicas of the Eiffel Tower.

Euro cheque
Consumers complain that exchange fees are still too high
But so far, this remains a travellers' utopian ideal. As a European consumers' group, BEUC, points out, it costs less to change Swiss francs into US dollars than it does to change between two euro currencies.

And then there are tricksters. A bureau de change at the border between Austria and Italy, for example, tried to pull one on customers by charging a higher exchange rate between the French Franc and Austrian schillings.

When challenged, the man behind the counter blamed "fluctuations in daily exchange rates" for quoting a different rate than the official fixed rate.

And until notes and coins are available, tourists need to change currencies unless they are planning to pay by credit card. Even though the currency risk is gone, charges remain high.

One response to this has been the system put forward by the Euro Banking Association. Set to go live on 20 November this year, the system aims to reduce costs for cross border transfers.

"Participants will thus be able to channel most of their retail and commercial payments through one pan-European system designed for that purpose," Willy Scheerlink, chairman of EBA Clearing said.

While the EBA calls the charge of 0.48 euro for each payment as "very attractive", it is quick to say that this is only one part of the total cost banks incur in relation to their payment services.

The EBA has thus hedged its bets for cross-border transfer fees to remain high.

The good of whom?

One argument used by anti-euro campaigners is that these benefits will only be appreciated by those with the disposable cash to travel and shop widely.

Businesses are expected to face high costs switching their systems to euro. Fear exists that these costs could be passed on to consumers.

In or out of the euro many people could see their economic life turned on their head. Job uncertainty could increase as companies relocate to other parts of the eurozone.

Stephen Crampton, secretary of the UK-based Consumers in Europe group, warned that with interest rates tied, people find themselves hit with a heavier tax burden, as countries find this their only way to rein in rising inflation.

However, to make up for it eurozone interest rates - and inflation - are currently much lower than those in most other industrialised countries.

And the current trend is to cut taxes, in an attempt to reform the eurozone's economy.

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