Friday, January 1, 1999 Published at 10:14 GMT
Consumer euro know-how
Consumers walk into an uncertain future
Do consumers have to get ready for the euro, even though the new money will not be in their wallets before January 2002?
The answer is yes, even though it will be another three years before colourful euro notes and two-tone coins replace escudos, pesetas, French and Belgium francs, guilders, punts, lira, schillings, Deutschmarks and Finnish markkas.
Consumers will see and feel the changes much earlier - in fact already now, regardless of whether they live inside or outside the eleven-member eurozone.
Exchange rates are "irrevocably fixed" - just like the centime to the franc, the pfennig to the Deutschmark and the penny to the pound.
And the euro is already being used for everyday dealings, by banks, stock markets and many companies.
Consumers are given a bit more time to adjust. The delayed introduction of the notes and coins is also due to the fact that it takes a lot of time to print and mint billions of euros.
Euro prices are the first thing consumers can see. Some shops, restaurants and banks in the eurozone have already begun to display prices in both the national currency and in euros. More and more will join during the next couple of years.
Consumers will have three benefits:
In some countries, however, dual pricing can cause confusion. The Irish punt and the euro have an "exchange rate" of nearly 1:1 and many shoppers are bound to confuse the two prices when comparing price tags.
And there is still the danger of hidden price increases. Retailers like 'nice' prices, 950 pesetas for example, or 19.99 Deutschmarks. Converted into euros the prices could look ugly: 5.70 or 10.22 euros.
To avoid this some manufacturers want to change the size of their products. Less content translates into a lower, better-looking price.
Some producers, however, could be tempted to cut the content a bit more than price adjustments would justify. Consumer watchdogs across the eurozone are getting ready to carefully monitor store shelves.
Travel and tourism
Most of us have some old coins around the house, left over from long-ago holidays in countries we are unlikely to visit again. And if we do they are probably out of circulation.
Eurozone travelers and tourists will feel the difference even before then. With exchange rates fixed, they do not have to pinpoint the 'best time' to buy holiday money anymore. And if they have any spare pesetas or francs, they can exchange them to any eurozone currency without a loss.
Tourists from outside the eurozone - UK, Sweden, Greece, Denmark or non-EU countries - will have less currency hassle too. Traveler's cheques denominated in euros will see them through in any country joining EMU.
However, they will continue to suffer the risk of currency fluctuations. If the British pound stays strong, euroland is for the taking. If sterling gets hammered, the Costa del Sol could suddenly be very expensive.
More competition, more choice
The euro makes it cheaper for many eurozone companies to move into new markets. For consumers this should translate into more choice and lower prices.
Some price differences between countries will remain - because of different levels of taxation in eurozone countries, transportation costs, regional peculiarities. Overall, however, prices should come down.
This will be especially true in places where the money comes from banks and building societies. In order to get ready for joining EMU, many countries had to lower their interest rates. This is making both loans and mortgages cheaper for consumers.
As mentioned earlier, there is one big drawback. Like all currency changes, the introduction of the euro will give fraudsters plenty of opportunities to make money.
For example, when the UK switched to decimalisation and when Germany introduced new bank notes in the late 1980s, fraudsters managed to wheedle money out of people who were unfamiliar with the new money or the changeover procedures to the new currency.
But there are threats that could cost you more than money. Increased competition will not only drive down prices. Firms will try to cut costs too.
This may put your company out of business - and you out of a job.
Supermarket chains like France's Carrefour and the Dutch retail group Ahold could move aggressively into the eurozone, forcing corner shops out of business.
American banks, for example, have plans to use the big euro shake-up to establish themselves in European retail banking.
As competition is heating up, shops and manufacturers are bound to get burned.
The taxman cometh
Another problem is tax harmonisation. This may sound like a nice thing, but it is unlikely to be so.
Across the eurozone there are different tax levels. High taxes make companies less competitive, and high-tax countries will urge others to raise their taxes to the same level.
Already there is a drive to close tax loopholes across the eurozone. Tax havens like Luxembourg and some of the British Channel Islands could face a clampdown on untaxed accounts holding billions of pounds, francs, and Deutschmarks from dubious sources.