EURO - In effect on Tuesday - confusion expected

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Converting a continent

In Europe, confusion expected to circulate along with new euro

By Jeff Israely, Globe Correspondent, 12/27/2001

On Tuesday, virtually all of Europe will be struck with that unsettling sensation, when the continent's single currency is introduced into circulation.

And for 300 million Europeans, there's no turning back.

The unremarkably named euro - set to replace Greek drachmas, French francs, German marks, Italian lire, and eight other national currencies - has been hailed as a monumental step toward European integration and the key to competing with the juggernaut American economy.

But for many, the coming months will be measured only by the headaches of constant price conversions and the nagging anxiety that every other business owner is taking them for a ride.

''Everyone is going to be checking their change very closely,'' said Massimo Di Persio, speaking from across his newsstand counter in downtown Rome. ''I just hope there is a lot of patience on both sides.''

There will be a two-month transition throughout most of the ''euro-zone'' during which retailers will accept both the new single currency cash and the outgoing national coins and bank notes. Automated teller machines, however, will issue only euros beginning Jan. 1, and most businesses will give change in euros.

In a practice study for Dutch railways, ticket clerks needed 60 seconds - twice the usual time - to take in Dutch guilders and give change in euros, and a full two minutes when payments were made with a guilder-euro mix.

A similar study by Carrefour, the Paris-based retail giant, estimated that lines at their stores may grow by 20 percent.

''A lot of conversations will take place between customers and cashiers,'' said Guy Huyberechts, euro manager for Carrefour Belgium.

But beyond learning to distinguish among the different values of bank notes and coins, Europe's consumers will be on the lookout for businesses that may take advantage of the Jan. 1 switchover to fix new, inflated rates.

Some businesses may simply jack up the prices in the hope that people won't be able to calculate the difference. Others are using the excuse that rounding prices up to a convenient number in the new currency will ease the flow of transactions and limit having to make change.

A study released last week by Germany's Federal Statistical Office found that euro repricing for 35 items from milk to men's socks has added 0.5 percent to prices over the past year.

But Riccardo Faini, who heads the Italian Treasury Ministry's economic analysis department, said concerns about inflation and upward price-rounding are overstated. He said natural market forces and nervous buyers will counteract any potential sneaky sellers.

''Consumers will be much more vigilant,'' Faini predicted, comparing European behavior in the next few months to travelers constantly checking and calculating prices. ''If someone wanted to try to charge higher prices, they would have done it already. The introduction of the coins and bank notes is really only the outer casing.''

In fact, the arrival of the new cash in European pockets and purses is just the final step in a long process of monetary integration, its roots dating half a century.

In 1952, six countries pooled production in the European Coal and Steel Community, which eventually became today's 15-member European Union, which has forged a single common market and opened free travel across the national borders of the continent.

In final monetary union negotiations in the late 1990s, three EU countries - Britain, Sweden, and Denmark - opted out, citing allegiance to their national currencies and doubts about being dragged down by some of the pact's weaker economies.

Still, the participating countries had to qualify for entry by meeting criteria of basic economic health, including a national deficit below 3 percent of gross domestic product.

On Jan. 1, 1999, the currency union was officially born, when the national tender values were fixed against the euro and one another.

For the past three years, while the financial and commercial world has been busy talking and trading in the new currency - and national mints have been quietly churning out the first 633 billion worth of euro cash - everyday consumers and merchants have largely put off the inevitable effort of understanding a new value.

But now, the reality of New Year's Day will mark as much a psychological as an economic milestone.

''I am 50 years old, and I can still remember waiting with my mother for hours and hours to cross the border into France,'' said Faini, the Italian Treasury official. ''Now you can not only cross the border without controls, but you will be able to do it with the same money in your pocket. It is an epochal moment in the history of European integration.''

Proponents have long argued that a single currency would eliminate artificial price disparities from country to country and force European businesses to become more competitive.

While it will take years to measure the broader economic effects, there will be an immediate payoff in convenience for travelers - both inside and outside the euro-zone - who will avoid having to make and pay for currency exchanges.

It will also make for easier arithmetic for Americans, with one euro more or less equal to a dollar. (Yesterday, the euro traded at 88 cents).

But the first order of business is getting locals in Europe to say goodbye to their treasured national cash and grow accustomed to euro bills and coins. Beyond the hard-line nationalists who bemoan the ceding of local economic control, there are pockets of nostalgia for currencies, such as the drachma and lira, that trace their origins to ancient times.

The new cash has been designed to avoid local references and encourage European unity, with the bills (from 5 to 500 euros) universally free of real places and personalities. The coins (from one cent to two euros) will feature one side designed with national references and the other with a common continental design.

While the actual appearance of the money is aimed at eventually drawing the 12 nations closer, it will leave current discrepancies plain for all to see.

''The euro will reveal our serious weaknesses,'' wrote Greek columnist H. A. Papadimitriou in the Athens daily Kathimerini. ''Above all, the amount of euros that we will have in our pockets will be much smaller than that possessed by most other Europeans.''

But one native of Italy, another country economically behind its neighbors, expressed the hopes of rich and poor Europeans alike.

''The euro is definitely a positive. It will increase trade and improve relations with other countries in Europe,'' said Gilberto Putignano, a 35-year-old architect from Rome. ''Sure, you'll have to do some math for a while. But we just have to get past the first few months.''

-- Anonymous, December 27, 2001


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