Gone in Twenty Days

Within less than three weeks the international currency markets will experience the final phase of implementation of the new European single currency: Twelve well-respected national currencies will no longer be used as a medium of exchange. What will be the impact of this transition? That is a question not even the European Central Bank (ECB) seems able to answer.

Many problems remain to be sorted out. What exactly will be the time allocated for businesses and individuals to exchange their national currencies for the new euro coins and bills? One proposal is three months; this is sensible to prevent a cash crisis at the banks. Another proposal is three days; the only sensible bit of this concept is that it would definitely force businesses and consumers to use the euro. The European Commission and the ECB seem unable to find agreement on precise implementation terms, so no decision has been taken. The best advice probably is to trade in the old money as quickly as possible.

Another problem is in what amounts to distribute the euro bills. Banks could easily find themselves in the unfortunate situation of not having enough euros available to satisfy the demands of the transition as a result of poor planning from the ECB rather than as a consequence of bank customer demand. The ECB uses very complex formulae to decide how many euros should be sent to each country, but there seems to be no contingency plan if there is an error in these calculations at some time in the process.

Another problem is businesses and customers themselves. Most businesses in Europe are not prepared for the euro because of the expensive costs involved. During times of economic downturns and recessions, businesses often have more urgent demands for their limited funds. The logic has been: "We have three years...We have two years...We have one year...We will get to it soon". But now these companies have less than three weeks, and many of them still have not got round to sorting out the glitches. Some companies are organized to file bills and financial statements in terms of euros, but they are not equipped to accept payments in euros as exchange for their services.

Opinion on the long term role of the euro remains divided. For the most part, the euro is regarded as something that was imposed upon European states by a group of politicians (most of whom were voted out of office by the electorates in their home countries) who were sent to Brussels to rehabilitate their careers. The saga of smoothing out differences among these politicians to ensure the "right" person is selected to take over the ECB in two years continues. This "it is our turn now" attitude will do nothing to help the euro when it enters circulation.

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