Deep Impact.

The effects of the Euro

The Euro will have profound effects on the stability and growth potential of the world economy - specifically impacting international travel, expatriates, and the pricing of imported goods from Europe such as cars and clothes, according to a recent analysis by Runzheimer International.

On January 1, 1999 11 of the 15 countries in the European Union (EU) began the transition of national currencies to a single currency - the euro. The primary goal in switching to the euro is to establish a single currency that will unify the European continent along economic lines. With a population of 300 million, nearly 20% of the world's economic output comes from participating euro counties.

The Euro will impact specific industries and enterprises in the following ways:

* Advertising and Marketing: Buyers of European advertising and marketing will keep the focus on product/service quality, personal service, and selection. However, price comparison shopping will be easier and more prominent.

* Airlines: Airline ticket prices in the 11 participating countries will be easier to compare because they will be listed in a single currency. Price differences will remain because of such factors as government taxes and subsidies, supply and demand, and market-related issues.

* Automobiles: Automakers will benefit from the euro because most of them do cross-border business and they will save money by handling fewer currencies. On the other hand, since car prices vary in different countries, there will be some dealers who buy cars in low-priced countries and sell in high-priced ones.

* Banks: Significant revenue will be lost in currency exchange for travelers. Banks also must bear the cost of converting computer systems. On the positive side, banks may offer different loan opportunities granted by branches in participating countries. In addition, interest rates should stabilize due to the centralized banking system.

* Information Technology: The euro will impact IT greatly both in software and hardware. North American organizations must adjust accounting and payroll systems for their international workforce. European cash registers, ATMs, and vending machines must also be modified.

* Retail: Exchange rates are virtually eliminated so European retail businesses must adjust marketing strategies to a comparison shopper mode. It will be far easier for the North American traveler, for example, to compare the price of a bottle of wine in Vienna to a bottle in Munich.

* Travel: Due to the elimination of currency exchange, travel costs and travel time within the euro zone should decrease. Transaction costs will still exist, however, because banks charge for cross-border services.

If the euro does what the EU wants it to do, it will rival the U.S. dollar as the world's primary reserve currency. Most economists feel an economically-unified Europe can only help the U.S. and North America. It should make it easier and less expensive for North American companies to sell their products and services to the 11 participating counties. The simplified use of a single currency across borders should also stimulate consumer demand in Europe and increase the demand for North American goods.