EUROPE READY TO WELCOME NEW CURRENCY.
Europe's single currency debuts at midnight Thursday, the biggest step so far toward uniting Europe into an economic bloc that could rival the United States.
A huge clock in Brussels ticked down the hours to E-Day, but even one day ahead of the birth of the ``euro,'' new economic figures and controversial comments from the head of the European Central Bank showed the road ahead may not necessarily be all that smooth.
For now, the ``euro'' coin is available only in chocolate - real euro coins and notes are to replace francs, marks and other traditional currencies only in 2002. So Europeans and tourists will be dealing in old money for three more years when using cash, but euro transactions will be possible through checking accounts and credit cards.
Already, merchandise from industrial products to bouquets sold on the French Riviera is carrying euro as well as local-currency prices, making cross-border price comparisons among the 11 euro countries a snap. Britain is the biggest European Union nation not planning to use the euro.
Finance ministers and central bankers from most of the 11 participating EU nations will meet in Brussels today to freeze the relative value of their national currencies - a move to keep them from fluctuating with each country's financial fortunes.
Banks, bond and stock markets and international businesses are spending the weekend adapting trading floors and computer screens to include the joint currency. In its first working day Monday, the euro is expected to trade at about $1.18, 6.58 French francs or 1.96 German marks.
The euro will streamline trade, and could further advance prosperity, in a bloc of 290 million people with an economic clout already rivaling that of the United States.
The euro, however, also could help U.S. multinationals better plan their strategies in Europe and cover much more of the continent without having to worry about national monetary fluctuations.
As Europeans from Spain's Mediterranean beaches to Finland's frozen tundra prepared for the euro, it was clear some bumpiness was persisting in the historic move toward a single currency:
November inflation figures released Wednesday indicate a 0.9 percent annual inflation rate in the 11 euro nations - the continuation of a steady decline. Portugal and Ireland, however, have reported significant inflation-rate increases over the past year. Some economists consider that problematic because a low common interest rate that would boost core EU economies such as France and Germany could overheat smaller nations with faster growth.
And the man guiding euro policies, Wim Duisenberg, said in an interview published Wednesday in France's Le Monde that he intends to fill out his full eight-year term as head of the new European Central Bank. Earlier, Duisenberg had said he would step down in four years - a ``gentlemen's agreement'' to settle a row following France's last-minute call for another chief banker.
Whatever lies ahead, when the New Year begins, the euro will be a fact of life from the trading floors in Tokyo to the smallest bank in the Grand Duchy of Luxembourg.
But after years of belt-tightening to meet entry requirements for the single currency, wild celebrations aren't likely to welcome the euro. Politicians will pop open champagne at the official launch, though Germany's finance minister, Oskar Lafontaine, is not even interrupting his holidays to participate in the Brussels festivities.
Of the 15 EU nations, only Greece failed to make the strict monetary conditions for joining. Britain, Sweden and Denmark opted out for now - holding on to their rights to set independent monetary policy for domestic reasons, such as to boost the economy or improve social conditions.
In Ireland, which will be part of the euro zone, a group calling itself ``Citizens for Keeping the Irish Punt'' demands officials ``break the link with the euro and re-establish a national currency.'' In Vienna, Austria, however, posters are welcoming, saying ``Euro - Prosit.''
WHO'S IN? WHO'S OUT?
Eleven European Union countries will be using the euro: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
Three EU countries say they don't want to join, at least for now: Britain, Denmark and Sweden.
One country failed to meet qualifying economic standards: Greece.
New European currency to aid businesses
Some common questions and answers about the euro:
Q: How much will a euro be worth?
A: The exact value of the euro will be set Jan. 1. It is expected to be slightly stronger than the dollar, around $1.10 to $1.20 to a euro.
Q: What will happen when the euro is launched?
A: The euro becomes the official currency in the 11 nations. That means stock exchanges will trade in euros and large businesses will keep track of finances in the euro. However, euro notes and coins won't enter circulation until 2002. To ease the transition, bank customers can keep accounts in euros - alongside national currencies - starting Jan. 1.
Q: Will Americans and other travelers from outside the 11-nation euro bloc need euro notes, coins or travelers' checks after Jan. 1?
A: No. Euro notes and coins won't be available until 2002. For now, the local currency is still good. Travelers checks will be available in euros, but aren't a must.
Q: Will there be any effect on the dollar?
A: That's not yet known. No sudden challenge is expected although the euro eventually could challenge the dollar as the international currency of choice.
Q: Who in the United States will be affected?
A: Managers at firms that buy or sell in Europe or have subsidiaries there.
Q: What are the advantages for business of the euro?
A: The size of the new currency bloc - with 290 million inhabitants - will provide a stable economic and business environment. Businesses will save money; the costs of changing currencies from country to country will be sharply reduced. Comparing prices will be quicker and interest rates will stabilize. All this will make long-term planning easier.
Q: What are the advantages for ordinary consumers?
A: Residents of the euro countries also will benefit from it being easier to compare prices across borders, and they won't have to change money within the bloc. Tourists, too, can avoid costly commissions as they move across Europe.
Q: Why did the countries choose to give up their national currencies?
A: The original idea was developed shortly after the end of World War II. The goal was to link Europe so closely that another war would be impossible. Political union proved too difficult, with countries refusing to give up national sovereignty. Economic union, as symbolized by the common currency, remains a feasible goal.
- Associated Press
Photo, 2 Boxes
PHOTO Stock exchange employees in Paris watch as their computer system prepares to switch to the new euro currency Wednesday.
Michel Lipchitz/Associated Press
BOX: (1) WHO`S IN? WHO`S OUT? (see text)
(2) New European currency to aid businesses (see text)
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|Publication:||Daily News (Los Angeles, CA)|
|Date:||Dec 31, 1998|
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