AUG 15, 2001

Coming of Europe's New Cash Feeds Jitters Large and Small

By SUZANNE DALEY

PARIS, Aug. 14 Will chaos reign when much of Europe starts changing over to euro coins and notes on Jan. 1? Will lines clog the aisles of supermarkets as cashiers fumble trying to figure out euro change? Will citizens hoard their new euro coins as collectors' items? Will people feel so ill at ease with the new prices that they just won't buy anything beyond the basics?

If all goes well, the conversion to euro notes and coins could give new power and legitimacy to the common currency being adopted by 12 of the 15 European Union countries.

Trade could grow, and investment from abroad rise. Some see the move to the euro, now worth about 90 American cents, as a major turning point in the unification of Europe.

But even as the European Central Bank gets set to unveil the final design of the new notes and coins next month, exactly what will happen on "E-day" one of the Continent's biggest peacetime undertakings remains a subject of intense debate. After years of planning for the switchover, European Union and Central Bank officials say they are counting on an orderly transition. Still, they admit to worries.

"Concerns, there are lots of them," said Benjamin L. Angel, the European Union official in charge of the practical aspects of the transition. "You can't help but have them when you have such a massive, historic event."

Across the European Union doomsayers abound, and anxiety is growing, much as it did with the Year 2000 computer scare. The logistics of the conversion are mind-boggling, and leave room for any number of disasters from a rise in money laundering, counterfeiting and bank heists to inflation set off by retailers rounding up prices as they convert to euros three years after banks and stock exchanges adopted the currency.

Worries range from banks that are offering employees free gym time to get them fit enough to haul extra sacks of money to the shortage of armored trucks in Finland, a large and sparsely populated country that has only 150 such vehicles to convey the new coins and notes to outlying stores and A.T.M.'s.

As of Jan. 1, about 50 billion new coins and 14.5 billion euro notes are to be pumped into circulation. If the bank notes were laid end to end, one bank official said earlier this year, they would reach to the moon and back twice. Another said that trying to distribute the new money was the equivalent of sending 500,000 trucks out onto the roads of Europe to transport 24 times the weight of the Eiffel Tower.

Some psychologists have warned that impact of the transition may send people into a kind of economic hibernation. Consumers and retailers could be infuriated if they see the wide discrepancies in prices between countries. Even charities and religious organizations could suffer.

A front-page article last month in the French daily Le Figaro said that French churches were fretting. Most parishioners apparently put either 5- or 10-franc pieces into the collection plate. But no equivalent exists in euros. Depending on whether they choose bigger or smaller coins, the churches could be facing a 30 percent drop in revenue.

Increasingly, consumer groups and retail associations are complaining of a lack of readiness. "I think we are headed for catastrophe," Christian Huard, the president of a large group representing French consumers, said last month. On Aug. 9, Holger Wenzel, the director of the German Retail Association, attacked the German government on much the same grounds and denounced banks for taking advantage of the situation by planning exchange fees.

Europeans appear ill-informed about their new currency. A recent European Union survey showed that support for the changeover was growing in the 12 affected countries France, Italy, Spain, the Netherlands, Portugal, Ireland, Belgium, Germany, Finland, Luxembourg, Austria and Greece. (Three European Union members Britain, Sweden and Denmark voted not to join.) But about half those surveyed in France, Italy and Portugal did not know that the euro was destined to go into circulation in four months.

Surveys show that few consumers have any idea of the value of a euro, despite a growing amount of dual price ticketing. A European Union report issued at the end of March said that 80 percent did not remember a single price in euros.

One in five did not understand that their old national currencies would disappear when the euro was introduced. One in four did not understand that euro notes and coins issued in their own countries would be legal tender elsewhere in Europe.

European Union officials think that this lack of information may change quickly in the next few months. As of September, the European Central Bank will start a major media blitz. Through the fall, most European banks will start sending their customers checkbooks in euros. Until now, euros have been used only in electronic payments and in bookkeeping.

The switchover is complex: not only do the new bills and coins have to be distributed, but the old notes and coins have to be collected. By most estimates there are even more of them, though no one knows for sure how much cash people have had squirreled away in cookie jars and under mattresses. Some banks have even taken steps to reinforce their floors because of the additional weight of money in their vaults.

Most of the conversion will take place as citizens withdraw new money from the bank and get euro change back from stores when they make purchases. But will the stores be willing to keep more cash than usual on hand? And what will happen when transactions become burdened with two currencies?

Mr. Angel, the European Union official, said that McDonald's had found that waits doubled or tripled when their employees had to handle two currencies and that mistakes in change were rampant. He said the fast-food chain was planning to double personnel at cash registers.

A major supermarket chain, he said, found its lines increased from an average of 5 people to 20, a situation that crippled movement in its stores. To ease the transition, the chain has decided to offer a rare service in Europe baggers.

But surveys show that the vast majority of small and medium-size businesses have yet to do anything to prepare. Even sales of calculators to convert the currency have been extremely slow, Mr. Angel said.

And what if European armored- car drivers should decide to strike? Dutch and French drivers have already threatened to do so.

The situation could vary widely depending on the country and how it prepares. The European Central Bank will start a $90 million television and print campaign to inform the public starting next month. But some countries Portugal has even enlisted the church to help educate older people have already embarked on publicity campaigns aimed at easing the changeover.

National habits could also play a part in how things go. In some countries, such as Ireland, consumers go often to A.T.M.'s and take out small amounts. In others like Austria, they tend to take out large bills.

The impact of the change will reach far beyond the 12 countries using the euro. In Poland, for instance, distrust of the banking system remains strong, especially among older and rural people. Some experts estimate that Poles may hold as much as $2 billion in cash hoarded at home, much of it in German marks the hard currency of choice in many parts of formerly Communist Europe. The Polish central bank has already kicked off an information campaign.

Bank officials fear the exchange of national currencies will offer criminals a convenient opportunity to introduce counterfeits and launder money. A report by the European Union's fledgling police agency, Europol, recently warned that the high value of the notes may make financial crime easier by enabling criminals to cram more cash into their briefcases when they cross borders. The report warned that the high denominations of the euro bills an 500 euro bill is worth about $425 could ease money laundering.

In most Eurozone countries, the highest value euro bank note will be worth far more than the current biggest domestic note. In Greece, for instance, the note will be worth 17 times the highest drachma note.

Meanwhile, some experts say the changeover may have a powerful effect on the psyche of Europeans. Some say that the unfamiliar prices, may so discombobulate people that they put off buying anything but immediate necessities, leading to an economic slowdown.

Others say that the euro might help forge a new political awareness. "The euro may be a real catalyst for change," Jacques Birouste, a professor of psychology who studied the psychosocial impact of the new money on European citizens. "This may be the moment where many Europeans for the first time really look at what the European Union means and the transfer of sovereignty, which actually happened years ago. And this may have a lot of impact on the political world."


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