Thu, Jan 03, 2002 page19

• New notes face a crucial test as businesses reopen

  • REUTERS
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  Europe's new euro notes and coins faced their first major road test yesterday as businesses reopen following the New Year holiday and people start using the brightly colored money in earnest.

  The largest financial switchover in history got off to a remarkably smooth start on Tuesday, with no major glitches reported in the 12 EU states that have abandoned their national coinage and adopted the common currency.

  But most major shops and businesses were closed on "e-day" itself, meaning some 300 million Europeans, from the Arctic Circle to the fringes of Africa, only get their first real chance to try out the new money yesterday.

  A planned strike by bank and post office staff in France, and a one-day stoppage by workers at Italy's central bank might snarl the euro rollout in those two countries. Elsewhere, officials were confident that all would go according to plan.

  The appearance of the notes and coins on New Year's Day was the culmination of the EU's most ambitious project to date, giving Europeans tangible, everyday proof that they share more than just an accident of geography with their neighbors.

  Automated teller machines will provide only euros, and stores are expected to offer change in the new money, the death knell for such familiar currencies as Germany's Deutschemark, the French franc and Italian lira.

  Most of the 12 old national currencies -- from Ireland's punt, or pound, around since 1928, to Greece's drachma, with a history that goes back some 2,500 years -- will cease to exist by March.

  In a mammoth logistical exercise, some 15 billion banknotes and 50 billion coins have been distributed for the launch and the European Commission reported on Tuesday that the complex changeover appeared to be going like clockwork.

  Politicians hope the euro will stimulate trade and investment by eliminating foreign exchange costs. It is also expected to fuel competition and tame inflation by making it easier to compare prices across the continent.

  But whatever the economics, the euro owes its conception to politics.

  France pushed a common currency plan in 1989 to bind wealthy old rival Germany into an unbreakable alliance as the fall of the Berlin Wall gave Germans a new dominance in Europe.

  The euro was introduced on the financial markets in 1999, when the national currencies ceased to trade independently. But for many, the psychologically important moment was the appearance of the real cash.

  Enthusiasts queued in the early hours on Tuesday across the continent to withdraw notes from ATMs. Banks reported massive demand for the new money throughout the day.

  "Aren't they sweet!" said 23-year old student Alice Magnoni as she extracted her first fistful of red 10-euro notes, complete with shiny foil holograms, from a Rome bank. "It makes me feel that we are part of something bigger."

  Some Europeans had hoped that the euro would gain global currency supremacy, but it has received a beating on the markets over the past three years, falling from US$1.1747 when it started trading in 1999 to around US$0.90 at the end of last year.

  Politicians believe the everyday use of euros will boost its worth as people around the world come into contact with it and accept that it is here to stay.

  Yesterday's strikes in Italy and France could disrupt the euro party, but officials in both countries expressed confidence that no major problems would arise.

  Bank unions in France have called a one-day stoppage over pay and security grievances, while staff at the Bank of Italy called a strike over slow contract renewal negotiations.

  While 12 EU states have adopted the euro -- Germany, France, Italy, Austria, Portugal, Spain, Finland, Ireland, Greece, Belgium, the Netherlands and Luxembourg -- the currency has spread well beyond.

  European micro states such as Monaco and the Vatican have accepted it. So have Kosovo and other parts of the Balkans. European-held territories as far away as South America and the Pacific have also become members of the euro club.

  In the EU itself, Britain, Denmark and Sweden have opted out.

  The purple, yellow, green, blue, red and orange euro notes bear architectural designs of bridges and arches meant to symbolize European openness and cooperation. The coins bear national emblems on one side like Germany's landmark Brandenburg Gate and Belgium's King Albert, a map of Europe on the reverse.

  Worries that the appearance of the new currency could spark a crime wave proved largely unfounded. Police reported few problems except for a theft from a bank of 90,000 euros (US$79,720) near the Spanish city of Zamora.
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