LUMIERE CONSULTING, LLC
a Colorado Company
LUMIERE CONSULTING, LLC
a Colorado Company
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News Letter Article
© Lumiere Consulting 2001
Traveling puppet shows explaining and promoting the euro are making the playbill in schools across Germany. Priests in Spain are preaching the news of the euro from the pulpit. Bankers across Europe are sitting down with their elderly clients, some of who cannot read, to explain the new currency. From the very young to the very old 300 million Europeans are learning about the euro and greeting it with mixed emotion. Not surprisingly, the change is being more easily accepted by the younger generation who are both curious and happy about the easy in travel. However, opinion polls still indicate that opposition to the new currency is still well over fifty percent.
The older generations are considerably more skeptical and concerned. A new currency tied to 11 other countries is one more bite out of the individual cultures of these countries as the world careens headlong into impending globalization. Many small towns in Europe have fought the entrance of fast-food restaurants and other Americanization of their culture only now to have the individuality of their personal currencies taken away by their very own leaders.
Many Europeans dislike of the appearance of the new euro, as paper money is considered mundane as opposed to the colorful and interesting legacy notes. The coins, however, are individually minted in each country and although the front of the coins are identical, the backs are unique to each country much like the new quarters that are being released here in the United States.
There is a great deal of concern with what this will mean to each country’s individual economy. Many Europeans have seen wars fought on their own soil and have witnessed the trials and tribulations throughout Europe’s many changes. And this, another change, even if predicted for the good, leaves them on edge wondering what will happen. Although the financial ministers assure them that the change makes economic sense, one would practically have to have a degree in economics to truly understand the ramifications of the new currency to their economy. For the average citizen, especially the elderly and those on a fixed pension, concern and confusion dominate their understanding of the euro. On the upside most of the older Europeans have experienced many currency and governmental changes in their lifetime and have learned to role with the changes.
It is widely believed by consumers that shop owners will use the opportunity to cheat the customer who knows what the price should be in Marks or French Francs but not quite sure what it should be in euros. There are concerns of raised prices to the average consumer by business trying to recoup some of the upfront cost of changing over the euro. Also, the rounding up of prices that fall between Euro denominations is of great concern. For example, a pair of Levi's jeans that may cost 610 francs translates to 92.9939 euros. Consumer advocates fear that businesses will choose to round the price higher to 93 euros instead of down to 92.99, inflating prices slightly. Some EU countries make rounding the price up illegal and rounding the prices down make the stockholders unhappy, talk about a rock and a hard place. So depending on what country the bennies and the banes will vary to some degree, but what impact this will have on the individual or the economy will not be known for sometime.
Price rounding is of little concern to the American tourist who only has limited exposure to rounded-up prices as opposed to the resident who will endure the burden daily. The amount of money saved from exchange fees and unfavorable exchange rates at kiosks are at least a few percent. The multi-country traveler will not feel the expense of only a fraction of one percent in the rounding up. As a matter of fact, the change is expected to lure more travel starved Americans into jumping ‘the big pond’ to spend their tourists dollars in the dollar hungry Eurozone.
The value of the euro is similar to that of the dollar, so no more dividing by a thousand, multiplying by 3 and then deducting 10% to figure out how much that purchase is going to cost in US dollars. Again, for the multi-country traveler, the euro, if nothing else, will eliminate the headache of keeping track of all those exchange rates. This is also considered a great advantage to the clerks in border town shops and tourist areas. Many of these businesses accept currency from many countries making it difficult for the employees to keep track of the differing exchange rates.
The major change expected in the Eurozone is price transparency. European leaders hope to create consistent pricing of goods and services throughout the EU, dispelling the difficulties of currency exchange and showing an easily understandable pricing for the consumer. This will have little effect on the traveler who does not have the luxury to price comparison shop while traveling from country to country. However, for the average importer, transporter, and country resident, price transparency can be a blessing or a curse. Again this situation will vary greatly from country to country giving an economic advantage to the weaker economies and unfortunately, hurting the stronger economies like that of Germany.
Germany predicts the currency changeover will cost the country about 9 billion dollars – most of which is borne by the small to medium-sized business. On average, it is expected to cost business owners about $3,500 in up-front expense in preparation for the new euro currency. This cost will not force many out of business, but for the small business owner, it sure begins the New Year off with a tough challenge. As we in the U.S. have never experienced a complete change over of our currency, we have never given much thought about what it means to shop owners who deal with actual cash transactions as opposed to transactions taking place only on balance sheets.
Shop managers have had to re-label their goods in euros, upgrade tills, train staff, update computer systems, recalculate their accounts, stock and salaries, and order enough euro cash to see them through the first weeks of January.
Many cash registers have been replaced, as the drawers in their predecessors would not accommodate the new euro note size. Many of the legacy notes are small enough in value that the use of legacy coins was limited. The euro coins will span a greater amount of value and are larger and heavier than most of the countries’ current coinage. Shop owners are actually building reinforcements under the counters where the register sits and under the floorboards of their safes to accommodate the additional weight. Clothing designers, such as Gucci, are working frantically to redesign wallets and trouser pockets to fit the new currency. The stitching in trouser pockets will also need to be reinforced to cover the additional weight of the coinage.
New computer software and accounting systems have been put into place. Business owners have had to bear these expenses as well as the cost of employee training on the new systems. New signage had to be made and displayed indicating prices in both Euros and the old currency. These will be needed for a period of months until the consumers are comfortable with the new euro pricing. Legitimate shop owners will have the headache of answering questions, explaining exchange rates, and dealing with accusation of price gouging. There will also be the additional expense of security cost to have the new euros brought in and the old currency taken out. Many business owners are resentful of the fact that their businesses are literally being forced to act as some kind of ‘bureau-de-change’ for the EU.
With out a doubt the first few weeks of the change over is hectic and maybe uncomfortable for some, but all is expected to smooth out quickly. The general consensus is that the change is for the best in the long run. It is the short run that is difficult. So far it seems that the transition seems to being going well – strikes have been averted, no major crimes have been perpetrated, and the people seem generally happy with the new currency. From conception to birth, the euro has had a difficult delivery. It is interesting to see how the EU handles its growing pains.