[November 21st, 1998]

See Also   Euro FAQ   The Euro and Your Web Store   Getting Europe Online   Intranet USA - Who Needs Europe?

Last week I explored the pros and cons of Web merchants offering goods for sale priced in euros. However, from the contents of my e-mail last week, it is quite apparent that there is still a great deal of ignorance surrounding the euro and its timetable for introduction. So to try and clear things up I've put together a simple "euro FAQ" which covers the main points about the new currency.

What is the Euro? What are the time scales for its introduction?
On January 1, 1999, 11 European Union countries will start using a new, single currency - the euro. These 11 countries will permanently fix the exchange rates of their national currencies against the euro and begin trading in the new currency. However, existing notes and coins will continue to circulate until January 1st 2002, when new euro notes and coins will start to become available.

What countries are going to be involved?
11 countries will be involved initially - Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain. It is expected that the remaining EU countries - Denmark, Greece, Sweden and the UK will join at a later date. There has also been talk about some non-EU countries - the eastern European countries in particular - adopting the euro too.

Why is the euro being introduced?
It is hoped that European Monetary Union will strengthen the position of Europe as an economic power. The union will produce 20% of world exports and the new European Central Bank will have 4 times the reserves of the US Federal Reserve.

From a business perspective, the introduction of the euro will bring lower transaction costs, as companies in member countries will no longer have to exchange currencies when doing business with each other.

Should the euro be thought of as just another foreign currency?
No, the euro is more than just another foreign currency. It represents a fundamental change to the business environment in Europe. For example, many companies currently choose to sell their products at different prices in different European countries. The arrival of the euro however will bring "price transparency" - purchasers will readily be able to compare prices being charged in different locations. This will have a major impact on the way many companies sell in Europe.

What happens to exchange rates?
Exchange rates between the national currencies of the 11 participants and the euro will be fixed. However, the euro itself will float on the currency markets and the exchange rate against other currencies - such as the US dollar - will vary.

How will the euro impact electronic commerce?
One of the biggest barriers to e-commerce in Europe is the large number of national currencies. The introduction of the euro will give Web merchants access to a market of 290 million people all of who can be sold to in a single currency. It is likely therefore that the euro will give a boost to European e-commerce although other factors such as low PC penetration and high telephone costs will continue to restrict its growth.

What should Web merchants be doing about it?
My advice for Web merchants is that they should begin discussions now with the vendors of their e-commerce software and the providers of their credit card merchant accounts to establish how and when they will be able to handle transactions in euros. However, apart from these exploratory discussions, most Web merchants should consider waiting until at least the middle of 1999 before making any changes to their store.

Where can I get more information?
Pay a visit to the official UK Web site or the European Union site.

Do you agree with me? I'd love to hear your comments.