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All about the euro
By Andrea B. Terry • Bankrate.com
Planning a trip abroad anytime soon? Have no
fear when you see two price tags on that beautiful silk tie in Florence
-- one in lira and one in euros.
It doesn't mean that you're going to pay twice;
it means that you have a choice of how you want to pay for the item.
But as the euro -- Europe's new single currency
that hit the market Jan. 1 -- is making its debut, both travelers
and shop owners are trying to make head or tail of this new, coinless
pecuniary system.
Easy calculations
Fortunately, the euro is quite easy for mathematically
challenged Americans to comprehend. It's currently tied so closely
to the dollar that even if you can't balance your checkbook, you
can easily calculate the exchange rate.
Mark Hallerberg, co-director of the European
Union Center of the University System of Georgia, explains it simply:
a Coke that costs $1 today in Atlanta costs .94 euros. It's almost
a one-to-one match, as of this writing. That's easier to understand
than trying to figure out the conversion of 5.881 Finnish markka,
1.83 German deutsche marks or 1,819.08 Italian lira.
The most difficult concept to grasp about the
euro is that right now, it's a virtual currency. The monetary system
is in place, but the fiduciary money isn't.
There aren't any bills you can place in your
wallet -- euro notes and coins won't appear until January 2002.
The euro, not to be confused with a Yugo --
a car that people laughed at years ago -- is off to a slow start.
That's because a transition period of three years has been installed.
The historical introduction on Jan. 1 marked
the euro as being the official currency of 11 out of 15 member states
of the European Union: Germany, France, Italy, Spain, the Netherlands,
Belgium, Austria, Finland, Portugal, Ireland and Luxembourg.
Four other members of the European Union --
Great Britain, Denmark, Sweden and Greece -- are not participating
in this first round of adoption.
On the introductory day, each country's currency
rate was given a fixed conversion rate against the euro and those
exchange rates remain static. They have become subcurrencies of
the euro.
Choice
of currencies
So a traveler making a purchase has a choice without a distinction
-- you can ask to pay in euros or in the local currency, but it
will never make a difference in the cost to you -- the rates are
fixed.
But the value of the euro against all other
currencies is fluctuating according to market conditions. To see
how the euro is doing today, try our online currency converter.
What this all means: as of Jan. 1, the French
franc, Italian lira, German deutsche mark, etc., are no longer currencies,
but simply temporary denominations of the euro. Franc, lira and
deutsche mark bank notes and coins will continue to circulate until
June 1, 2002.
In time, "The consumer will be the beneficiary.
Ultimately, they will be able to carry one currency with them,"
says Michael Sherman at Visa International.
The euro means that money becomes simplified
for people traveling from one country in the Euro-zone to another.
For example, when going from France to Germany, people won't have
to be bothered with converting the money, paying a commission or
worrying about a fluctuation in exchange rates.
Written money,
but no paper
Some retailers have started marking their goods in euros,
mostly for comparison purposes. Shoppers can now pay in euros, in
the form of "written money" -- checks, travelers check,
bank transfers and credit cards.
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Interesting
tidbits of information about the Euro
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According to the Treaty of Maastricht, the
single currency should have been called the "ECU"
but in 1995, members of the European Council decided to
rename it
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Euro notes and coins will come into general
circulation in January 2002
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It will become the only currency of the
EMU zone on July 1, 2002
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Other currencies, such as the Dutch guilder
and French franc, will cease to be legal tender
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Travelers checks are available in euros. If
you're paying with a credit card, the card company automatically
converts the euros for you into dollars, and it shows that exchange
on your monthly statement.
The euro means simplification to consumers.
You will no longer need to change money when roving from one Euro-zone
country to another. And it makes price comparisons from one country
to another, more user-friendly.
But Hallerberg mentions one drawback to the
euro: "There are fewer places where you can exchange your money.
It's harder to find kiosks, so plan ahead."
The bottom line, if all of this sounds Greek
to you -- remember, Greece is not in on the euro yet -- take heed
of what Sherman says: "Do not be afraid to buy your items in
euro."
-- Posted: May 21, 1999
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