Some skeptics are bracing for chaos when the European Union officially rolls out the euro on January 1, 2002, but others expect a smooth transition. More concept than reality since 1999, the newly minted coins and paper money will physically replace the 12 member countries’ so-called legacy currencies, and some businesses may be caught unprepared.
While larger corporations are ready for the switchover, banks are scrambling to educate smaller firms and consumers about what the change means and urging them to convert their accounts into the common denomination before the 11th hour. Some observers are expecting popular resistance to the switch and snafus in routine transactions.
Beginning in 2002, European Union electronic transactions will be euro-only; individual member countries will set their own rules about whether to accept checks written in legacy currencies. Fran Berndt, first vice president of Ruesch International, says many meeting planners and others accustomed to doing business overseas are already dealing in euros, so the transition for them should be relatively smooth. Washington, D.C.–based Ruesch, which helps clients manage international payments, routinely transmits amounts in euros with a reference to the individual country’s currency. Berndt sees mass circulation of the euro as a big positive for meeting planners.
"The fact that we have the euro in 12 countries does away with the exchange rate risk in dealing with different currencies," she explains. Perhaps more significant, though, is the ability to make apples-to-apples price comparisons. Instead of having to convert different currencies into U.S. dollars, "you can look at hotels in different markets and really see the cost," Berndt says.
For anyone considering an overseas event, there’s more good news: The U.S. dollar continues to hold its own against the euro and other world currencies. It dipped briefly after the September 11 terrorist attacks, but by mid-November the dollar had rebounded compared to major currencies such as the euro, Swiss franc, and Japanese yen.
Alex Beuzelin, a senior market analyst with Ruesch, declined to make any long-term predictions about the dollar, but says two factors influence the outlook:
The global economic situation. Despite the current U.S. recession, the federal government’s moves to stimulate the economy are seen as a plus.
Geopolitical trends, specifically the war on terrorism. "If the situation continues to evolve favorably, that will help the dollar," Beuzelin says. Conversely, if it worsens, the dollar will likely take a hit as well.