Some Win, Some Lose on Euro
FRANKFURT – The euro, the European single currency whose coins and bills are to replace 12 national currencies from the new year, is meant to be a boon to European business, but its rollout is bringing both pain and joy.
The creation of the euro, proposed more than 40 years ago by visionaries like former Luxembourg Premier Pierre Werner, has been hailed as a way for the euro zone, whose population of 300 million is responsible for one-fifth of global economic output and trade, to exert more influence.
But while a single currency in Europe for the first time since the Roman Empire is certainly momentous, exchanging the 12 separate euro zone currencies now in circulation for 50 billion new euro coins and 14.5 billion new bank notes is a huge project that will have clear winners and losers.
On the one hand, the estimated 50 billion euros ($44.5 billion) that will be spent on putting the euro into the hands of Europeans will be a boon to many companies and to Europe's economy as a whole at a time of economic slowdown.
But some, notably currency exchange businesses, stand to lose out as citizens in euro zone countries — Germany, France, Austria, Belgium, Finland, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain and Greece — exchange their national currencies for euros in a process expected to last until March.
GWK, a chain of currency exchange offices near borders and at train stations in the Netherlands, expects its turnover to drop by more than a third next year as the national currencies of the euro zone countries are replaced by a single currency with just eight euro coins and seven euro notes.
"Our clients traditionally were holiday travelers, people heading for Southern Europe, Austria or Switzerland. We will close 19 of our offices, mainly those at the borders,'' GWK's chief financial officer, Ad van der Waal said in Amsterdam.
GWK, a unit of Dutch-Belgian bank Fortis, is set to cut its workforce to 400 next year from 1,100 only a few years ago and can consider itself lucky to be able to weather the change.
It decided years ago that hefty cost cutting and a change of focus was the only road to survival, and it will keep its 50 branches thanks to a shift into such activities as hotel bookings and money transfers made in anticipation of the euro.
In Greece, one of Europe's favorite holiday destinations, some currency exchange businesses may not even survive the euro's arrival as tourists next year will no longer flood the country with marks, francs and guilders, but pay, like locals, in euros.
"The smaller companies may not be able to handle the new conditions. This will leave a market share for the remaining companies to try and snap up,'' said one Greek foreign exchange company.
For Europe's vending machine industry, the prospects are much brighter as the use of single cash opens up a market of 300 million people. But the entry ticket comes at a hefty price of an all-out revamp.
"Adapting machines for the euro has cost the industry 1.5 billion euros ($1.34 billion), or one to two years worth of profit,'' said Catherine Piana of the European Vending Association.
As some bemoan the loss of lucrative business or the high price tag of the changeover, for others the arrival of the single cash next year is a welcome boost at a time of an economic slowdown.
With 12 nations estimated to spend up to 50 billion euros ($44.5 billion) or more on preparations for the euro, the pie is big enough for plenty of companies to get a handsome slice of the cash-related business.
Europe's largest department store chain, Karstadt, is among those which will run up extra costs because of the changeover, but it knows quite well who will benefit.
Peter Niederhausen, the manager responsible for the German chain's shift to the euro, said that up to 70 percent of the total cost of the switch, estimated at more than 10 million marks, was spent on software.
"And this software we're only using for the changeover and we can dump it once it's over, because we'll probably never see a similar case ever again,'' he said.
France's Cap Gemini Ernst & Young is an example of a firm that could typically have catered to the needs of a company like Karstadt from the start.
Cap Gemini, Europe's largest computer services firm, offers everything from writing software to explaining how to store cash or prevent money laundering by clients.
"The switch to the euro has been an excellent opportunity to show the whole array of our services,'' says Philippe Durante, the company's global head of euro offers for financial services.
He declined to say how much the euro windfall for Cap Gemini was, but said for a large bank the cost would have been about two billion French francs ($270 million) since the 1996 start of the switch.
CASH BUSINESS BOOMS
The unprecedented logistical exercise of moving a total of 14.5 billion euro bank notes and around 50 billion coins across Europe also provided a golden opportunity for cash shipping and handling companies.
Swedish Securitas, the world's biggest security firm, expects full year profit growth of 30 percent and sees a solid 20 percent windfall in cash-handling revenues from the arrival of the new notes and coins.
To do the job, it had to increase its cash handling staff by 20 percent. It also enlarged by 20 percent to 28 percent its fleet of money-transporting armored vans, Securitas cash handling unit Chief Executive Santiago Galaz said.
Other cash-related businesses are also booming. Eurocoin, a producer of the blank pieces of metal used to mint coins, sees turnover rising to some 500 million German marks ($227 million) this year from 80 million in 1997.
NCR, a U.S. maker of equipment ranging from cash tills to sophisticated transaction and pricing systems, saw sales of point-of-service software increase by 61 percent in 2000, although not all was directly attributable to the euro.
Other sectors have also shown signs the euro may provide a glimmer of hope in the current economic downturn.
German insurer Allianz says a new product enables its clients to insure the unusually high amounts of cash in circulation, though it cannot say how much this boosted sales.
Advertising group Publicis won the 80 million euros contract for the European Central Bank's euro campaign.
And then there's the odd windfall that will go unnoticed in euro zone aggregated economic data, but may mean a big change for a small company.
As the Irish government decided to distribute a euro/Irish pound converter free to every household, Patrick Donoghue's Cork-based company Carma clinched a contract to supply 1.5 million units.
"We had the machines made for us in China. It was a big contract and we were against the clock but we filled the order. It was very much a one-off deal but I have to say, it was a very profitable one,'' he told Reuters.