The Euro and You
You're going to love the new European currency. Any questions?
What is the euro?
The euro is the European Monetary Union's new transnational currency, sort of a European answer to the dollar. As of January it became effective in 11 countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. While it could eventually be adopted in other EU nations, there's no definite expansion schedule.
Where can I get euros for my next trip?
You can't. Until January 2002, the euro will exist only as a "virtual currency" or "intermediary currency," with the function of translating from one national currency to another. So for the next couple of years, visitors and residents alike will still use francs, deutsche marks, and so forth for cash transactions.
The new currency will be issued in bill denominations of 5, 10, 20, 50, 100, 200, and 500 euros, as well as one- and two-euro coins. Each euro will be divided into 100 cents, represented by six coins: 1, 2, 3, 10, 20, and 50 cents.
You can, however, already buy euro-denominated traveler's checks, and you should be able to make credit-card purchases in euros within the 11-nation "euro zone."
If it's not in use, what difference does the euro make to me?
When you start to research a trip to Europe, you may find rates quoted twice, once in the local currency and once in euros (the euro symbol looks like this: €). And when you go shopping in any of the participating countries — and some non-participating countries — you'll begin to see price tags with two numbers on them.
How will the euro affect the exchange rate between my dollars and the 11 European currencies?
In January, the European Central Bank established fixed exchange rates between the euro and each of the 11 national currencies. These rates will not change. But the exchange rate between the euro and other currencies — such as the U.S. dollar — will float, i.e., will be subject to changes based on the currencies' value relative to one another.
The fixed exchange rates are as follows:
1 euro= 13.7603 Austrian schillings
= 40.3399 Belgian francs
= 5.94573 Finnish markkaa
= 6.55957 French francs
= 1.95583 German marks
= 0.787564 Irish punt
= 1,936.27 Italian lire
= 40.3399 Luxembourgian francs
= 2.20371 Dutch guilders
= 200.482 Portuguese escudos
= 166.386 Spanish pesetas
From now on, the dollar's strength (or weakness) will be felt uniformly in all the euro-zone countries. No longer will it be possible for the dollar to rise in value by 10 percent against the French franc while it falls by 5 percent against the deutsche mark.
When the euro was introduced on January 1, it was worth about $1.17 in U.S. currency. Then it trended downward, to about $1.10 by mid-March, and economists were issuing conflicting forecasts. Some expected it to rebound to $1.20 by later this year, while others said the euro and the dollar might reach parity, or a 1-to-1 exchange rate (bad for the euro but good for American travelers).
Will paying in euros make any difference in the cost?
It shouldn't, because the price, whether in local currency or euros, is supposed to be exactly the same in terms of dollar equivalency, and sellers aren't supposed to impose any kind of surcharge for people who pay in euros.
What's in it for me?
The most immediate benefit will be a much greater ability to compare prices across and even within the 11 participating nations, something known as price transparency. Say you're going to be traveling by rail through Europe, and you want to rent a car for three days to explore the back roads of the Benelux region. The train takes you through Cologne, Amsterdam, and Brussels, and you could rent the car in any of these cities. Before the euro, you might have been quoted three-day rental rates such as 348 marks in Cologne, 343 guilders in Amsterdam, and 5,370 francs in Brussels. Now the car-rental company could cite a rental price of 178 euros in Cologne, 156 euros in Amsterdam, and 133 euros in Brussels. That makes your comparison shopping a lot easier.
In fact, even when you remain in one country, the euro makes pricing simpler. If a Paris hotel quotes you a rate of 2,100 francs, odds are you'll need a calculator to figure out that that's $352. But as long as the euro is worth a little more than $1, you can quickly recognize the value of 320 euros as somewhere not far above $320.
Once euro currency goes into circulation, there will be another benefit for travelers who plan to visit more than one country in the zone: they won't have to keep paying currency-exchange fees every time they cross a border.
What should I do with my leftover francs?
Spend them in the next three years. There'll be a transition period from January through June 2002, during which time euros and the pre-existing currencies will both circulate while the latter are phased out. Starting July 1, 2002, the old banknotes and coins will no longer be legal tender. (It's likely, though, that anyone holding old-currency cash will still be able to exchange it for euros for quite some time.) Or you could save the francs for your grandchildren — they're sure to become collector's items.