An Old World Prepares for New Money in 1999

The data-processing wonks at Paribas have crunched the numbers three times for practice. Hotel space has been reserved for the equivalent of 400 nights, and coffee and croissants ordered for 1,000 breakfasts.

As the big weekend approaches, the atmosphere in the ninth-floor control room equipped with 40 new computer terminals and overlooking the rooftops near the Paris Opera seems more in keeping with a moon shot than with the genteel world of international banking.

Correct, says Jean-Francois Tuloup, one of the executives at the Paris-based bank supervising conversion to Europe’s new common currency, the euro.

“Usually in our industry, we can take our time,” the 52-year-old Tuloup explains. “But this time, we’re launching everything at once, like a rocket or a fireworks display. This is a one-shot deal. It has to come off right.”

It will be three more years before actual euro bills and coins are put into citizens’ hands, and tourists won’t have to worry about it until then. But the euro nonetheless becomes a reality on Friday--the basis for most noncash transactions, credit card billings, stock and bond trading and dealings between businesses.

The exact value of the new money won’t be known until European Union finance ministers calculate it Thursday, the final business day of 1998.

And when the magic number--expected to be about $1.17--is made public, it will ignite a frenzy of activity. For thousands of businesses in Western Europe, large and small, this New Year’s holiday is going to be the longest weekend in memory, perhaps in history.

Belgium’s GB supermarkets, Germany’s Karstadt chain and many other retailers plan to post prices immediately in both euros and the national currency, as a way of getting consumers used to the new money. At large “hypermarkets,” such as the Leclerc store at Moisselles north of Paris, there may be 70,000 prices to refigure and stick on the shelves in euros over the weekend.

Like Tuloup and 200 co-workers at Paribas, bankers, stockbrokers and businesspeople from Vienna’s Boerse exchange to Dublin’s commercial banks will be gazing, bleary-eyed, into computer screens for up to three days and four nights as 11 countries change to the euro.

A Few Glitches in the Preparations

With a good part of the Old World shifting to a new money, will there be foul-ups?

Well, pessimists have pointed out that a prototype hologram imprint for the first euro bank notes disappeared earlier this year on a flight from the Frankfurt airport. The first batch of euro coins minted had to be melted down because of complaints that they would confuse blind people. Already, it’s clear that many credit card systems won’t be ready to accept euro charges as of Friday, as previously advertised. And an Italian Treasury Ministry hotline that was supposed to answer people’s questions has been delayed.

Moreover, during the trial runs at Paribas, the most recent of which began on Halloween and lasted four days, the computers at one point were running 15 hours behind schedule. But to minimize the chance of disaster, a backup computer in the Paris suburbs will be available this weekend in case the bank’s mainframe fails.

In addition, executives at 10 Paribas branches from Singapore to New York will check in with the specially created Paris command post every three hours, so the entire bank and its 20,000-member work force will proceed according to a detailed changeover plan. As added insurance, Jean-Philippe Delcroix, who has been in charge of switch-over operations at Paribas since November 1996, wants the process done by midnight Saturday, so Sunday can be used to deal with unexpected problems.

“We must never lose sight of the goal: to be ready for business when we open Jan. 4,” Delcroix says.

Even the countries that have opted out of the euro, such as Britain and Sweden, are scrambling to adapt because of their extensive economic ties to what’s now been dubbed “Euroland.”

In London’s City, the British capital’s financial district, the equivalent of two infantry divisions of white-collar workers--about 30,000--will be at their desks this weekend to tend to the necessary bookkeeping and computer chores. In Sweden, large retailers will ultimately have to spend the equivalent of $500 million to adapt, the Swedish Federation of Retail Trade says.

For many businesses, the cost of going euro will be on the same great scale as the bill for inoculating computer systems against the year 2000 bug [and many are doing both tasks simultaneously]. Eurocommerce, an association of European retailers, estimates the money changeover will cost its members up to 2.6% of a year’s sales, or more than $51 billion.

Just at Paribas, one of the world’s 30 largest international banking groups, the tab is expected to run to $80 million. Seventy percent of data-processing programs, now figured in French francs or other national currencies, must be amended or replaced. In the bank’s London branch alone, 7,500 tasks will have to be completed over New Year’s weekend on computers or by hand.

The expected payoff: no more currency exchange fees to switch from, say, French francs to Dutch guilders, and a surge in cross-border business.

“This is really a revolution, a unique adventure,” enthuses Delcroix.

To keep employee morale high as the big weekend nears, the bank is doling out rugby jerseys silk-screened with the euro emblem. To prevent people from getting the blues as they ring in 1999 at the office instead of with loved ones, a catered New Year’s Eve supper of salmon and venison will be served.

There will be champagne, but employees will be back at their terminals after two glasses, Delcroix predicts.

When the rest of Europe goes back to work on Monday, the first business day of 1999, the euro is supposed to be a functioning, if still virtual, currency. In the countries adopting it--Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain--it will become the only legal money.

The older national money--from the franc and the mark to the Portuguese escudo and the Finnish markka--will still be around until mid-2002. But legally, they will be “expressions” of the euro, in the same way nickels and dimes are divisions of the U.S. dollar.

The new European money is already a fact of life for all businesses in the euro zone, and many outside it.

At Tartufi Morra, a 68-year-old company in the northern Italian city of Alba specializing in white truffles, the pungent fungi cherished by gourmets, they’ve just loaded $9,400 of new software onto the two office computers.

Now the seven-member office staff will be able to issue invoices and keep office records in euros as well as Italian lire--that is, after the four months they’ll need to get comfortable with the new computer programs, says export manager Alessandro Bonino.

“The euro will be good for business, I think,” Bonino predicts. “It should make it easier for our customers outside Italy to pay.”

“Transactions will be a lot easier,” agrees Giampiero Grandi, managing director of personal financial services at American Express Bank in Paris. “Having just one currency in Europe will make life easier for a businessperson.”

Actual currency in euros may still be three years away, but with the advent of 1999, American Express will sell traveler’s checks denominated in the new money, and cardholders will be given the option of being billed in euros as well.

Moreover, to cash in on what is widely expected to be a euro-driven boom on European stock and bond markets, Amex, which manages more than $170 billion in assets for its clients, is launching five mutual funds denominated in euros.

With Western Europe becoming more of a single market than ever, life is quickly changing for its stock exchanges.

Amsterdam, Brussels and Luxembourg, on one hand, and Stockholm, Copenhagen and Oslo, on the other, are forming alliances. Europe’s two biggest bourses, London and Frankfurt, have reached an agreement that could lead to joint trading of the 300 most important stocks on each exchange. Other markets, such as Paris, have been invited to join; the euro may ultimately usher in a common exchange for all Euroland and its neighbors.

But for now, all eyes are on Monday, the euro’s first working day.

Citizenry to Get Educated in a Hurry

International investment banks need to be ready to carry on multimillion-dollar deals in euros without a hiccup. Traders will have to quote and deal from euro stock markets, and banks to open euro accounts and quote loan rates in euros.

Though Euroland’s governments have launched public relations campaigns to explain the euro via mass mailings or TV spots, many of the supposed beneficiaries--ordinary citizens--are clearly bemused by all these goings-on.

An opinion poll commissioned this month by the Assn. of German Banks found that fully 70% of the Germans surveyed didn’t know when actual cash in euros will start circulating (correct answer: Jan. 1, 2002). Ten percent thought they could pay with euro currency as of Saturday.

But in ways large and small, pleasant and unpleasant, the citizenry will start getting educated in a hurry.

For example, as of next week, top auto makers such as Volkswagen, Fiat and Renault have promised to post sticker prices in euros as well as in local currencies.

“It’s safe to say that prices will begin to align,” predicts Enrico Bretto of Fiat’s euro project.

Business owners are worried about their own employees understanding the new money, especially those who deal with the public.

“We’re not worried about our software,” admits Bruno Di Carlo, in charge of euro conversion at La Rinascente, an Italian retail group with $5.6 billion in annual sales. “We are much more worried about the checkout clerks and the buyers. We [not] only have to train the managers, but also the personnel who are in contact with customers.”

Between now and 2001, a total of 123,000 hours in euro training will be given the employees of La Rinascente’s 400 supermarkets, hypermarkets, discount stores and other outlets.

Meanwhile, the most minute details must be attended to--at great cost. In Italy, customers normally need a 500-lire (30-cent) coin to unlock a shopping cart to use it. But at a cost of $8.75 each, the carts at some of La Rinascente’s Milan stores have been modified so that they will also be able to take future euro coins.

However, surveys show that many of Euroland’s small and medium-sized businesses have adopted a more laid-back approach.

“We’re taking one step at a time,” says Diarin Kelly, duty manager at Kildare House, a luxury hotel and country club in the heart of Ireland’s golfing and horse-racing country.

“Some of our staff have been sent on training courses . . . but we haven’t really looked down the line to see what effect it will have on our profit margins. We expect there’s going to be a difference, but we haven’t looked that far ahead yet.”

Times researchers Christine Winner in Paris, Maria De Cristofaro in Rome, Janet Stobart in London and Christian Retzlaff in Berlin contributed to this report.

* COMING FRIDAY: A special report on the euro: its historic and political significance, its meaning for the dollar, why Britain and other nations are sitting it out, answers to common questions, and James Flanigan commentary. Main News and Business sections.