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Euro the facilitator - EMUbusiness - Issue 7

EMUbusiness - Issue 7
15 November 2000
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EMUbusiness top stories
1. Belgians to force pace of changeover to euro
2. French SMEs not as prepared as they should be
3. The next steps in U.K. policy of 'prepare and decide'
4. Accession countries must wait to adopt euro
5. Communicating on the euro
6. Recipes for successful euro conversion projects

Publisher's Note
The euro is a facilitator, not the final stage of a process. Just as the euro was necessary in order to garner fully the advantages of the Single Market, there are further steps which need to be taken if the euro is to deliver its full potential for efficiency gains in the
economy. This point has been hammered home in the last few days by four different events in as many days, including launch of reports on debt issuance, securities markets and financial services and a forum on cross-border payments, particularly those of low value.

In practice, the Giovannini report on debt issuance is not
recommending any further action now. It does not rule out the possibility that the pace of market change as a result of globalisation and technology combined with the impact of the euro will produce the desired results. And larger EU Member States do not have as great an interest in co-ordinated debt issuance as small. Nevertheless, the report acknowledged that the fragmentation of the EU public sector debt markets needs to be kept under review.

Alexandre Lamfalussy, who heads the group looking at securities markets, has no doubt, however, that in this area action is needed now. "European regulation is simply not up to speed," he said. "The stakes are so high because the benefits are so important. It's high time we complemented the euro with a deep, liquid, integrated
European capital market." The underlying message in re-launching the Financial Services Action Plan was the same. Many participants at the cross-border payments forum were in clear agreement that public acceptance of the euro is at stake if there are delays in creating a single payments area.

Many of the improvements which are under discussion will benefit all EU countries, but it is hard to dispute that the euro will be an added advantage in exploiting these changes in the financial market scenery.

Marion Bywater
Publisher, EMUbusiness

EUbusiness Week and EMUbusiness reach a global community of over 10,500 business people interested in doing business in Europe. For details of how to reach this audience:

1. Belgians to force pace of changeover to euro
Belgian banks will start converting their customers' accounts to euro in the middle of next year. A major euro awareness-raising campaign will be launched at the beginning of the year to prepare customers, particularly retail customers, for the change.
Full story:

2. French SMEs not as prepared as they should be
There is a serious risk of dysfunction in 2002 among some French small and medium-sized businesses, the French Ministry of Finance has warned in commenting on the results of a recent survey on preparations for the euro. It is concerned that a growing number of businesses have not yet started their preparation for the euro and are intending to wait until the second half of 2001 until they do start is growing. The Ministry points out that even small and medium-sized businesses need to allow six months to plan for the changeover.
Full story:

3. The next steps in U.K. policy of 'prepare and decide'
Detailed preparation for introduction of the euro in the U.K. will extend planning to local authorities and other local public bodies in Spring 2001. This is consistent with the U.K. government's policy of 'prepare and decide' and the recognition that conversion to the euro is likely to work most smoothly if the planning and preparation
are spread over several years. It is one of the next steps announced in the Fourth Report on Euro Preparations released by the U.K. Treasury earlier this month.
Full story:

4. Accession countries must wait to adopt euro
Adoption of the euro by the candidate countries for EU membership is the very last stage of a phased process of integration with the EU and EMU, EU Finance Ministers stressed at their last meeting. While these countries may well increasingly use the euro as a transaction currency in the intervening period, there can be no question of them
adopting the euro as legal tender or integrating themselves with the Eurosystem of central banks.
Full story:

5. Communicating on the euro
Co-operation with the public and private sector will play an important role in the ECB's euro communications, the campaign director told a conference on November 14. It was the first time that Seth Goldschlager, who is responsible for the euro campaign at Publicis, the agency which won the EUR 80 million contract, had spoken publicly in any detail about the campaign. The goal of the campaign is to inform the general public about the physical appearance and the security features of the euro notes and coins.
Full story:

6. Recipes for successful euro conversion projects
It is already too late to plan for a Big Bang changeover of corporate IT systems to the euro, Roger Annett of Merant International warned Euro Project Managers at a conference on the practical euro changeover, organised by the European Accountants' Federation (FEE) in Paris this month. "Any enterprise which tries to change over all its systems on Monday night, 31st December (2001) is bound to fail",
Annett said.
Full story:

Other stories on EUbusiness in November

Euro use 'not picking up yet' shows report
EU citizens are still slow to use the single currency in accounts and payments, according to the latest Commission quarterly review of the use of the euro. While there has been a slight increase in euro use terms of value for national VAT returns - from 5.7 to 6.1% - the figure for single currency use in customs declarations has gone down
from 7.7 to 7%.
Full story:

'Get ready for increased pension burden' says Ecofin report
The implications of pension fund liabilities for public spending will be integrated in future discussion of euro-area countries' stability programmes EU Finance Ministers decided this month. They were considering a report from the Economic Policy Committee which shows that the additional cost of funding ageing populations will be
equivalent to 3 to 5 percentage points of GDP. The report, which looks at the predicted impact of populations growing older on national pension schemes, calls for EU countries to exercise tight budgetary discipline in order to get ready for the resulting higher public debt burdens.
Full story:

'No change needed on public debt issuance in euro-zone'
Differences in public debt issuance techniques and the working of the various national debt agencies mean some fragmentation in the market, but these do not justify a major change in EU issuance arrangements now, according to the Giovannini Group. The group, a committee of financial experts, chaired by Alberto Giovannini, who offer advice to
the EU on capital market integration, considered four hypotheses for more co-ordinated issuance of public debt in the euro area.
Full story:

Change or stay in the financial markets slow lane, says Lamfalussy
Significant reform is needed if the EU is to capture the major benefits of an integrated financial services and capital market, according to Baron Alexandre Lamfalussy who leads Ecofin's Committee of Wise Men on the regulation of European securities markets. Baron Lamfalussy said the EU regulatory system needed to become more efficient and decisions had to be taken quicker.
Full story:

EU talks tough over banking single payment systems
The creation of a single payments area is essential for public acceptance of the euro participants at a European Commission round table on 'Establishing a Payment Area' in Brussels on November 9 warned. The Commission threatened to force banks to take action if they do not move of their own accord. Representatives of the banking and payments industry were discussing with the European institutions
and consumer and retailer organisations how the speed of cross-border credit transfers can be improved, how the cost could be brought down and how best to direct future developments in credit card, internet, mobile phone and online banking.
Full story:

Commission calls for 'quantum leap' to single financial market
The Commission has set out 10 urgent financial services proposals which it says are needed to make the 'quantum leap' towards rapid implementation of its financial services action plan (FSAP) to integrate capital markets in order to improve competitiveness. A deadline of 2005 has been set by EU heads of states. The latest FSAP progress report also suggests possible benchmarks for indicating
trends and developments in market integration.
Full story:

ECB intervenes as Prodi says 'give them time'
The European Central Bank surprised the markets again on Monday 6 November when it intervened to bolster the euro but the resulting rise in value proved to be just short-term, dropping back after just an hour. The ECB entered the markets on the same day that Commission President Romano Prodi called for the world's financial markets to give the ECB time to settle down and do its job. Euro gains from the
intervention were cancelled out by the end of the day.
Full story:

Council Watch
Ministers at the 7 November ECOFIN Council backed proposals for implementing a risk capital action plan by 2003 and for improving the focus of financial instruments used to encourage small and medium-sized enterprises. (in French)!!!&BID=93&DID=63899&GRP=2921&LANG=2

EMU diary

Ecofin Council, November 27
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The Commission is currently preparing a Directive on cross-border electronic invoicing. VAT Forum, a Brussels-based international organisation, is urging the Commission to publish its draft as soon as possible. Do we need an EU Directive on electronic invoicing? Vote now in our new poll:

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