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Euro cash means growth - EMUbusiness - Issue 18

EMUbusiness - Issue 18
1 May 2001
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EMUbusiness top stories
1. Time to think about contingency planning
2. Austria watching for hidden price increases
3. Legacy coins for charity
4. Candidate countries should spend longer in ERM II says Hypovereinsbank
5. Spanish banks tot up cost of note and coin introduction

Publisher's Note
Amidst the doom and gloom scenarios about the possibility of introduction of euro notes and coins leading to considerable hassle and confusion and even a drop in consumption, there is some good news. Read carefully the latest Broad Economic Policy Guidelines from the European Commission and statements by the Governor of the Austrian Central Bank, among others, and you will see that euro cash
could be the euro-area's secret weapon against those who say that next year's euro-area growth rate of 2.8% in the latest Forecasts from the European Commission is over-optimistic. Physical monetary integration is itself expected to be good for growth. It seems hard to believe that the disappearance of transaction costs and the fact
that the single currency will finally seem real will immediately translate into extra growth, but these are people who should know, so let us hope they are right.

Marion Bywater
Publisher, EMUbusiness

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1. Time to think about contingency planning
It is time to think about contingency planning, crisis management and disaster recovery in relation to companies' changeover to the euro, Patrick O'Beirne of Systems Modelling Ltd explains in a paper on the risks of the changeover which can be found at . The changeover is probably unprecedented for many companies because it involves creating an inventory of all the currency data that has to be brought forward into the new euro area. Mistakes are almost inevitable and it is time to plan how to manage them.
Full story:

2. Austria watching closely for price increases
Austria's Deputy Chancellor, Susanne Riess-Passer, has promised that a close watch will be kept to ensure that the introduction of the euro is not used as an opportunity for hidden price increases. She was speaking after a Cabinet meeting last month at which government preparations for the euro were extensively discussed. Each Minister made a presentation on the preparations in the area for which they
are responsible.
Full story:

3. Legacy coins for charity
Schemes to collect legacy coins for charity, i.e. those euro-area coins which will be replaced by the euro and in particular the non-national coins which euro-area residents (and others) have broughtback from trips to EMU countries, are multiplying. Recent additionsto the list include Change for the Future and Action Cambio in Belgium, a campaign by Licht ins Dunkel (Light into Darkness) in Austria and L'Ultima Buona Azione della Lira (the Lira's last good deed) in Italy. Some existing campaigns, such as those run by Unicef or in France by Caritas, are likely to be stepped up.
Full story:

4. Candidate countries should spend longer in ERM II says Hypovereinsbank
Criteria for euro-area membership should be stricter for countries of eastern and central Europe than they are for the current EU members, Germany's second largest bank, Hypovereinsbank, argues in a recent research paper. It believes that it would be possible for these countries to fulfil the Maastricht criteria for euro-area membership
and yet be a threat to euro-area stability. These criteria are not an adequate guarantee that these economies will have achieved sustainable convergence with the euro area, the paper suggests. While there has been much debate as to whether the inflation criterion should be eased to allow for the fact that these are catch-up economies, Hypovereinsbank wants to go the other way and make
membership harder by imposing a longer and more testing period of pre-euro membership of the exchange rate mechanism.
Full story:

5. Spanish banks tot up cost of introducing notes and coins
Spanish commercial banks belonging to the Spanish Bankers'
Association calculate that introduction of euro notes and coins will cost them Ptas60 billion or more than EUR360 million in logistics alone. This amounts to between Ptas1 million and Ptas1.5 million, or between EUR6,000 and EUR9,000, for an average branch. This does not include the cost of converting cash points, training staff or overtime.
Full story:

These articles are provided by Euro-impact. Euro-impact is a monthly newsletter on the regulatory, practical and strategic impacts of the euro for companies. Articles may be reproduced with acknowledgement of the source and Euro-impact. Every reasonable effort has been made to ensure the information is correct at the time of writing.

Coming up in euro-impact
French unions are on the warpath about lack of consultation on introduction of notes and coins; Belgium and France are re-thinking share capital redenomination rules to make them more business-friendly; this month will see the launch of a number of national information campaigns; it is time to review banking supervision arrangements for the euro-area and Ecofin has made some initial recommendations, while the OECD and IMF agree there is an issue but do not totally agree on the correct recipe; the multilateral interchange fee could be a major step towards transparency, if not
lower costs, in low value cross-border payments. All these items are covered in the May issue of euro-impact. For subscription information .

Other stories on EUbusiness in April

IMF economist sees need to cut interest rates in Europe
A senior official of the International Monetary Fund (IMF) is using Eastern Europe as an example of the interdependence of regional economies - and a reason for the European Central Bank (ECB) to cut interest rates. If the ECB does not act, he says, Western Europe's economy may slow more than anticipated - to the detriment of Eastern
Europe's economy. (RFE/RL)
Full story:

Commission plans new controls of 'financial conglomerates'
The Commission presented a draft on 26 April for a directive to improve supervision of financial conglomerates from the banking, investment services and insurance sectors. Commentators see this as a key measure in improving banking oversight in an increasingly integrated euro-area financial market. One of the main aims of the
new legislation would be to ensure that the conglomerates had adequate capital. The proposed rules would prevent the same capital being counted twice over and so used simultaneously as a buffer against risk in different entities in the same financial conglomerate - a practice known as "multiple gearing".
Full story:

Brussels approves 'ambitious' Broad Economic Guidelines
This year's 2001 Broad Economic Guidelines guidelines, published last week by the Commission, have a "clearer focus on the euro area and present targets that are ambitious, monitorable and precise", says Pedro Solbes, Europe's Economic and Financial Affairs Commissioner. The Commission's recommendation, which still needs European Council approval, take account of lower growth forecasts, aim to promote entrepreneurship, innovation and a knowledge-based economy, and to prepare for the impact of ageing populations.
Full story:

No early cut in interest rates, say EU finance ministers
A clear majority of EU finance ministers stressed at the weekend informal meeting of finance ministers on 20-22 April that the European economy remained strong and would not be affected to any great extent by the international ecession. Wim Duisenberg, president of the European Central Bank, saw no reason at the moment to follow the US and cut interest rates. "Europe was a large market that would manage to withstand the international crisis", he said.
Full story:

Euro-zone February trade deficit hits EUR 1bn
The first estimate for euro-zone trade with the rest of the world in February 2001 was a deficit of EUR 1 billion, compared with 0.3 billion deficit in February 2000, Eurostat reported on 24 April.
Full story:

Euro-zone March inflation stable at 2.6%
Euro-zone annual inflation was 2.6% in March, unchanged on the previous month, Eurostat reports. A year earlier the rate was 2.1%. EU-15 annual inflation - - comparing the price change between the current month with the same month the previous year - - was 2.3% in March, also unchanged.
Full story:

This newsletter is produced in association with FEE, the Federation des Experts Comptables Europeens. FEE is the representative organisation for the accountancy profession in Europe. It is a "non profit" organisation which groups together 38 professional bodies from 26 countries, including all 15 Member States of the European Union and the 3 main member countries of EFTA. The FEE Euro Information Service is at:

Internet Monitor

Euro-denominated bond markets
The Economic and Financial Affairs DG's monthly note on developments in the euro-denominated bond markets is now available on its web site.

Ecofin meeting: key euro-zone statistics
The Commission on 19 April issues its latest update of key economic statistics for the euro-zone, ahead of the finance ministers' meeting in Malmoe (PDF format).

EMU diary
7 May, ECOFIN Council, Brussels
28 May, Economic and Monetary Affairs Committee of the European Parliament, Monetary Dialogue with ECB President, Wim Duisenberg
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