The Color of Money

At the Galeria Kaufhof on Berlin's historic Alexanderplatz, preparations are well under way for the Jan. 1 conversion to the new euro currency. Prices are displayed in both euros and deutsche marks, staff have been trained and 4.6 tons of euro coins and notes have been ordered to fill the venerable safes in the store's basement. "We will be a change bureau, and it's a great advantage," says manager Detlef Steffens. "We want people to bring us their marks because then we can sell them something."

Things are much different at Kamin's Minimarket, a small grocery not far away. Owner Lothar Kamin doesn't have the staff to put up dual pricing, or a cash register that can handle the new currency. "I can't afford the conversion to euros," Kamin says.

He will have to try. In four months the euro replaces marks, lire and francs in the 12-nation euro zone, like it or not — and plenty of Europeans don't like it. To win over the skeptics the European Central Bank last week opened a campaign to sell the euro to the Continent, unveiling the elaborate security precautions embodied in each euro note and launching a $73 million advertising campaign. "The euro is a symbol of the successful enterprise and initiative which has crossed borders and removed barriers to people working, trading and living together," said Wim Duisenberg, president of the European Central Bank, as he introduced the notes at a ceremony at Frankfurt's New Opera. But acknowledging that the European economy is weaker than hoped at this historic juncture, Duisenberg also announced that the E.C.B. had cut interest rates by a quarter of a percent. He said the bank had underestimated the duration and depth of the U.S. economy's slowdown.

Ready or not, armored cars and security trucks have begun the gargantuan task of distributing 14.5 billion banknotes and 50 billion coins to banks and stores throughout the euro zone. The planners hope that sufficient amounts of the new currency will be in place on Dec. 31 so that banks and shops can make the conversion with a minimum of confusion. For up to two months into the new year, consumers can still spend their old cash, but they will receive change in euros. After the initial period, old coins and notes can be exchanged only at banks.

"We're very well prepared," said Andreas Goralczyk, head of the conversion team at the German Bankers Association. He said it was on track to position 60 billion euros worth $55 billion around the nation. Goralczyk said Germany's banks were sufficiently well-prepared that virtually all cash machines in the country will make the switch on the night of Dec. 31. But that's the good news. "The problem is that many small businesses do not have the financial capacity to invest in the changeover," said Kathrin Pingel of the Federal Association of Retailers. A typical shop needs at least one new cash register capable of pricing in both euros and marks, as well as enough employees to change thousands of prices by hand.

Miriam Wittamer, who owns a luxury cake and chocolate shop in Brussels, feared the changeover was going to be extremely difficult. "I have to allow time to train my staff, and I have to change all the prices," Wittamer says. "And it has to be done carefully, because the costs of ingredients and equipment are also changing." Peter Haegeman, chief economist for the Belgian retailer's association, said shopowners will be forced to keep both the old and new currencies in their tills, tying up twice the normal amount of cash on hand. "The burden will fall on the retailer to distribute euros to consumers, some of whom are seeing them for the first time," he says. "It's a lot to ask."

In France, at least one industry is making the changeover ahead of schedule. Last week 16,000 gasoline service stations began displaying prices only in euros, though payment can still be made in francs. The reason is that there is a shortage of technicians trained to change the counting mechanism at the pumps, so the industry had to move ahead in steps. In all, 80,000 stations must be converted. Yet a last-minute rush for limited expert help is expected to disrupt the change-over in unprepared French businesses — 25% of which have yet to buy equipment to process credit card transactions in euros. "A lot of businesses will simply find themselves unprepared as the new year opens," says Christian Huard, president of a French consumer group.

In addition to the logistical difficulties facing shopkeepers, consumer associations throughout Europe have expressed concern that merchants will use the changeover to pass on clandestine price increases. "No one should be allowed to make a profit from the change to the euro," said Austrian Finance Minister Karl-Heinz Grasser. To counter such fears, the Spar Austria supermarket chain promised last week that prices will be rounded down in the conversion from schillings to euros. In France, retailers have agreed to a price freeze between mid-November and mid-March to ease consumer concerns.

Apart from price rises, one of the greatest fears in Europe is the potential for criminal activity. "The introduction of the euro provides a unique opportunity for criminals across a range of activities," says John Abbott, director general of Britain's National Criminal Intelligence Service. "The lack of familiarity with the new currency, confusion, plus high demand on financial institutions particularly in the early stages, will provide them with an opportunity." The introduction of euros is likely to inspire counterfeiters to bring out quick copies of the new notes because consumers and shopkeepers will be unfamiliar with them and less likely to spot a fake. For that reason, the new notes are printed with special raised inks, foil strips containing holograms of the denomination of the note, security threads that change color under light and watermarks on the paper. "Confidence is the key word," said Eugenio Domingo Solans, a member of the E.C.B.'s executive board. "Building that confidence has therefore been the most important motivating force behind everything we have done."

Another major concern is the potential for money laundering in the two-month changeover period. Millions of Europeans are believed to keep unreported — and untaxed — money in cash at their homes and offices. Apparently out of fear that the money will be worthless after the euro conversion, or that tax authorities will take a share, there has been heavy demand for U.S. dollars from several countries, notably Spain and Italy. German customs officials have warned that there may be long delays at borders as they step up the hunt for currency smugglers. "Large amounts of cash have been assembled across Europe," said Germany's Finance Ministry. It warned that criminals would use the transition to launder money "through banks as well as bring in large quantities of banknotes into their country of origin for exchange into euros." Another police concern: with a 500-euro note worth $458 in circulation, euros could displace the $100 bill as the currency of choice for illegal drug payments and kidnapping ransoms.

Even charities worry about the effect of the new currency. Some Catholic priests in Ireland have expressed concern that worshippers may switch from a one-punt coin to a one-euro coin when the collection plate is passed around. That would leave churches with 20% less income than before. Even those toiling in God's name, it seems, have worries about the euro changeover.