‘Is anyone prepared for monetary union? Of course not.’ Not the words of a ‘Save the Pound’ campaigner but the judgement of one eurozoner whose native country, Italy, will be joining the single currency street party at the start of 2002.
Massimo Zanta, a 42-year-old businessman in the north-eastern province of Treviso, is unphased by the findings of a 2001 survey carried out by the European Commission’s Directorate General for Economic and Financial Affairs (ECOFIN), which revealed 42% of Italians regard next 1 January as nothing more than a day to recover from New Year excesses.
‘No one here is getting worked up about the start of the single currency,’ explains Zanta, co-partner in BTI Solutions, a small Veneto firm specialising in marketing and e-communications (the client list includes home-grown successes such as Benetton and De Longhi).
As an entrepreneur based in that part of the peninsula, it is hard to ignore the proximity of European Union neighbours – Austria, Germany and Switzerland are all within a euro’s throw.
It is a geographical position which goes some way to explaining the local ‘prima o poi’ (‘sooner or later’) stance on economic and monetary union.
And it is also a location that Zanta maintains will stand the business community in good stead, come next year.
Yannis Xenakis of Brussels-based ECOFIN believes EMU ignorance among first-timers to be surmountable. Director of the organisation’s unit on transition issues related the euro, he is quick to point out that the directorate’s survey dates back to April this year. If the same results were obtained this month, when information campaigns in the 12 countries should be well underway, the situation would be more worrying. Xenakis urges a sense of proportion. The real cause for alarm, the Greek euro expert insists, lies in the level of IT unreadiness.
‘Europe’s response to EMU’, the fourth in a series of studies carried out by Big Five accountancy firm KPMG, estimates investment in compliant IT systems will require five times Y2K spend – approximately 85% of the total outlay for conversion. The arrival of the euro will not simply entail reconfiguring programs so national currency signs convert, but involves the risky job of ensuring data can be safely ‘migrated’ between systems without corrupting.
Silvia Viceconte of ECOFIN’s EMU unit wholeheartedly agrees with suggestions that SMEs in Europe could hit an IT bottleneck. ‘Apart from the obvious legal consequences, if companies haven’t readied accounting procedures they will also experience problems communicating with clients,’ the Italian-born economist explains. ‘If customers ask for product prices or invoices in euros, firms are going to have create that information manually if their computers are not capable of doing so.’
Although BTI Solutions is only in the first phase of software conversion, Zanta is not losing any sleep. Predictions that some companies may end up paying over the odds for the changeover do not worry the entrepreneur unduly.
He is in no doubt that just as the e-provider rode out the year 2000 without incident, so the introduction of the single currency will pass off uneventfully.
‘We started this company mid-1999,’ Zanta explains, ‘so we avoided the Y2K issue because we didn’t have to update the software. And actually the millennium bug turned out to be a bit of a storm in a teacup.’
Zanta maintains the cracks in companies’ euro conversion plans will start to appear when dual circulation ends in February 2002. An attitude widely held in the eurozone small business community. Yet customs and excise authorities in Italy, for example, have threatened that firms which cannot produce invoices in the single currency as of January will not be opening for business.
ECOFIN’s Viceconte reveals that in a recent survey of Italian SMEs, 10% replied they would start to invoice in euros from next year while 34% said they would only do so when such measures become compulsory – compared with an EU average of 17%.
Clearly, Viceconte underlines, the latter figure shows that many companies have no idea as to when external accounting in euros becomes mandatory.
Such a ‘wait and see’ approach is also likely to lead to trouble for SMEs in the area of taxation. In common with other EMU states, the Italian treasury will be requiring VAT returns in the single currency from the start of 2002.
In a speech to the UK Local Government Association on single currency planning last June, Xenakis revealed that in 2000, one in four ‘sub-national authorities’ in first-wave countries had yet to install euro-friendly software. That figure has risen to one in three intent on converting mid-2001. And preparation in other areas is improving.
Italy, long seen as the player which passed ‘go’ into EMU by the skin of national economists’ teeth, is keeping up with the Schmidts and the Le Francs in the conversion countdown. The country’s civil servants will have been seeing their pay in both euros and in lire since mid-2001.
Others such as the Netherlands are delaying until December. Spain alone will be sending out public pay slips in the single currency from this month.
In Treviso, Zanta remains confident that the ‘canniness’ of north-eastern entrepreneurs will find them well-prepared for E-Day. ‘I don’t have a great sense of anticipation,’ he says. ‘You don’t need to be alarmist about the whole euro thing really.’
RACKETEERS COULD SPOIL EURO PARTY
One minute past midnight 2002 and, as if by magic, lire, francs, gilders and deutschmarks transform into one spanking new currency.
The Cinderella fairytale-in-reverse tells of cashpoints across Euroland (29,000 in Italy) issuing forth euro notes. Provided national banks have followed the plot, the advent of 2002 means the internal workings of cash machines will have to be readied for the cut of a new currency. In Italy, services that have not been made euro-friendly will be suspended. The country’s financial houses have until 15 January at the latest to get dispensing in order.
Bad timing by banks apart, the most serious threat to the euro party will be the counterfeiters. But the EMU equivalent of the heavies on the door have a formidable pedigree. The Forgery of Money Group based at The Hague headquarters of Europol – the organisation that already works with the EU states on issues such as illegal immigration – will be busy collating information on counterfeiting incidences as 15 billion notes and 56 billion coins wend their way around the eurozone.
Monetary union creates one currency but not one country. First-wave states and the European Central Bank will have to keep a strict currency watch.
A common approach to fighting counterfeiters should mean law enforcement agencies can respond more quickly because they are assisted by a central database.
‘For criminals, the euro is just another currency, maybe with a mixture of new and old security features,’ Europol member Michael Muller explains.
‘The only thing that changes for the racketeers is that, instead of printing deutschmarks or francs, they’re printing euros. Counterfeiting has been around for a long time and it won’t cease just because, for example, the lire disappears.’ The arrival of monetary union also means the UK won’t be able to sit idly counting coppers and our luck at having stayed away from the whole monetary union business. Twelve countries may have adopted the single currency for now, says Muller, but those on the opt-out list should be just as concerned about the fate of false euros. Counterfeiters, like bad pennies, have a habit of turning up everywhere.
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