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by Linda Strait

On Jan. 1 a new currency will be introduced in Europe. The new currency the euro will instantly become one of the world's most important currencies.

"EMU (European Monetary Unit) has been described as the most significant and far-reaching development in Europe since the fall of the Berlin Wall," said Kurt Ritter, president and chief executive officer of Radisson SAS Worldwide.

The new currency will be implemented over a three-year period. The euro will become legal tender Jan. 1, but notes and coins won't be issued until Jan. 1, 2002. Existing European coins and notes, such as German marks and French francs, will go out of circulation by the middle of 2002 when the euro will become the sole currency of the Euro Zone.

Eleven countries are members of the Euro Zone Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain.

The United Kingdom, Sweden and Denmark decided to stay outside the Euro Zone. Greece, the 15th European Union member, was not allowed to join the single currency because its debt, interest rates and inflation rates were too high.

In addition to the single currency, the project also includes harmonizing the value-added tax rates and ending duty-free sales between European Union countries.

There will no doubt be confusion during the changeover. U.S. consumers will be able to pay for goods in euros with credit cards and checks, but they will also have the option of using local currency.

Whether euro rates will be available for products and services such as restaurant meals, gas, etc., is uncertain. Most airlines and major hotel chains will offer the euro rates immediately.

This should eventually make life much easier for U.S. firms and travelers, as they will have only one set of figures to deal with if they do business with several different countries. Another benefit will be ease of comparison between countries. A Big Mac in Germany might cost 4 marks, 5,000 lira in Italy, and 200 pesetas in Spain. You won't know who offers a bargain without your calculator. But if you know you are charged 2.05 euros in Germany, 1.59 euros in Italy and only .98 euros in Spain, you can buy your Big Macs in Spain. Being able to easily compare prices is expected to drive prices down in more expensive countries.

Once coins and notes are introduced, foreign exchange transactions within Europe may become more expensive, in an attempt to recoup lost income from commission and transaction fees. Americans will get a better deal by exchanging their money before leaving home but they will just need one currency, rather than a bundle of different currencies.

Some concerns of the transaction period are that EMU countries, because of price leveling, would become more expensive than non-EMU countries. With regard to tourism, countries such as Portugal, where pricing is low, may experience an increase in prices, which would cause them to lose business.

There has also been speculation that a "merger mania" might occur in EMU countries when the euro hits. There may be opportunities to buy companies in Europe because of the price fluctuations.

(Linda Strait is president of House of Travel Inc., a full-service travel agency in Springfield.)

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