Europeans ponder impending leap into the euro zone For some, the switch is a dreaded headache

others see opportunity

May 01, 1998|By Bill Glauber | Bill Glauber,SUN FOREIGN STAFF

BERLIN -- Ute Karpinske is a self-taught currency expert. The 58-year-old owner of the Zum Nussbaum pub has lived through cash minted by Hitler's Reich, Communist East Germany and a united Germany.

She recalls when American dollars and West German marks were like gold nuggets to those who lived behind the Berlin Wall. And she was raised on tales of the 1920s, when inflation in Germany was so rampant, people paid a barrel full of cash for a loaf of bread.

So, when it comes to the impending launch of a single currency for Europe, in a revolutionary bid to remake the continent's economic face, Karpinske counts herself among the skeptics.

"Why do we need it?" she says. "Nobody asked us if we wanted it. But we're going to get it anyway."

Throughout Germany, and much of Western Europe, people such as Karpinske are pondering what it will mean to soon live together under a new currency called the euro, the cash that is due to cross national boundaries, languages and cultures from the Mediterranean to the Arctic Circle.

Nations that have fought wars against one another are using currency to bind into a colossus of nearly 300 million people in a combined $6.2 trillion economy, second only to the United States.

This weekend at a meeting in Brussels, Belgium, 11 countries -- ** led by Germany and France -- are expected to sign up as founding members of the euro, setting the terms on trading their marks, francs, pesetas and lire for the new cash. Others to grasp the euro include Austria, Belgium, Finland, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.

Britain, Denmark and Sweden are holdouts -- content to keep their cash while monitoring the project. Greece didn't meet the initial financial requirements to cut inflation and government deficits to get in the first euro class.

Banks and financial markets will begin phasing in the new currency Jan. 1, 1999. The actual new euro bank notes and coins will be introduced Jan. 1, 2002, with national currencies ditched six months later. A powerful central bank, based in Frankfurt, Germany, will oversee monetary policy.

The project comes nearly 50 years after European leaders first dreamed of forging closer economic ties to discourage conflicts like the two world wars that ravaged the continent in this century. Yet the euro is still a great leap into the unknown. Europe's leaders are giving up the authority to print and control their currencies. In exchange, they are combining forces in a daring plan to create wealth and keep the peace.

"The euro changes everything," says Malcolm Levitt, a chief adviser on the issue for Barclay's Bank in London. "Will it fly? Yes. How long will it stay in the air? The countries are determined to make it work."

At its most basic, the euro is viewed as a vehicle to more cheaply and efficiently move goods, services and cash throughout "Euroland." But the euro represents more than cash. Some see the currency as a forerunner for a united states of Europe, with the nation-states moving to a federal-style government in the coming decades. Others claim the project could fall apart over inevitable political tensions. The euro notes haven't even rolled off the presses, and Germany and France have battled over rival candidates for the top central bank post.

'People didn't use them'

Yet for a small-business owner such as Karpinske in eastern Berlin, the euro is something of a dreaded headache. She has already handled the cash during an experimental euro program that shopkeepers along Berlin's Propst Street participated in last year. Consumers were urged to trade in their marks for euros and buy specially priced products.

"It didn't work," Karpinske says. "People didn't use them."

Even though the euro won't be jingling in people's pockets for a few years yet, the red-haired, red-faced Karpinske is already counting the costs to her business, a smoky, paneled pub -- reputedly Berlin's oldest and located on a cobblestone square in what was once the Communist east.

Karpinske will need a new cash register, perhaps as early as January, in an effort to give prices for beer and schnapps in euros and marks. She'll print new menus with new prices for a delectable array of sausage dishes. She'll seek to convince the eight people who work for her that their salaries haven't decreased when the euro replaces the mark.

"I don't see any advantage in this," Karpinske says. "None at all. Well, maybe one. When people go abroad, they won't have to exchange their money. But I don't travel much."

While Karpinske sees only problems with the euro, another nearby shopkeeper sees opportunities. Ines Faenger sells Belgian chocolate and other goodies in her tea shop.

"Whenever I cash a check now for Belgian francs, I have to pay the bank a commission," she says. "With the euro, I won't have to pay that commission any longer. I'll just cash the check in euros."

Yet even Faenger admits she has mixed feelings about giving up her marks for the untested euros.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.