Re Euro conversion: International Herald Trib. Wednesday:
By Tom Buerkle
International Herald Tribune
LONDON - A group of bankers scheduled a
meeting with the Bank of England last month to
discuss technical preparations for the introduction
of Europe's single currency, expecting about 20
experts to attend. They scrambled for chairs when
95 showed up.
Across Europe and around the world, bankers
and corporate executives are fast waking up to the
realization that economic and monetary union is
barely one year away and that the launch of the
euro, as the single currency will be called, will
demand costly and far-reaching changes in the
way they do business.
''There's that whiff of panic in the air,'' said
Graham Bishop, an economist at Salomon Smith
Barney and chairman of the European monetary
union committee of the London Investment Bank-
ing Association. ''People suddenly realize
they've got to have everything
ready to go.''
Banks and companies will
have to modify everything from
computer systems to billing and
payroll forms to accept the euro
as well as existing national cur-
rencies over three years, or until
2002, when countries participating in the euro are
to abandon their national currencies.
The task is more complicated and expensive
than solving the year 2000 computer problem,
which for all its complexity requires only a one-
time fix. What's more, the close proximity of the
two problems has triggered a rush for information
technology experts, driving up salaries for com-
puter programmers by as much as half in the past
year.
Analysts estimate the euro bill for European
industry alone at a minimum of $80 billion, more
than half of which will be spent on computer
services. Companies around the world that trade
with or invest in Europe will need to spend tens of
billions more to prepare for the single currency.
That counts only direct transition costs. The
elimination of national currencies will make it
much easier for consumers to compare prices
across borders, a fact that executives say will
force the prices of their goods and services down
toward the lowest levels prevailing in Europe.
''It's going to squeeze margins very substan-
tially,'' said Vicky Pryce, chief economist at
KPMG Management Consulting.
The costs may be daunting, but most major
European companies are not complaining. They
figure that the euro is inevitable, and enterprises
that are prepared to deal in the currency from Jan.
1, 1999, will gain a competitive advantage over
their rivals.
That is particularly true in banking, the industry
most affected by a change in money.
Banque Nationale de Paris is spending 1.5
billion French francs ($252.4 million) - 10 times
its year 2000 budget - to modify everything from
its securities trading systems to customer check-
ing accounts in order to give all of its customers
the option of dealing in either francs or euros from
1999. BNP expects many large corporations and
bond markets to make the switch almost im-
mediately, but its research also indicates that 10
percent of retail customers will want to shift their
accounts into euros in 1999, a conversion the bank
plans to make free of charge.
''We will have to offer both means of payment
to all of our customers for three and a half years,''
said Jean-Francois Colin, the senior vice president
who is coordinating the bank's efforts. ''The only
way to recover the costs is to get market share.''
Dresdner Bank AG in Frankfurt views the euro
as an opportunity to invest in long-term im-
provements. It will spend up to 300 million
Deutsche marks ($168.8 million) to modernize its
data-handling and electronic payments systems.
''We're not moaning and complaining about
it,'' said Klaus Friedrich, chief economist at the
bank. ''We're hoping to make some money out of
this.''
Some non-European banks and financial ser-
vices companies appear to be taking a more
relaxed view of the transition. At Daiwa Europe,
the subsidiary of Japan's second-largest securities
firm, executives note that 70 percent of business is
conducted in yen and much of the rest in dollars.
''The implications of EMU for us are much less
significant,'' said Sally Wilkinson, chief economist at
Daiwa Europe.
That attitude worries many European securities ex-
perts. A U.S. mutual fund, for example, could suddenly
find itself unable to trade its European bonds or stocks
if the custodian of that security, often a small U.S.
bank, has not overhauled its computing systems to
handle the security redenominated into euros.
''You've got to have every link in the chain work-
ing,'' Mr. Bishop said.
Outside of the financial services industry, many of
big European multinational corporations such as
Philips Electronics NV of the Netherlands and
Daimler-Benz AG of Germany have announced plans
to switch to the euro in 1999 to simplify their ac-
counting procedures across Europe.
But even a strategic decision like that raises a host of
issues. A company can bill suppliers in euro and
national currencies, for example, but if each item in an
invoice is listed in dual currencies rather than the
bottom line, that will demand far greater changes in
computer programming and the printed invoice.
The scale of the changes and the need to tackle the
year 2000 problem first has led International Business
Machines Corp. to delay its full transition to the euro
until 2001.
''Our view is that the majority of firms, especially
small and medium-sized ones, are going to find this a
big deal, and one they're not going to be able to do
quickly,'' said Peter Cruttenden, who is in charge of
the U.S. computing giant's preparations. ''The amount
of skill that's around is finite.''
The biggest benefactors of all the euro largesse are
programmers and other computer service experts. Sal-
aries in Britain for computer programmers with two
years' experience have jumped to as high as œ40,000
($65,320) from œ25,000 a year ago, said Les James, a
director at the Agency Partnership, a recruiting firm.
New hires also can receive signing bonuses of up to
œ10,000 and a further loyalty bonus of up to œ10,000 a
year payable in March 2000.
''Two years ago, you had to look for permanent
vacancies'' on behalf of job seekers, Mr. James said.
''Now you don't. Companies phone around looking for
staff.''
The number of job vacancies in Britain in information
technology has soared to as high as 100,000, recruiters
estimate. That is double the number of vacancies during
the run-up to the deregulation of Britain's securities
industry in 1986, when banks and brokers scrambled to
overhaul their computing systems.
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