Trading globally can be extremely rewarding. And with the advent of the euro, the new single European currency, it can become easier or more difficult depending on your perspective.

Nevertheless, in the short-term, you’ll need to know how the euro will affect your business — so you can take the necessary steps to gain new opportunities and mitigate risks.

Euro to Be Phased In Over 3 Years

On January 1, 1999, the euro became the official currency of 11 of the 15 European Union (EU) member states. This group of countries, referred to as Euroland, includes: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain.

As of the first of this year through December 31, 2001, Euroland businesses are free to use either the euro or their national currency for non-cash transactions.

On January 1, 2002, euro notes and coins will be made available. After that, national currencies gradually will be withdrawn and will cease to exist on July 1, 2002.

How Will the Euro-Dollar Exchange Rate Affect Your Business?

Euroland represents an economy almost as large as the United States’. Should all 15 EU countries become members, which is very likely, Euroland will become the largest world market. And as Euroland becomes stronger and more influential, the value of the euro should increase.

On May 14, 1999, one U.S. dollar was worth 0.9397 euros. However, analysts believe a large shift from dollars to euros — a somewhat likely scenario — may cause significant fluctuations in this exchange rate. In turn, this quickly could be followed by a precipitous fall in the value of the dollar.

Overall, a stronger euro would make Euroland exports more expensive and decrease the region’s level of competitiveness. On the other hand, U.S. goods and services would be more attractive in Euroland, benefitting U.S. exporters. If a large shift from euros to dollars occurs, the opposite situation would happen.

U.S. Companies Need to Deal With the Euro

In order to do business successfully with Euroland companies, many U.S. firms still need to get up to speed. This means adapting price lists, ledgers, receivables, and other financial systems to the euro.

To achieve this, companies will need to invest in new software and training, so they can accurately process monetary data in euros. If not, firms will risk losing business.

Business Costs Will Be Reduced

In the short-term, the cost of effectively dealing with the euro may be significant. However, over the long-term, the cost of doing business in Euroland will decrease — for you and your customers.

No longer will you need to incur the costs of converting the dollar into a dozen different currencies. Furthermore, European prices should decrease, since it is now easier to compare the prices of goods and services in any of the Euroland countries. This means Euroland firms will be forced to become more competitive.

This article appeared in April 1999. (CB)

John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, emerging risks, competitive strategies and the latest economic trends. He also is founder of the and Chief Strategy Officer of Ignition Life Solutions. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.

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