Article

Dawn of a new currency

The euro makes its formal debut on Jan. 1. How it will affect the operation of pay-to-use kiosks throughout Europe is something kiosk operators and peripheral manufacturers are grappling with.

February 18, 2002

From Brusells to Athens, Barcelona to Berlin, Europeans have been lining up for days, filling their pockets with new coins. The coins feature motifs designed by their own countries, but they bear witness to a new dawn of continental unity.

Welcome to life with the euro, as 12 countries attempt to live with a similar currency and the concept that a continent full of disparate cultures, languages, and economic approaches can exist as one.

The conversion began in mid-December, when the participating countries began selling starter kits that contained about 30 coins apiece. On New Year's Day, trading in the currency officially begins.

For Europeans, the move is another indication that economic cooperation is crucial to the continent's long-term prospects. It also means a period of sustained confusion as consumers adjust to the value of the euro - worth about 90 cents American - especially in comparison with their old currencies.

The euro will have its formal launch on New Year's Day (photo: Sydney Morning Herald).

"We'll need a calculator to buy a cup of coffee," Greek security guard Yiannis Karayiannakis told the Associated Press. In Greece, the euro has been assigned a value of one every 340.75 drachmas (Greek currency).

For tourists, the conversion to the euro is a logistic godsend - though currency exchanges will probably frown at the reduced business.

But what does all this mean for kiosk operators, especially those that offer coin-operated, pay-per-use services? In terms of sheer numbers, the impact will be tremendous.

"We're talking at least ten million units, especially if you take into account payphone kiosks and gaming machines," said Fiona Naughton, global business development manager at MEI. "There's never been such a complex matrix of coin and bill manufacturers involved."

But that impact is also tempered by other factors, such as the reach of the euro, the time that has been allocated to prepare for the conversion, and the scope of the currency production process.

Does this look like your currency?

The 12 European countries converting to the euro are Austria, Belgium, Finland, France, Germany, Greece, Holland, Ireland, Italy, Luxembourg, Portugal, and Spain.

The conversion process began on Jan. 1, 1999, when the euro was introduced in non-cash form, fixed rates were established between the euro and European currencies, and trading began on the euro. Jan. 1, 2002, was established as the launch date for the euro as a physical, tradable currency.

In most cases, participating countries will continue to accept domestic currency for purchases until Feb. 28. The Dutch have set a Jan. 27 deadline, while Ireland and France heave deadlines of Feb. 9 and 17, respectively.

In the weeks before Jan. 1, when euros will be accepted as both notes and coins, the 12 countries began distributing an estimated 200 million starter kits, containing roughly 2.4 billion worth of euros. According to the Wall Street Journal, more than 105 million kits alone will be distributed in Germany and France.

Despite the time devoted to preparing for the change, acceptance of the euro has been slow among the general population. A lack of information and/or a resistance to abandoning familiar currencies made many hesitant at the change.

"The euro saw an amazingly fast adoption in the financial markets, but it was not adopted as quickly by private citizens as people had been expecting," Jean-Pierre Beguelin, chief economist at Pictet & Co., told CBS Marketwatch.com.

The kiosk effect

For kiosk operators whose machines accept currency in return for services, the conversion to the euro is a complex process on a number of fronts.

Adopting machines to the euro will be a difficult process because the currency, both notes and coins, are not being mass-produced at one location.

"There's over 11 different mints making coins and there are some differences. The 11 mints don't produce exactly the same coin sets, so that can be an issue," said Alan Marsh, project manager for Eurocoin Ltd., a peripheral manufacturer based in London.

Steve Smith, Eurocoin sales director, said the company is encountering a similar problem with euro notes.

"The notes are a mine field. There's eight different mints making five different kinds of notes, and doing this in different ways," Smith said. "We feel like we're prepared now, but in mid-year it could be hectic."

Smith noted that kiosk deployers appear to have heeded the advance warning, and prepared sufficiently for the euro.

"I don't think I've had anybody through the door in the kiosk market serious considering changing," he said. "Either then went to someone else who was very prepared, or they'll be knocking on my door in a month scared as heck."

Still, with no precedents to turn to for guidance, there is an air of mystery to the euro's impact on kiosks.

"There's lots of unknowns, though, such as how long do we have to run dual-currency capabilities on our machines," Naughton said.

Standing alone, as an island

One notable absentee from the list of euro friendly nations is England. The United Kingdom is sticking to the pound, one of three European Union nations - along with Denmark and Sweden - that are not joining the conversion (Denmark voted against it, Swedish prime minister Goran Persson said in August that his country could adopt the currency by 2005).

British Prime Minister Tony Blair is considered an advocate of the euro, and could call a national referendum within the next two years to decide on the country's currency future. Several experts say it is a matter of time before the Queen's subjects join the rest of the continent.

"In the real long run, it will be difficult for the UK to be outside of the euro if they stay in the (European Union)," Beguelin told CBS Marketwatch.com.

But in the short term, it appears that Britain - whose kiosk deployments include the 9,000-strong UK Jobcentres employment kiosks and British Telecom's planned deployment of 28,000 payphone kiosks over the next five years - will not be significantly affected by the euro.

"If the government here decides to take an interest, we still won't see euros for another four or five years," said Mark Rimmer, production and marketing manager for Blazepoint.

In a sense, Britain will become an island economically as well as geographically, until it embraces the euro.

"This is stupendous stuff, really," economist John Gage, deputy director of the National Europe Centre at the Australian National University, told the Melbourne Age. "Once you have monetary union, then basically a lot of the economic elements that define a nation state are gone."