Little to smile about in build-up to big euro changeover

Date: 26/04/01

By Renée Cordes

WITH less than nine months to go until the arrival of euro notes and coins, the European Commission is embarking on a major product re-launch.

The product is a 1998 voluntary commitment by retailers throughout the 12-country euro-zone to display prices in both euros and national currencies, allow customers to pay in the new single currency and follow prescribed rules for converting and rounding.

Ideally, these and a host of other measures should have been in place at small and large retailers from 1999 onwards. In return for signing up to the plan, merchants are allowed to display a specially-designed logo announcing 'Payments in euros accepted' - in the appropriate language - accompanied by a smiley face.

So far, the EU executive has had very little to smile about. In practice, only half of retailers across the Union have implemented the euro logo agreement. Though many supermarkets display dual prices, many smaller shops, hotels and restaurants still operate exclusively in national currencies. It doesn't help that the logo was never properly promoted.

Alarmed by the general lack of readiness for the new currency, the Commission negotiated a new accord earlier this month renewing the 1998 commitments and tacking on a few others, all in the name of paving the way for a painless transition to the euro. But like the first time round, the deal is purely voluntary.

Under the latest agreement, retailers have pledged to display prices in euro as of September 2001 and continue to do so until the end of the dual circulation period (anywhere between six weeks and two months).

They also agreed to feature euro prices more prominently than those in the national currencies - for example by using bigger print - and promised not to use the changeover to the euro to apply hidden price increases.

Once paying in euro notes and coins becomes commonplace, consumers should find it easier to compare prices from store to store and country to country.

But consumer advocates are worried that in the meantime, there will be no foolproof way to make sure that retailers are keeping their part of the deal.

"Only those who are willing to implement this agreement will do so," says Dominique Forest of EU consumer lobby BEUC, adding that binding legislation - as is the case in a couple of member states - would have been far more effective. Now, of course, it is too late for that.

With a voluntary arrangement, there's nothing to stop retailers from raising their prices, Forest argues, noting that this is a perfectly normal commercial practice. "Increasing your prices is not forbidden," he says.

"It is difficult to find out whether or not an increase is due to the euro changeover. It's a tricky issue for us and the Commission."

In order to ensure transparency, the EU's statistics office plans to release weekly price surveys beginning this autumn. But Forest argues that even if retailers do not hide behind the changeover to increase prices, ultimately what matters is whether consumers trust them. "If consumers rightly or wrongly have the feeling that there has been an increase in prices because of the changeover to the euro, that will affect the credibility of the whole process."

He says this is what happened when the UK switched its currency base from 12 to 10 during decimalization in the early 1970s. Even though it was later shown there were no massive price increases following the reform, the overall perception was that shopkeepers had hiked them.

Carole Brigaudeau of Eurocommerce, the umbrella group for Europe's retailers and wholesalers which signed both accords, admits that some prices probably would increase as a result of the changeover.

However, she says that these would have to be offset by lower prices on other items. "There will be some ups, some downs but the average will be similar," she says.

Brigaudeau also says consumers will keep a close watch on retailers, especially with the euro making it easier to compare prices and harder for merchants to sneak anything past them.

But she concedes that there is only so much Eurocommerce can do to ensure that the agreement is implemented.

Garry Parker of the small-and medium-sized enterprises lobby UEAPME agrees, adding that it is important for consumers to check their change and raise queries in case of any confusion. In large part, the first campaign flopped due to bad timing.

A study by Deloitte & Touche found that public interest in the euro died down in 2000 after the initial euphoria surrounding the launch of the single currency a year earlier.

Few consumers have bothered to use their right to file complaints against merchants that violate the 1998 pact. Not surprisingly, there has also been a slowdown in most countries in actions related to the accord.

But the report concludes that a fresh campaign to boost recognition of the logo is likely to be effective, especially in the final few months before the arrival of notes and coins.

On the other hand, launching the effort too late in the process could create confusion and negative reactions from consumers, it warns.

Although awareness of the timetable is rising, one person in five still doesn't know that the phasing in of the euro will be accompanied by the withdrawal of national currencies.

Also, most residents of euro-zone countries say they do not pay attention to the dual display of prices and only 11% claim to know how much one euro is worth in their national currency.

Many owners of small shops and other businesses still seem clueless about the euro. A little under under half of SMEs still do not have an action plan for the changeover, while nearly a third have not yet realised 1 January 2002 is the final date for operating entirely in euro.

On the plus side, public authorities and banks appear to be generally ready for the changeover.

The organisations that signed the accord plan to encourage consumers to ask retailers how they will organise their changeover to the euro, to take advantage of making payments in euros and carry out as many banking operations as possible in the new currency from now onwards.

Public authorities are also being urged to immediately re-launch communication campaigns on the euro logo or similar agreements and to strengthen monitoring of the arrangements.

Some countries such as Austria and Greece have taken a more pro-active approach, adopting legislation requiring the dual display of pricing. But both laws provide for exemptions towards the smallest retailers - for whom dual pricing tends to be the most problematic.

Andreas Henkel of the Austrian chamber of commerce, who is also a member of the group set up by the Commission to oversee changeover preparations, says the best way to avoid confusion is proper communication between retailers and consumers.

Under the Austrian law, businesses will be able to display prices in just one currency if they reach an agreement with their clients.

As with any product re-launch, the new eurologo agreement won't sell with consumers if it isn't promoted properly.

As the clock ticks away until E-day, businesses and public authorities have no choice but to get it right this time around.

Major feature. With less than nine months to go until the arrival of euro notes and coins, the European Commission is embarking on a major product re-launch.