All change as EU deals with impact of euro

Date: 12/03/1998

By Tim Jones

IT IS ironic that European governments cannot find the money to pay for the huge information technology impact of the birth of their single currency because of the euro's budgetary disciplines.

And the costs will be high: at least an extra 35&percent; on top of the average information technology budget of public bodies, according to Marie-José Spire, euro-impact director for the procurement arm of American IT behemoth IBM.

“Some are already dealing with it,” she says. “I am encountering more understanding of this problem every day.”

However, the scale of the undertaking is enormous, a fact underlined by Spire's survey of 200 government officials throughout Europe. “Governments and public administrations are the vanguard of the euro project,” she says. “They represent 50&percent; of European gross domestic product and in most member states - the UK being an exception - they are also the biggest employers, taking up nearly a quarter of the active population in Belgium and France.”

The first real challenge for administrations will come nine months from now. Ten governments have already promised to allow companies to make their corporate tax and social security declarations payments and to report their annual results in euro.

This has practical implications for company administrations, says Spire.

“If you give this option to companies then you have to be able to cope with it,” she stresses, adding that authorities should combine their IT regrading work with measures to counter the Millennium Bug, known amongst the computing fraternity as 'Y2000'.

“I have heard some people say that they should concentrate on Y2000 - the simple task of changing a date - and leave the euro until later, but they just cannot do that,” she warns. “Governments have made a commitment to offer companies options in euro and these administrations will have to deliver on that.”

Some firms, including Dutch electronics giant Philips and Germany's Siemens, have made it clear that they will pay suppliers and carry out their internal accounting in euro from next January. So it will make sense for them to deal with public administrations in the new currency.

The biggest problem for everybody, including government departments, is that the transition to the euro will be carried out between January 1999 and July 2002 rather than being completed overnight.

During that period, all currencies will be locked at an exchange rate against the euro and a single monetary policy will be in place, but accounting will be in both the old currencies and the euro. This means that all administrations will need to have IT systems able to deal with two currencies over three years.

The obvious way to deal with this would be for firms to duplicate their current systems so that they can deal with both currency units, but that is unrealistic, says Spire. “It is very high-cost, too cumbersome and, well, nonsense. Three years later, when the euro replaces the national currency, you would have to scrap the system you had invested in.”

The more public administrations study the problem, the more they realise that the most practical option is to deal with 'converters' - pieces of software which automatically translate currencies at set rates. “The problem with that,” warns Spire, “is that you need to install them and, in most cases, you can't just buy them off the shelf since the euro has very specific characteristics.”

For example, some countries which have had high inflation in the past and therefore have currencies with lots of noughts, such as Belgium, Italy and Portugal, do not quote prices with decimal points. Secondly, the European Commission has set strict rules on how to round conversions up or down and how transparent public bodies should be in their calculations.

“This is not a black box in which you enter, for example, Belgian francs and at the end of the process you have euro,” she says. “You must have a highly transparent box through which you can closely follow the conversion process and rounding methods.”

Even when euro-land becomes a reality, there will still be problems. Firms and public bodies will have to prepare for the euro to replace national currencies fully in July 2002.

“Dealing with the second step cannot be done with conversion tools,” warns Spire. “At that point, many will have to completely rewrite their systems. In much of the public sector, IT applications are very old. Many are written in COBOLD [a 39-year-old computer language], the codes have been lost and the people who designed them have left the administration.”