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. . .The Euro

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					 1. . . . The Euro
 2. . . . . . .What         it is?

 3. . . . . . .How         is it?

 4. . . . . . .Implementation                    - Timetable

 5. . . . . . .Affected            Sectors
 6. . . . . . . . . .Public Administrations
 7.   . . . . . . . . . . . .Information Systems
 8.   . . . . . . . . . . . .Economic Area
 9.   . . . . . . . . . . . . . . .Planning, programming and evaluation
10.   . . . . . . . . . . . . . . .Taxes and Revenues
11.   . . . . . . . . . . . . . . .Public Finance
12.   . . . . . . . . . . . . . . .Intervention
13.   . . . . . . . . . . . . . . .Public Debt
14.   . . . . . . . . . . . .Area of Communication and Promotion
15.   . . . . . . . . . . . .Area of Human Resources
16.   . . . . . . . . . . . .Contracting
17.   . . . . . . . . .Companies
18.   . . . . . . . . . . . .Information Systems
19.   . . . . . . . . . . . .Accounting System
20.   . . . . . . . . . . . .Financial System
21.   . . . . . . . . . . . .Fiscal System
22.   . . . . . . . . . . . .Economic System
23.   . . . . . . . . . . . .Marketing and Commercial System
24.   . . . . . . . . . . . .Human Resources
25.   . . . . . . . . . . . .Contracting
26.   . . . . . . . . . . . .Internalization of the company
27.   . . . . . . . . . . . . . . .Advantages and disadvantages
28.   . . . . . . . . . . . . . . .Internationalization of supply and demand
29.   . . . . . . . . . . . . . . .Foreign Trade
30.   . . . . . . . . . . . . . . .Cooperation Instruments
31.   . . . . . . . . . . . .Standard of Good Practices
  32. . . . . . . . . .Agriculture and Fishing
  33. . . . . . . . . . . . .Common Agricultural Policy
  34. . . . . . . . . .Construction
  35. . . . . . . . . .Energy and Industry
  36. . . . . . . . . . . . .Energy
  37. . . . . . . . . . . . .Industry
  38. . . . . . . . . .Services
  39.   . . . . . . . . . . . .Commerce
  40.   . . . . . . . . . . . .Education
  41.   . . . . . . . . . . . .Real-estate
  42.   . . . . . . . . . . . .Health
  43.   . . . . . . . . . . . .Transport and Communications
  44.   . . . . . . . . . . . .Tourism and Hostelry
  45.   . . . . . . . . .Social groups
  46.   . . . . . . . . . . . .Disabled persons
  47.   . . . . . . . . . . . .Groups with social exclusion risk
  48.   . . . . . . . . . . . .Consumers
  49.   . . . . . . . . . . . .Senior citizens

  50. . . . . . .Conversion
  51. . . . . . . . . .Exchange Rates
  52. . . . . . . . . .Conversion and Rounding
  53. . . . . . . . . .Examples of Conversions


The Euro
The Euro is the name of the single currency that from the 1st January, 2002 will circulate in the twelve
countries that, at present, form part of the euro area or euro zone.
With the introduction of the euro, all the economic agents of the Member States will be faced with new
challenges. In the case of Public Administrations, their role in relationship to the change to the new
currency is essential since they should not only adapt to the euro as it happens in all areas of activity, but
they also have to take the initiative and make the transition to the euro simple, attempting to achieve it
in the most neutral way possible.
With this purpose, each and every one of the governments are realizing different communication
activities in connection with the implementation of the single currency and its effects, paying special
attention to consumer protection in an attempt to do all that is possible to avoid irregular behavior during
the period of substitution of national currencies by the euro.
The Public Administrations of the eleven countries that on the 1st January, 1999 passed to the third stage
of the EMU (Greece joined the euro area on the 1st January, 2001), prepared a Plan for the Transition to
the Euro and they all implemented policies to make the transition to the euro easier for companies as well
as for their own public administrations and citizens.
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What it is?
The Euro is the name of the single currency that from the 1st January, 2002 will circulate in the twelve
countries that at present form part of the euro area or euro zone. Its denomination was adopted from a
Germany proposal in the European Council celebrated in December 1995 at Madrid, since it was
believed convenient to substitute the expression ecu (European Currency Unit) by another that would be
easy to pronounce in all the languages of the EU.
The Euro has its own legal statute, its regulatory framework, composed of two Regulations of the
Council of the EU. The first of which was approved on the 17th June, 1997 and came into force the 19th
of the same month. Essentially, it gathered together the following aspects of the euro:
    1. Denomination: 1 Euro = 100 cents.
    2. Euro-ecu conversion : 1 ecu = 1 euro.
    3. Six figure exchange rate
    4. Continuity of Contracts.
    5. Rounding rules
The second Regulation, of 3rd May, 1998 and which came into force the 1st January 1999 dealt with the
problems surrounding the euro that could not be regulated until it was decided which countries would
form the EMU. It gathered together the following topics:
   1. the coexistence during the transitional period of national currencies and the euro as well as the
      "principle of "non obligation, non prohibition" during the same period,
   2. the substitution of national currencies by the euro and its implementation as the single currency
      and
   3. the continuity of the monetary denomination of contracts.
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How is it?
Symbol

The euro, just like other strong currencies, has its own symbol. The
EMI considered indispensable the need that the euro had its own
symbol, distinctive, and because of this it supported the logo
proposed by the European Commission: €.
Its design is easily recognizable as the European symbol. It can be
written by hand easily, and has a similarity with the Greek letter
epsilon, being furthermore the first letter of the word Europe. The
two parallel lines that cross the symbol represent its stability.
In view of the great quantity of abbreviations and symbols that are
normally used in the written economic language, the appearance on tickets, invoices, cheques and other
documents with monetary values of the symbol of the euro during the transitional period, will be
extremely useful for differentiating amounts in national currencies with those which appear in euros, thus
helping the population to become accustomed to this new currency.

Notes

See euro notes >>
The characteristics of the coins and notes of the Euro currency were designed by the EMI, according to
what was established in the Treaty of Maastricht.
Notes will have a value of 5, 10, 20, 50, 100, 200 and 500 euros and they will be the same in all the
countries of the euro zone.
The front of each note will show windows and gateways, in addition to the signature of the President of
the ECB, the initials of the issuing bank in the official language of the EU, the flag of the EU, the name
of the currency in the Greek and Latin alphabet, the number of authentication and the various elements of
security (security thread, intaglio print, a shaded mark, fluorescent fibers, metallic plates and the
elements that facilitate mechanical reading).
The reverse side will feature bridges, architectural elements that show the desire of the European people
for communication between themselves and with the rest of the world.
The design is inspired by the topic "European Epochs and Styles" and represents the architectural styles
of seven periods of European cultural history :
    q 5 EUR : Classical

    q 10 EUR : Romanic

    q 20 ERU: Gothic

    q 50 EUR: Renaissance

    q 100 EUR Baroque and Rococo

    q 200 EUR: The epoch of iron and glass architecture.

    q 500 EUR: Modern architecture of the 20th century

For the visually impaired, there also exist specific distinctive elements such as:
   q the size,

   q the color:
          r    5 euros note: gray
           r 10 euros note: red

           r 20 euros note: blue

           r 50 euros note: orange

           r 100 euros note: green

           r 200 euros note: yellow - chestnut

           r 500 euros note: purple

   q   the value of the note, legible and clear and
   q   tactile marks on the surface to be able to differentiate the different denominations

Coins

See euro coins >>
There will be 8 euro coins, of 1, 2, 5, 10, 20 and 50 euro cents and of 1 and 2 euros, that will be
differentiated in addition to its monetary value, by its size, weight and color.
In relation to the symbols that will appear on them, the back will be common for all the States of the
Euro zone. It will consist of a map of EU, that will appear in various forms. On the coins of 1, 2 and 5
euro cents, the EU will appear within a map of the world, in those of 10, 20 and 50 euro cents, it will be
shown as a group of nations, and on the coins of 1 and 2 Euros Europe will appear as a space without
political frontiers.
The front will be specific for each country.
The same as occurred with the notes, coins will have distinctive elements for the visually impaired and
the edges of each and everyone will be different.

Recognising the euro

Bank notes

Various security features have been incorporated into the euro banknotes. They will help you to
recognise a genuine banknote at a glance.




                                Feel the "raised" print - the special printing processes give banknotes
                                their unique feel.
Look at the banknote and hold it up to the light: the watermark, the
security thread and the see-through register will then be visible. All three
features can be seen from the front and the reverse side of genuine
banknotes.




                               Tilt the banknote: on the front of the banknote, you can see the shifting
                               image on the hologram foil stripe (on the low-value banknotes) or the
                               hologram foil patch (on the high-value banknotes).




Tilt the banknote: on the reverse side, if you tilt the banknote, you can
see the brilliance of the iridescent stripe (on the low-value banknotes) or
the colour-shifting ink (on the high-value banknotes).




Coins

The euro coins also were produced according to advanced technical specifications that make
reproduction extremely difficult and easy to detect.
Particular care has been taken to include unique security features on the EUR1 and EUR2 coins.
The EUR1 and EUR2 coins are produced using sophisticated bi-metal technology, which makes them
difficult to counterfeit. You will find lettering around the edge of the EUR2 coin. The euro coins
incorporate the safest machine-readable characteristics and will be used in vending machines throughout
the euro area, irrespective of the Member State which issued them.
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Implementation - Timetable
Starting from the 1st January, 1999, we can establish a timetable for the implantation of the euro,
structured in the following way:
From the 1st January, 1999 and until the 31st December, 2001

   q   The ECB carries out in euros its operations in the exchange markets.
   q   The ESCB formulates and executes the single monetary policy in the euro zone.
   q   The payments system TARGET and the new mechanism of exchange rates begin to operate.
   q   Transition to the euro in the inter-bank, monetary, exchange and capital markets.
   q   Exchange between national currencies with fixed and permanent exchange rates.
   q   Issue of middle and long term new public debt exclusively in euros.
   q   Control of the exchange process in the banking and financial sector.
   q   Continuation of the changeover to the euro in transfers, cheques, credit cards, etc.
   q   Assistance to all non financial sectors for a transparent, safe and ordered transition.
In this period we can distinguish a stage of pre-distribution of notes and coins that will begin in
September 2001.

From 1st January, 2002 to the 28th February

   q   Stage of dual circulation of the currencies (euros and the different national currencies).
   q   Beginning of the withdrawal and exchange of national coins and notes.

From 1st March 2002

   q   Suppression of the legal tender of national notes and coins.
   q   Exclusive and general use of the euro in the 12 countries of the euro zone.
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Affected Sectors




Public administrations       Companies




Agriculture and Fishing      Energy and Industry        Services                  Construction
Social Groups

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Public Administrations
The introduction of the euro implies radical changes in the administrative organizations. Because of this,
in most of the countries that form the EU the governments have begun a series of actions to make sure
that the public administrations will be prepared to face those changes by the forecast date.
Besides this, it is expected that the transition from national currencies to the euro will be at all levels the
least problematic possible. In order to achieve this, among its functions the followings stand out:
    q Permit and promote the use of the euro between the various economic agents during the
       transitional period avoiding information gaps,
    q Inform and advise society about the possibilities that are offered from public organizations for
       the use of the euro and
    q Coordinate the efforts of social agents in the adjustment to the single currency.

Due to the radical change that supposes the introduction of the euro in society, the function of local
administrations is transcendental given its character of being close to the citizens. Because of this, the
successful adjustment to the Euro will depend to a large extent on whether society in general can take
advantage of the benefits that the single currency offers.
We can consider the following as the areas and aspects that are mainly affected within the Local
Administrations:
  q Information systems

   q   Economic area
   q   Area of communication and promotion
   q   Area of Human Resources
   q   Contracting
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Information Systems

The IT area is one of the most affected by the process of the introduction of the single currency, since
this supposes the obligation to adjust all computer systems so that they can handle the new requirements
that the euro imposes such as: treatment of decimals, rounding, converting amounts, etc.
We can differentiate in the information systems two types of effects:
  1. those which emerge during the period of transition (from 1st January, 1999 to the 31st
     December, 2001), mainly in relation to aspects concerning the treatment of amounts (use of
     decimal, rounding and the existence of two currencies) and the conversion of national currencies to
     the euro.
  2. those which constitute operative reforms and which the Local Administrations have to face up to,
     that is to say, all that is relative to the treatment of documentation (salary slips, contracts, invoices,
     receipts, forms, books, etc.) and communications with the financial entities and with third parties.
As variables that influence the transformation of computer systems provoked by the arrival of the euro
we find:
   q The complexity and the quality of the computer systems.

   q The availability of resources, internal and external, to face up to the changes. Without forgetting
      that as time elapses we have a lower performance margin and the adjustment costs will be greater.
   q   The existence of programs developed to pre-defined specifications or standard applications. It will
       be necessary to evaluate the degree of adjustment to the euro for existing systems and to check if
       specially designed programs will be required or if buying standard programs will be sufficient.
       In this case, in the moment of acquiring a new software package, we should check different
       aspects:
           1. that the product carries out all the necessary activities (intermediate operations, credits,
              debits) in euros,
           2. that the accounting and treatment of the original operations in euros are correct and that it is
              possible to return to them in case it is necessary,
           3. that the conversions are accomplished according to the standards of the euro,
           4. that the differences produced by rounding are treated in accordance with the stipulated
              accounting recommendations and
           5. that said package guarantees that with the final arrival of the euro in 2002 there will be no
              need to acquire new instruments to modify the adjustments accomplished during the
              transitional period.
The problems that those responsible for the computers systems of the Local Corporations will have to
face are among others:
    q The conversion of the existing data.

    q The adjustment of the interfaces (interconnections) between applications as much internals (for
       example salaries - accounting), as externals (exchange of data with financial agents).
    q The modifications to be made to the structure of the data.

    q The changes in the way data is visualized on screen as well as in printed reports.

To conclude, we could say that during the transitional period as the use of the euro will be voluntary,
the Local Administrations should be prepared to face those payments that within what is legally
stipulated, can be made in euros. It is necessary only an adjustment that admits credits and debits of data
in euros as well as in the national currencies, and the existence of conversion programs for amounts
between currencies. All this together with a modification in forms so that they include a space for the
exchange values in euros of the figures in national currency.
Upon finishing the transitional period, that is to say from the 1st January 2002, Local Corporations
have to be totally prepared, so that their information systems are able to complete any type of operation
in euros.
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Economic Area

The economic area of Local Administration is the area which will probably be the most affected by the
introduction of the Euro due to the monetary component of its operations.
Because of this, we will indicate some of the aspects that within the area of the economic management of
a local entity, will be affected with the arrival of the euro.
    q Planning, programming and evaluation

   q   Taxes and revenues
   q   Public Finance
   q   Intervention
   q   Public Debt
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Planning, programming and evaluation

The areas that will be mainly affected will be those related to:
   q Budgets: Their elaboration, forecast of the same, etc. The preparation of the budgets for the 2002
      exercise will have to be already in euros.
   q Control of incomes: capital transfers, current transfers, current incomes, etc.

   q Control of the expenses: indebtedness, subsidies, investments, etc.

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Taxes and Revenues

In this area the effects of the euro will be numerous affecting matters such as:
    q Management of taxation, fiscal ordinances, fiscal calendar, fixing of rates, tariffs and public prices,
       the fiscal census, etc. At this point it would be helpful if the banking entities communicate to
       citizens the value of taxes in euros as well as in the national currencies.
    q The fiscal inspection: emission of collection documents, taxable incomes, the accomplishment of
       liquidations, the formalities and acts of inspection.
   q   Management of economic activities relative to sewer systems, garbage collections, vehicle taxes,
       and in addition undue tax refunds
   q   Management of what is related to real estate: new taxes and modifications in the tax, taxes and
       building permits, etc.
Due to the changes that will be produced in these areas, it is probable that doubts emerge and a certain
disorientation among the citizenry and to face this, it will be convenient that the local administrations
have sufficient resources available to settle any incidence in this respect. In addition to this, they should
emphasize that the arrival of the euro does not carry with it an increase in taxes nor tariffs.
The existence of tax returns in euros will depend on the agreement of two parties: the Administration and
the tax payers. It cannot deleted the models in national currencies, forcing the employment of the euro,
neither can the tax payers demand that they are generally provided with legal instruments in euros, since
this obligation does not exist until the 1st January, 2002.
The relationship of the Administration with tax payers will be centered in the following points:
   q The Tax Administration will accept the payment of taxes in euros from the beginning of the
      transitional period (1st January, 1999).
   q To realize income tax returns in euros, societies will have to prove that the accounting books are
      made in such a currency, being necessary to remember that it will not be possible to change euros
      back to the national currency.
   q Fiscal registers have to employ the same currency than those of accounting and mercantile books
      and records.
   q Invoices in euros for the purpose of deductions or fiscal reductions will be recognized with total
      validity, with independence to what ever currency the accounting is carried out in.
One must emphasize that the commitments of the Tax Administration consist basically in making
effective the fiscal neutrality principle, that is to say, that the adoption of the euro does not increase the
fiscal pressure and that no tax payer has to pay more for being linked to the Administration in Euros.
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Public Finance

The area of Public Finance is going to be especially affected by the introduction of the Euro since
monetary and capital markets will be able to operate in euros from the 1st January, 1999.
Before this situation, the Local Administrations should be in a position to operate in euros from the
beginning of the transitional period even though their accounts and operations are expressed in a national
currency. Although the impact to Public Finance will depend not so much on operational adjustment but
the strategic change in its environment.
Thus, with the arrival of the euro, it will increase the possibilities for the management of Public Finance
due to the following factors:
   q Lower types of interest therefore the cost of financing will be less.

   q The disappearance of exchange rates risks, that will carry over to the wider financial markets (not
       centered so much on Public Debt and national securities), with more investors and that will
       provoke greater competition resulting in additional savings.
All this will result in a lower financing cost for Public Administrations.
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Intervention

We refer here to the control of economic management relating to its legality, and to its financial
efficiency, to the auditing of local public societies and to the accounting. In relationship to accounting,
(liquidations, subsidies, fines, collection, utility receipts, etc.) this will have to be made in euros by the
1st January, 2002, at the latest. Even though it is foreseeable that supplier invoices will be received in
euros before that date, since the introduction of the single currency will have effects in accounting from
the beginning of the transitional period.
For this motive, although the Local Administrations do not yet have the obligation of operating in euros,
they will have to be prepared to facilitate for example, the receipt of invoices in this new currency.
The accounting aspects to be regulated in all countries during the transitional period are:
   q The currency in which the accounting will be carried out.

   q The completion of accounting documents.

   q The currency in which the accounting information will be obtained.

   q   The instructions for the accounting register of the rounding differences that are produced by:
          r the formalization of contracts in euros,

          r the maintenance of bank accounts in euros and

          r the re-naming of the emission of debt notes in euros.

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Public Debt

Public Debt is issued by the states through their Public Exchequers. In the Council of Madrid of 1995 it
was decided that the public administrations issue in euros all new public debt negotiable from the 1st
January, 1999 and that expires after the 31st of December, 2001. Thus, the markets where public debt is
negotiated have been modified both in their national character and in the credit risk that is associated to
the debt with the application of the two community principles:
   1. Principle of non financial co-responsibility.
   2. Principle of the non monetary financing of public deficits.
Credit risk is one of the elements that explains the price of public debt since the profitability of the debt
depends on the credit risk of the issuer.
Currently, deficit and indebtedness limits that the convergence criteria implies and that the Stability and
Growth Pact attempts to maintain, (the process the EMU began), have slowed down the need for issuing
new Public Debt emissions.
If we speak about the euro and the public debt, we cannot forget the topic of the re-nomination of the
public debt to the single currency, that will be done in the following way:
    q All new emissions of Public Debt by the participating States are effected in euros from the 1st
       January, 1999, carrying out this process on this date according to the normative principles that
       each State has freely decided.
    q The existing debt by the 1st January, 1999 was re-nominated as euros and the debts previous
       characteristics are maintained, except for its denomination, that is now expressed in euros.
The re-nomination of Debt emissions and of other operations of indebtedness will cause differences of
rounding for the conversion system employed and for lack of reversibility of the conversions. Said
differences of rounding will be considered non budgetary.
Whereas, the accounting of redemption operations of indebtedness nominated or re-nominated in euros
gives cause for differences in rounding (in the case of debt emissions as well as in the case of singular
loans with partial returns), that will be attributed to the budget.
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Area of Communication and Promotion

Public Administrations are charged with leading the process of introducing the Euro and, because of this,
they have to transmit to the different social agents the safety of the fact that this process is carried out
according to legally established principles.
At the moment of planning communication actions, it will be necessary to take into account that due to
the relatively long character of the process of implementation of the Euro, different stages will exist.
Because of this, the needs of information in each one will be different. Thus, the ideal would be a policy
of communication that takes into account the specific point of the adjustment process in which society
finds itself.
Starting from this base, and in order to facilitate the transition of the Euro to the population and to the
business community, we can use the following processes:
   1. Institutional advertising so that the actions that the corporations are carrying out to promote the
       Euro are made known. This could be done through the publication or advertisement of a telephone
       number on the Euro which would deal with different groups, or through the establishment of web
       pages with a mailbox to which the citizens could contact to express their doubts.
   2. Information and advice to entrepreneurial initiatives by means of meetings with associations
       and traders, local development actions, etc.
   3. Specific attention to the citizen, that should constitute the objective with the highest priority for
      Local Governments. It would be interesting the possibility of creating a Euro shop window in
      which citizens could obtain information and advice and through which is spread the idea of the
      Euro as an essential element for an integrated Europe.
      In this point, also, they would carry out educational activities related to the Euro for
      schoolchildren, so that they become familiarized with the currency. The same must be carried out
      with other organizations that could have difficulties in adapting to the change (senior citizens,
      visually impaired, etc)
   4. 4. Promotion and local development, we refer here to the organization and participation in fairs,
      samples fairs and conferences. In these cases, Local Governments should attempt to include in the
      different contributions that they make to these type of forums, a mention of the process of change
      that the Euro supposes in relationship to the sector in question.
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Area of Human Resources

The area of Human Resources will be affected by the introduction of the Euro mainly in what is referred
to training of personnel. And this training will be an essential factor at the time of confronting the
changes, operative as much as structural, that the appearance of the Euro will provoke.
At the time of establishing a formative plan, the Local Governments will have pay special consideration
to those workers that are in contact with the public and with those that accomplish their functions within
the Economic Area.

As a rule, formative plans must be carried out so that:
   q they guarantee that the personnel the most affected by the process of the introduction of the Euro
      will be fully abreast of all the particularities that govern it and
   q they permit the workers to know what will be the impact of Euro in the exercise of their functions
      and in the overall activities of the Administration
Thus, it is expected that the personnel from the Administrations know everything in relation to the
changes brought by the Euro in the following areas:
   q Management and wage administration: the impact of the Euro will be seen in all that is related
      to the elaboration of wage receipts, the processing of overtime, management of advances of
      expenses and wages, salary calculation, application of social and fiscal retention, etc.
   q Collective negotiation: for this point it will be convenient to check the content of economic
      clauses, such as those of wage reviews, those of economic benefits (support funds and pensions
      funds), or remuneration by salary categories.
   q Relationships to Social Security, the administration of social security etc.: since all the
      processes related to tax as for example the calculations of retention and the presentation of
      statements will have their monetary aspect modified.
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Contracting

From the 1st of January, 1999 contracts will be able to be established as much in national currencies as in
Euros. Before this situation, it has to be made clear that the introduction of the Euro will in no way affect
the duration of the contract. That is to say, that the Principle of Contracts Continuity is guaranteed.
Beginning the 1st of January, 2002 it will be necessary to establish all contracts in Euros, and those
that appear in the national currency at that date will be automatically re-denominated. Therefore,
contracts that already exist will have to be checked in order to identify problems, for example if unitary
prices or decomposed prices of a low amount exist. Before this and other questions, necessary actions
will have to be taken to reduce the effects of the conversion. It can be done through clauses incorporated
into contracts that avoid complaints.
Concerning the problems that emerge in contracts that are ruled by what is established in the regulations
of countries not belonging to the EU and that affect currencies that have been substituted by the Euro,
community legislation cannot be responsible for the solution of these problems since it refers to the
legislation of countries that do not form part of the Union. According to the principle of monetary law, a
jurisdiction outside of the EU must interpret references to the Euro in the terms of the legislation that
defines it, in this case the community legislation. Due to it, some jurisdictions of countries outside of the
EU have taken legislative measures in connection with the continuity of contracts.
At level of Public Administrations and in relationship to contracting, the arrival of the Euro will affect
matters such as:
    q Control and contests management

    q Tenders

    q Administrative grants

    q Contracts

    q Purchases (requests and contacts with suppliers)

As concrete examples of the effects of the Euro in some of the aspects related to contracting we can
mention the following:
   q In the preparation and drawing up of invoices, receipts, and order forms, etc. the amounts in Euros
      should be included by way of information during the transitional period.
   q Also it is necessary to modify all the files and data bases that include monetary amounts.

   q Taxes, sanctions, insurance and other economic concepts, although they are in the national
      currency should be accompanied with their reference in Euros.
   q Tariffs and costs in national currency amounts should also be referenced in Euros. It is necessary
      to evaluate beforehand the effects of the rounding, especially if they are small units, since in this
      case the impact will be greater, perhaps requiring the change of the unit that is employed as the
      base of calculations.
   q If there are generic clauses that consider the introduction of the Euro as a substantial modification
      to the terms of the contract, it will be necessary to analyze them since they could give cause for a
      review of the economic financial balance of services under concession or even for the completion
      of the contract.
   q It will be necessary to see if in the relationships with the users of services, the contractor includes
      information about the Euro.
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Companies
The introduction of the Euro will have a significant impact as much in the population as in the different
areas of the economy. The business sector will be one of the most affected. Within this area, the effects
of the single currency will be noticeable in a greater measure in companies with numerous international
activities, in particular multinationals that act in several countries of the EMU although they do not
belong to it. The changeover to the Euro will suppose for these type of companies a series of advantages
such as:
    q elimination of exchange fluctuations,

    q reduction of the transaction costs in commercial and financial operations,

    q lesser uncertainty in strategic planning,

    q and principle it will favor to a large extent investment and trans-national trade.

Together with multinationals, within the business area we should speak of the essential role of small and
medium sized companies due to their greater social impact since they employ a high percentage of the
total workforce.
Even though the importance of this group is evident, its micro-economic reality is different being at a
disadvantage with respect to large companies due to:
    q Their financing through banking credit

    q The reduced average size and the low level of partnerships

    q Scarce management training.

    q The dependency of larger companies and reduced negotiation power.

    q Difficulty for investment and innovation

    q Restricted access to international markets

But not everything is a disadvantage, since as opposed to large companies, they possess a simple
organization structure and thus, much greater ability to adapt to changes. Furthermore:
   q The reduction in the risk of the exchange rate will be highly beneficial since these companies do
      not have had the same access as large companies to different financial instruments.
   q An increase in competition in the banking sector and a reduction of interest rates will permit the
      financing of their operations at a much smaller cost.
   q Cost transparency will facilitate the execution of their activities in Euro zone being able to
      multiply the sale of products and services and to see an increase in their client portfolios. Thus, it
      will result in greater competition in the EU that will benefit all of the European economy.
Due to the important weight that small and medium sized companies have at the economic level, we will
focus on the practical repercussions that the arrival of the Euro is going to have in all the departments of
these companies, and especially in what is related to:
   1. Information systems
   2. Accounting systems
   3. Financial and fiscal systems
   4. Economic system
   5. Commercial system and marketing
   6. Human resources
   7. Contracting
   8. Internationalization of the company.

All those companies that are committed to carrying out the introduction of the Euro in conformity with
what is recommended in the Standard of Good Practices will be able to obtain the designated
Euro-etiquette.
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Information Systems

The adjustment of information systems to the Euro has been and is a challenge for companies
independent of what ever their size maybe.
The introduction of the single currency supposes the transformation of all budgetary, accounting and
fiscal systems of the companies, so that they will have to check the operations of their systems according
to their end use.
To confront these changes from the computer point of view, projects are being completed within the
framework of the European investigation program ESPRIT (European Strategic Program for Research in
Information Technology ). It intends to develop useful instruments through which businessmen can
reduce the costs to their companies in this area.
As during the transitional period companies can effect transactions in Euros as well as in their national
currency, they will have to prepare systems capable of processing several currencies. It is something for
which some large companies are already prepared. The same does not occur with companies of a smaller
size as for these companies the achievement of a rapid solution can be very costly. Because of this, many
of them will make use of converter systems that convert one currency to another or on the conversion
services provided by an external supplier, for example by the financial entities with which they work in a
reoccurring bases. So only in the case that transactions in Euros where not common during the period
that finishes the 1st of January, 2002 will these companies be able to accomplish their transactions in
Euros outside of the customary computer programs.
The principal technological impacts of the Euro with respect to companies will be various:
   q Representation impact: since numerical amounts with decimals will be employed and many of
      the current systems are not prepared for this.
   q Operative impacts: systems for tagging products and the operation of cash registers among others
      impacts will be the object of change due to the Euro.
   q Business impact: strategic decisions such as the launching of new products, fixing prices at
      European level, or the management of new logistics routes will be affected from the point of view
      of information systems.
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Accounting System

Within a company, accounting has as objective the reasonable representation of its assets, its financial
situation and the results of the company, and since all these variables are given in monetary units, if this
varies, accounting will undoubtedly be affected.
In general and at the moment of outlining the transitional process in accounting, we are able to make
some initial recommendations:
    q To prepare as soon as possible work papers in Euros.

    q To establish information mechanisms that continually update companies with modifications about
      regulations that are relative to the Euro.
    q Attempt to carry out a double accounting system to simplify the process of change to the Euro and
      thus to improve the relationships with other companies that can operate in Euros or in the national
      currency.
The change from national currencies to Euros in accounting, can be carried out at any moment within
the transitional period (without the possibility of returning to accounting in the national currency).
Although it would be convenient to fix a meaningful date for this, for example the 1st of January, since
any other date would be within the course of the accounting exercise and would suppose problems.
On the other hand, companies whose economic exercise do not coincide with the natural year, should
make the transformation on the first day of the new exercise in question.
Concerning how to accomplish the process, what is fundamental will be the application of an irrevocable
exchange rate to the opening balances of the exercise in which the change will be made, rounding the
resulting quantity to the second decimal.

How to adapt accounting?

Companies that before beginning the transitional period had acquired assets in foreign currencies will be
affected inasmuch as they will have to update their currency values. Furthermore, as a consequence of
the application of irrevocable exchange rates, these companies will have to recognize in their accounts as
much the appreciation as the devaluation that are manifested by this reason.
The increase in income or expenses that is produced as consequence of the application of rounding will
have to be reflected in the profit and loss account, entered in specific accounts of the exercise in which
they are accrued. Thus, any analyst can value its effect by looking at the annual accounts of the company.
In the report of the annual accounts of the exercise in question the following will have to appear:
    1. Plans elaborated for the introduction of the Euro with estimations of their dates and amounts.
    2. The value of the losses or expenses caused by the introduction of the Euro.
    3. The differences caused by rounding, especially in relationship to the figure of capital and the
       effects that it has produced by its conversion to Euros.
    4. The quantification of the exchange rates differences as consequence of the introduction of the
       Euro.
   5. If the company has operations or exchange rate contracts with respect to Member State currencies
      it will have to show the most important operations as well as the accounting treatment used
      including the amounts of the differences and the periods of maturity differentiating between the
      accounts receivable and the accounts payable.
The annual accounts, individual and consolidated, corresponding to exercises that are closed between the
1st of January, 1999 and the 31st of December, 2001, can be expressed in Euros as well as in the national
currency of each country. In the first case, they should be incorporated into the balance of the profit and
loss account, and into the annual report the figures of the previous exercises (also in Euros), so that the
information can be compared. If it is decided to present the annual accounts in Euros, it will be necessary
to continue doing the same during all of the transitional period.
This possibility of expressing accounts in Euros or in a national currency permits companies with
international activities or that use foreign capital markets to simplify their way of operating. But once it
is decided to use the Euro, this will be the currency that is applied to all accounting practices without the
possibility of returning to the national currency.
Concerning fiscal records, they have to use the same currency denomination than mercantile books and
records, even though according to the principle of "not prohibition, no obligation", contributors can
choose freely the currency in which they nominate the obligations derived from their contractual
relationships during the transitional period, as well as the corresponding invoices, being valid for the
purpose of accrediting deductions or tax relief.
In any case, we can not forget that from the 1st January, 2002, companies that have not re-nominated
their venture capital will see it automatically expressed it in Euros.
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Financial System

Small and medium sized companies have always used excessively the credit banking system due to the
difficulty in accessing capitals market and to the high financial costs that endanger the viability of their
projects. Because of this, it is foreseen that the integration of national markets that will be produced with
the arrival of the Euro will lead to a market with surpluses in financial resources. This will facilitate
better financing conditions for business investments.
The transformation of the financial market, product of the fusion of national capitals markets into one
European market, will affect small and medium sized companies in a positive way for three reasons:
   1. The appearance of new financing formulas as a consequence of the increase in competition
      between financial organizations
   2. The increased importance that will be given to the quality of entrepreneurial projects. It will
      permit entrepreneurs to access more easily and in better conditions the capitals market.
   3. The foreseen stability that will be obtained with the likely maintenance of interest rates for the
      short and medium term and their possible reduction in the long term. So, it will result in better
      conditions for entrepreneurial investment.
Upon speaking of interest rates it should be mentioned that in the European banking industry a single
form of inter-bank interest has appeared, the EURIBOR. Various are published depending on the time
which they refer to, a day (EONIA), a week, a month, three months or a year, so that in loan operations,
both personal and mortgage, the Euribor is used to a year while for short term operations it is normal that
the Euribor of the day in which the operation was made is used. Its importance, from the entrepreneurial
point of view, is that with it, it is intended to standardize the workings of the different markets of the
countries that have passed to the third stage of the EMU and therefore to increase the legal security in
them.
In relationship to the impact of the Euro in the financial area of companies, we cannot forget the changes
that will be produced in the way of operating of the financial organizations since during the transitional
period clients will be able to use the national currency as well as Euros for their operations.
    q Current accounts and saving accounts: from the 1st of January, 1999 current accounts and saving
       accounts in Euros can be opened. Also the conversion to Euros of the existing accounts in pesetas
       can be requested. However until 31st of December, 2001 if we want to withdraw cash sums, the
       Saving Bank or Bank must convert the balance in Euros into the national currency. It will not be
       until the 1st January, 2002 when all current accounts and passbooks in pesetas will be converted to
       Euros.
    q Checks: from 1st January, 1999 they can be issued in Euros. If from that date we receive a cheque
       in Euros, the savings organization or bank will deposit it according to how we have ordered it, in
       the current account or saving account that we have opened in pesetas (making in this case, the
       corresponding conversion), or in Euros. From the 1st January, 2002 cheques will only be made out
       in Euros.
    q Bank transfers: from the 1st January, 1999 they can be ordered in Euros and from the 1st of
       January, 2002 they will have to be ordered in the new currency.
    q Direct debiting and commercial portfolio: from the 1st January, 1999 the financial entities will
       accept bills and receipts in Euros in order to be charged to an account, transferred or compensated.
       Therefore, from this date, commercial paper, IOUs and letters of exchange in Euros can be
       discounted.
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Fiscal System

Political theory establishes that the three fundamental pillars that define a modern State are currency,
defence and the Treasury department. Because of this, and taking into account that with the beginning of
the third stage of the EMU the first two points are fulfilled in the EU, fiscal harmonization remains to be
achieved.
With the suppression of restrictions on movement of capital, the fear emerges that fiscal competition will
erode national bases. So, according to the development of a general fiscal policy by the Community what
is intended in general is:
     q To avoid the distortion of competition that different types and systems of indirect tax in the
       single market provoke. For example, the existence of different tax rates implies that the producers
       located in countries whose rate is greater than another will have a lower profit margin if they want
       to meet prices or will have higher market prices if they want to maintain the profit margin.
   q   Concerning direct taxes, the objective is to close loopholes that permit fiscal evasion and to
       avoid double taxation.
In spite of the general acceptance of these objectives, the Member States have difficulties in the moment
of approving measures with the objective of fiscal harmonization due to the different economic and
social structures and the various conceptions of the role of duty in general and of a tax particularly in
each country. Because of this, more than the harmonization as an end in itself, measures are required that
provide an effective defense against the loss of fiscal sovereignty that the Members States have
experienced in benefit of the markets.
To combat fiscal competition and to eliminate a series of distortions that affect the single market, the
Public Finance Ministers established a package of measures that included:
   q An agreement on the need for the suppression of deductions at source on the trans-border payment
      of interests and of taxes between companies.
   q Key elements for fiscal saving.

   q   A code of conduct for the taxation of the companies that was approved by the Parliament and the
       Council and that compels the signatory States to:
          r Not to introduce new pernicious fiscal measures.

          r To re-examine the existing provisions and practices in force modifying them if it is
            necessary in order to eliminate as soon as possible all pernicious measure.
          r To be informed of the fiscal measures that could enter into the field of application of the
            code and to supervise the communication of the information related to these measures.
It is anticipated that these type of distortions will be dismantled before the 31st December, 2002.
Concerning company tax returns, these can declare Value Added Tax, Corporation Tax and the Single
Customs Document in the new currency as long as the following requirements are fulfilled:
   q That we are dealing with taxable sources of income accrued in tax periods beginning from the 1st
     January, 1999.
   q That all income tax returns corresponding to the same tax period are submitted in Euros.

   q That companies are using the Euro as a base currency for their accounting.

Once it has been decided to declare a tax in the single currency, this decision will be irrevocable, even
though it is permitted that the same tax payer may use different accounting units for the payment of each
tax, that is to say, for example, that VAT is declared in Euros and Corporation Tax in the national
currency.
From the 1st January, 2002 all tax returns models will have to be expressed in Euros, even those that are
referring to taxable sources of income produced during the year 2001.
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Economic System

The convergence conditions that are demanded from all countries for the establishment of the Euro
contribute to a climate of economic stability. It will be translated into greater growth that will favor the
competitiveness of companies. Thus, the existence of lower types of interest and inflation, together with
the disappearance of the uncertainty that exchange rates provoked, will motivate bigger investments and
will facility exchanges between the countries of the EMU.
One of the principal consequences that the Euro will bring to the economic area will be the need to
improve the level of entrepreneurial efficiency, since the existence of increased competition, the trend
towards an international equalization of prices, and the impossibility of using exchange rate policy as an
instrument to improve competitiveness, will compel companies to change their strategies in production as
well as in marketing.
Due to this, companies will have to:
   q Revise their purchase policy and attempt to detect all the improvements that can be realized in
      order to make the most cost savings.
   q Realize a study of investment aids, specialization, etc.

   q Consider the possibility of offering more specialized goods and services.

   q Consider the need in some instances of restructuring the company.


Competition

The companies are going to have several processes available in order to face up to increased competition
that the arrival of the Euro provokes:
    q Prices: they should never be increased under the excuse of the introduction of the Euro.

    q Quality: it will be basic to increase the quality of the products and services that are offered,
       offering always the maximum possible information.
    q Investment in research and development of new products together with an improvement in the
       quality of those already existing.
    q Entrepreneurial concentration: the building of agreements with other companies at both the
       national and European level.
    q Specialization in a specific geographical zone, or in an area of the market.


Productivity

Due to the greater level of competition which companies must face with the arrival of the Euro, it will be
indispensable that these companies improve their level of productivity, and for this it is necessary to look
at aspects such as the size of the company and costs management.

Size of the company

This is considered a key issue since upon speaking of small and medium sized companies, their weakness
at accessing capital markets and their inferior power of purchase places them at a clearly disadvantage
position. Thus, the search for alliances will be one of the most useful tools that they can employ to
confront competition from other companies of larger size.
The European Union facilitates its support of small and medium sized companies through policies of
entrepreneurial cooperation through which these companies:
    q Can access new markets and clients

    q Develop new products

    q Improve their level of specialization and technical knowledge as well as their possibilities of
      growth.
    q Acquire more advanced technology.

    q Increase the amount of capital available.

    q Reach the necessary size in order to accomplish actions that in other circumstances they could not.


Costs management

With the introduction of the Euro, small and medium sized companies especially need to analyze all the
costs related to their activity, since the introduction of the currency offers them new strategic
opportunities.
It will be necessary to negotiate new agreements with current suppliers as well as the beginning of
negotiations with others that emerge as consequence of the opening up of the market. Both of them will
have to requested information about their adjustment calendar to the Euro since those which have
greatest power of negotiation might prefer to invoice only in Euros from the beginning of the third stage
of EMU, which would require being prepared on time.
Together with management costs, labour and energy costs also have an important role. The first ones
because wage increases will have to be connected with productivity so as not to lose competitiveness and
to guarantee the survival of the company in the long run. The second costs, since they will tend to
decrease as a consequence of the reforms policy that is carried out continuously in this sector.
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Marketing and Commercial System

The arrival of the Euro places companies in a new stage which will influence and affect all the
departments of the company, especially the commercial area and marketing.
The adjustments that companies will have to accomplish in this commercial area will be of two types:
Operative: between those are emphasized:
   q   The change or transformation of prices, taking into account that prices in Euros will have two
       decimals and that it will be necessary to apply rounding to establish the last decimal.
       The operation of rounding will have to be done with great care in reduced prices and in what are
       called psychological prices. In relationship to the second ones (those that are used for commercial
       policy reasons, for example 1999, 2995, etc.) if we want to continue employing them, certain
       strategic decisions have to be taken (modifications of the product or of its size, promotions, etc.) so
       as not to see affected our market competitiveness.
       Greater transparency in markets will facilitate prices comparison. Therefore, it will be more
       difficult for companies to maintain large differences in prices with companies of the same sector
       located in other European countries, especially with respect to easily transportable products. With
       respect to this, entrepreneurs must act on their pricing policy taking into account the business
       opportunities that exist in other zones.
   q   Client Information: this point is determinant within the marketing and commercial area since
       everything that is related to changes in the national currency to Euros, carries with it a certain
       confusion that is translated in a change in purchase decisions. For this, measures should be taken
       such as:
          r To undertake communication campaigns to inform clients on the actions that companies are
             taking in relationship to the Euro with the purpose of reducing the uncertainty surrounding
             the topic.
          r To use the double price tag so that consumers and personnel become accustomed. This price
             duality, must be limited to the final price on the label of the product and to the sum of the
             prices of the products bought on the receipt.
          r To publish catalogues, price lists and any other sales and promotion material in both
             currencies.
          r Following the principle non-obligation, non-prohibition, merchants should indicate in a
             visible place if they are ready or not to receive payments in Euros in said period.
          r Attempt to fulfill the voluntary procedures of entrepreneurial conduct (Standard of Good
             Practices) that enables that a commercial or professional establishment can exhibit during
             the transitional period the Euro Label.
Strategic: It will be indispensable to test the capacity of entrepreneurial adjustment to new and growing
competition. Because of this, decisions to be made in the strategic plan of the company will be the related
to:
    q The size to be reached by the company

    q With which companies to be allied

    q What policy of distribution to adopt

    q Possible changes in consumers due to a more globalized market

    q Need to gain information on the market in which we are going to compete in.

Thus, taking into account internal factors (size of the company, the sector of activity or the degree of
opening to the exterior) and external factors (competitor strategy, attitude of middlemen, preparation of
the collaborators, etc.) we could opt for a waiting strategy, or for one of anticipation.
    q Waiting strategy: it is not the most adequate, since it can carry a risk of overload in the moment
       of contracting service companies (for data processing, administrative and legal work, etc.) to
       facilitate the step up to the Euro. Also it can carry a loss of business as if we delay our adjustment
       to the new currency, upon entering a very competitive market there will always be companies
       willing to offer services for those which we are not yet prepared.
    q Anticipation strategy: It is the most beneficial since if we begin to use the Euro from the
       beginning of the transitional period, doing everything possible to adapt the different departments
       of our company, the greater possibility we will have of taking advantage of all the opportunities.
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Human Resources

The arrival of the Euro will affect in a greater or minor measure all of the personnel of the whole
company. Because of this, a minimal level of training should be offered to all the personnel independent
of the fact that they are carrying out training programs specifically according to their needs.
Thus, communication and training resources can be carried out in general areas, training about topics
such as:
   q the plan of the company before the arrival of the Euro,

   q the effects of the Euro on the lives of the workers (salaries, collective agreements, etc.) and

   q handling cash and making conversions between the two currencies

Also there will have to exist specific training focused at first on the financial departments, accounting,
computer etc. paying special attention to the personnel of these departments that work directly with the
public.
As the market conditions will vary to a very large extent with the arrival of the Euro, the greater number
of users will compel companies to modify certain entrepreneurial aspects that will affect the professional
profiles that companies demand. Thus, it will be valued positively the knowledge of languages,
geographical and functional mobility, technical training as well as the ability to adjust to changes.
Within the processes affected in the area of human resources with the arrival of the Euro we must
distinguish between:
External processes: they are related to inter-sector agreements in matters of human resources, to the
adjustment to new requirements in matters of Social Security and Income Tax, and to procure appropriate
data processing solutions among other things.
Internal processes: we referred to the introduction of references to the Euro in new contracts, in
expenses circulars, subsistence allowances, etc., to the determination of the actual date of introduction of
the changes in pay slips with regard to the Euro, and to the change techniques related to the focus on the
mechanisms of remuneration, binding them to productivity.
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Contracting

The legal department of companies will be responsible for adapting the companies to the new legal
framework, guaranteeing the fulfillment of the principle of continuity of outstanding contracts, respecting
commercial as much as financial contracts(credits, bank accounts, etc.). During the transitional period the
re-denomination to Euros to all legal instruments will carry with it a change in the accounting unit. In
this period, the value of any contract signed by the company will be executed in the currency that the
contract states, referring to either the Euro or the national currency. However, from 1st January, 2002,
the re-denomination of contracts will be understood to have been made automatically.
Recommendations that should be taken into account for all legal departments of companies are:
   q The possibility that during the period of the simultaneous existence of the Euro and the national
     currency, it can be agreed by contract, to have a right to an option in which currency the payment
     has to be made.
   q To attempt that during the transitional period workers are informed with respect to the questions
     that affect labor law, as well as to outline in the collective agreements the presentation of salaries
     in Euros and national currencies.
   q The need of agreeing additional clauses in some contracts that envisage a reference value that
     disappears or can disappear after the arrival of the Euro, linking, those clauses, with the reference
     values to their equivalent values in Euros.
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Internalization of the company

With the new competitive framework that the Euro introduces, large opportunities are opened up while at
the same time threats emerge for companies since, together with the possibility of entering new markets,
it will also be possible for new competing companies to enter the national market bringing with them
benefits and disadvantages.

The arrival of the Euro will cause companies to begin thinking about the new commercial stage in which
they will have to move. Due to this, the greater the delay in beginning to move in international markets,
greater the risk of being eliminated from these markets will be. This will not occur only in commercial
relationships with other countries but even in national businesses since if they do not respond rapidly in
answering the challenges of the Euro, many of the companies that considered themselves safe from
problems can be seriously affected by the competition that arrives from neighboring countries.
All countries are extremely interested in increasing their level of exports and therefore export promotion
programs are more numerous. Because of this, companies that know and make competitive offers to their
clients using adequate technical marketing, will see their profitability being assured in the international
market.
It is necessary to develop a entrepreneurial policy capable of amending possible imbalances that emerge.
The key is to know if companies are prepared to understand and to adapt to a new stage characterized by
the suppression of privileges, by the liberalization and in short by free competition. To be able to answer
this question, the entrepreneur must go more deeply into the following aspects:
     q Internationalization of supply and demand

     q Trade with countries outside of the EU

     q Cooperation instruments

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Advantages and disadvantages

The advantages that the introduction of the Euro will bring to companies in the moment of there opening
up to the rest of the Union are several:
    q Enlargement of the markets and greater business opportunities for companies, especially for
       those of a small and medium size, that will see their competitiveness improve as they are not
       affected by monetary fluctuations.
    q Decrease in costs in commercial transactions between the countries that form the EMU.

    q Reduction in trans-border payment periods due to the operation of the system TARGET, that
       permits that wholesale payments are effected in only one day.
    q Greater simplicity in the administrative process due to the possibility of carrying out
       accounting in one single currency.
    q Foreign sales of companies will begin to depend more on factors such as the quality of the
       products and foreign demand.
    q The stability of prices, taxes and wages will be converted into a strong tool for overseas
       competitiveness.
    q Companies will be financed more in the long term due to lower types of interest.

    q The stock markets will develop more favoring the realization of fixed-interest emissions in large
       companies.
    q The lowering of interest rates will favor variable revenue, something which will benefit companies
       that are quoted on the stock market (for example, for capital expansion).
Even though we have seen that there will be multiple advantages that the Euro will bring to exportation,
one must take into account that companies will also have to face up to questions such as:
   q possible loss of market share in national markets provoked by an increase in competition and

   q the new framework in which companies will compete, formed by markets with different fiscal
      pressures, social costs, etc.
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Internationalization of supply and demand

As consequence of the environment change, the companies will have to consider a series of issues related
to the national market and to the possible internationalization of the company in two senses, demand and
the supply

Demand

In this paragraph the questions are centered on four aspects:

Clients

   q   Will the profile of the client change due to regional differences within the EMU?
   q   Will the quantities and frequency of their purchases change?

Products
   q   Will it be necessary to widen the range of products offered due to the demand in European market
       of products that up until now were not demanded in local market?
   q   Which products will be the most vulnerable? Could other substitutive products come?
   q   Is it necessary to modify some products due to foreign competition?

Marketing

   q   How will current techniques of marketing and distribution need to be adapted in order to sell in
       other countries?
   q   How to reinforce our techniques in the national area so as not to lose clients before new
       competition?

Prices

   q   Do important differences exist between the prices of our products in the national market and
       competitors products in other countries of the EU?
   q   How we will react faced with possible differences in this aspect? Will we harmonize prices?
   q   What strategies will have to be developed to face up to a new way of configuring prices that
       implies real variations in them?

Supply

The questions that companies should ask themselves are:
   q How to identify beforehand the strategies and resources of our new competitors in the market?

   q From which countries will they come from?

   q Which will be the best collaboration opportunities with national or foreign companies in order to
      defend our current market quota or to increase it?
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Foreign Trade

As we already know, the single European market will have a level of competition that is a lot more
demanding and aggressive. Because of this, the extra-community expansion of companies becomes
very important.
The Euro zone constitutes one of the largest economies in the world and, by this, foreign trade of the
EMU must see itself in the context of a growing external environment in continuous evolution that is
characterized by a rise in globalization and the integration of markets.
Thus the EU, with some 320 million citizens, is the largest market in the world, and will see itself
increasing in the next decade after the future enlargement of the Union.
The EU continues being the principal trading partner for many industrialised countries, even though new
industrialised economies, mainly in Asia and Latin America, together with those countries that are
candidates to the Union, are increasing in a significant way their participation in the foreign trade of the
EU.
As a rule, the principal trends of European foreign trade with respect to the rest of the world can be
summarized in the following:
   1. The EU is the principal international exporter of goods in front of the United States and Japan, and
      the second biggest importer, surpassed by USA and being a long way in front of Japan in this
      aspect.
   2. European exports are more diversified as a rule than those of USA and Japan and the same occurs
      with imports.
   3. In relationship to services, the EU is clearly the principal international exporter followed closely
      by the USA.
   4. The balance of trade is also positive in services though far away from the North American.
   5. Of extra-community trade in services, 34% approximately is related to USA and 26% to the rest of
      Europe. Thus, the level of concentration is much greater than that of the goods.
   6. The growing importance of China and of Eastern Europe can be clearly observed in the trade with
      the EU, in addition to an acceleration of exports to Latin America. In respect to imports, those
      from the rest of Europe are also accelerating.
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Cooperation Instruments

The appearance of the Euro offers companies the possibility of acting in a larger, open and competitive
market. Due to this, the Commission has always tried to favor trans-national cooperation between
companies, facilitating the access to new markets, products, technology, clients, etc.
An indirect and not too risky way for internationalizing companies and that is furthermore more
frequently used is the cooperation or association with others. It is an alternative that has the consent of
the community authorities. Thus, it emerged the European Economic Interest Group (EEIG) that
permits trans-border cooperation between companies without the obligation of merger or of creating a
joint company. The objective of these groups is to encourage the union between companies in order to
obtain better results, than those which could be obtained separately. The creation of a EEIG can be due
for various reasons: organizational, financial, commercial, technical, of development, etc. and in spite of
being a new legal instrument and being formed by at least two associates from two State members,
disadvantages can be considered:
    q fiscal regime to apply,

    q application of community regulation in areas of competition and

    q difficulty in the drafting of a constitutional contract.

The EEIG present numerous advantages:
   q they facilitate the outward exportation from the European market,

   q it increases the volume of sales,

   q it produces greater competitiveness,

   q there is an improvement in the image of the company and
   q   its creation favors the participation in community programs since many of them require that the
       projects are presented in association with several State members.
Within these groups, commercial agreements are the most common together with those which are
signed in order to present combined operations in a third country, sharing the risk.
Chambers of Commerce and different Foreign Trade Institutes are an indispensable instrument in the
moment of obtaining information about internationalization, without forgetting the multiple possibilities
that Internet offers us today:
    q Market Access Database is a data base within the strategy of the Commission for the elimination
       of commercial barriers in third party countries. Furthermore, it offers information on regulations,
       trade regime and duties, permitting exporters to accede to useful information about the conditions
       in the markets of third party countries.
   q   The World Index of the Trade and Industry is an Internet address that permits contact with anyone
       of the worlds Chambers of Trade and Industry and to accede to the information related to services,
       companies, offers, etc.
       At the European level, the same services are offered by www.eurochambres.be
   q   The International Importers Directorate collects names and addresses of importing and distribution
       companies and agents of purchase in 140 countries, classified by alphabetical order and according
       to the product that is traded.
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Standard of Good Practices

                     Those commercial or professional establishments that can complies with the code
                     can show during the transitional period the Euro Label.
                      The Standard of Good Practices for a better adjustment to the installation of the Euro
                      was approved by the "Inter-ministerial Commission for the Coordination of
Activities relative to the Introduction of the Euro" and its contains 10 commitments:
   1. Information commitment: to facilitate to all clients, real and potential, specific and general
      information, statistic and dynamic, veracious and sufficient about problems such as:
          r The price equivalences in pesetas, Euros and cents of Euros of products that are sold or of
            services that are given
          r The exchange rate and the conversion rules or rounding

          r The nominal values and physical characteristic of notes and coins in Euros.

   2. Commitment to Personnel Training: using those means that are at the disposition of the
      entrepreneur in order to train himself as much as the personnel under his authority. Special
      attention must be paid to those who are in contact with the public.
   3. Commitment to Conversion Security: putting on record that the calculation of exchanges
      operations between currencies will be made using only the exchange rates and guaranteeing to the
      consumer that the prices paid in Euros correspond to the mere mathematically application of the
      conversion rate and the procedures of rounding established by law.
   4. Commitment to round final figure.
   5. Commitment to dual pricing: being practiced progressively from the 1st January, 1999, it is
      referred to price lists, signs, conversion of the final invoices figure and/or receipts and the
      advertising of the products or services that contains some mention of the prices.
   6. Commitment to return change in Euros: from the 1st January, 2002.
   7. Commitment of continuity, maintaining the level and the non discrimination in the collection
      of prices designated in Euros and/or pesetas: guaranteeing that the exchange from pesetas to
      Euros will be made so that the products and services maintain the same prices level than before the
      currency change, and reiterating the obligation and observance not to carry out discriminations in
      the payment received only because they are expressed in pesetas and/or Euros.
   8. Commitment to the personalized attention of the consumer or user: attending them and
      advising them in the substitution process of the pesetas to Euros, paying special attention to the
      groups that will be particularly affected by the currency change.
   9. Commitment to the diffusion of the Standard.
  10. Review commitment: at least every six months all these points should be checked in order to
      provide a better service for consumers based on the circumstances that occur in each moment.
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Agriculture and Fishing
Agriculture

The agricultural sector in Europe has been the object of multiple changes in the last two years due to two
events:
   1. The agreements reached in the Uruguay Round.
   2. The reform of the Common Agricultural Policy (CAP).

It is foreseen that the adoption of the Euro will reinforce the effects of the trend towards the liberalization
of the markets during these last few years and will increase competition between the goods and services
of the different countries. Furthermore it must take into consideration the next enlargement to the
countries of the East, whose economies are largely agricultural.
In addition, the possibility exists of the ending of grants in the long run. Even if it continues, the
enlargement of the EU with the countries of the East, will provoke a redistribution in these grants.
The most competitive agricultural sector such as fruits and vegetables will see a reinforcement in their
exporting potential with a price unification that is derived from the use of the same currency. On the
other hand, the sectors that traditionally exported less and where especially orientated to the internal
market, will clearly note the effect of competition within the EMU. Thus, it will force them to increase
their productivity and to control their costs.
Also it is foreseen that there will be a trend towards abandoning fruit and vegetable production that is not
profitable and a gradual beginning in the specialization of products with respect to which they have
advantages over new competitors. So that this will be possible, it will be necessary to modernize the
productive infrastructures that permit that the said specialization process can be prepared for the
requirements of new demand.

Fishing

The community fishing sector has recently just accomplishing a major restructuring effort and currently
it is faced with an important challenge due to production overcapacity and competitive pressure.
Due to the shortage of existing fishing resources currently in the EU and the existing difficulties in
accessing fishing reserves of other non-members States and international waters, a progressive reduction
has been produced in the activity of this sector as well as a decrease in the fleet.
In relationship to the arrival of the Euro, it cannot be affirmed that large changes will be produced in
European fishing. The sector will logically be affected by greater stability, and by the elimination of the
exchange rate risk, as well as by the reduction of costs. All this is foreseen to reinforce competition.
Within the fishing sector, those who have already an exporting activity will see it reinforced by the
unification of prices that the single currency will bring, while those whose activity is mainly developed
in the internal market will suffer a greater impact from competition.
The establishment of the Euro will provoke a greater degree of integration in European economies.
Before this new scenario, companies of this sector will be able to develop more alliances with other
European companies so that it will be easier to confront problems such as the restructuring of the sector
or the needs of technological modernization.
In general the arrival of the Euro should be used by the fishing sector to achieve an optimum operation of
the market through:
    q The promotion of the quality of the products

    q The lasting exploitation of the resources

    q The improvement in competitiveness

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Common Agricultural Policy

The CAP has been with difference the most important policy of the EU. Its objectives appear in article
39 of the Treaty of Rome:
   q To increase productivity

   q To guarantee an equitable standard of living to the agricultural population

   q To assure supplies to the consumer at moderate prices

   q To stabilize the markets
   q   To guarantee the security of supplies
Furthermore, in that article, it is realized the need of taking into account the social structure of
agriculture, the inequalities between the different agrarian regions and the convenience of progressively
making the necessary adjustments.
The CAP was created in the 60's, when Europe was lacking in a large part of nutritional products.
Because of this, the mechanisms of this common policy were directed to solve this situation supporting
prices and internal revenues through intervention and trans-border protection systems, converting the EU
into the worlds biggest importer and second biggest exporter for agricultural products.
But when the Community began to have large surpluses of the majority of its agricultural products it
began to see the deficiencies in the system, that provoked tensions in relationships with other countries.
Before this situation, there had already been a general agreement in connection with the need for a
reform.
Throughout the course of its history, the CAP has suffered various changes. After the first attempts at
reaching its objectives, it moved to amend the quantitative imbalances. Later it focused on a decrease in
prices and compensatory grants that finished with the current reform that intended to deepen and to
widen the reform accomplished in 1992, substituting the price support measures with direct help,
accompanying all this process with a coherent rural policy.
The new challenges which the CAP faces are the following:
   q The world agricultural market has currently some of the best perspectives for growth, with the risk
     existing of a return to surpluses, with the consequent loss of positions at a community and world
     level.
   q With the different enlargements of the Union, management of the CAP has been made more and
     more complex, being necessary the outlining of new and simpler criteria and mechanisms of
     control especially in the face of enlargement towards the countries of the East whose economies
     are supported fundamentally by the agrarian sector
   q One of the communities principal objectives is to maintain the viability of rural zones, for which,
     in addition to achieving a diversification of the rural economy (favoring the creation of small and
     medium sized companies and promoting the use of the new technologies), it is indispensable to
     agriculture competitiveness. For this it will be necessary to guarantee that agricultural expense
     contributes more than what it has achieved up until now to needs such as: the protection of nature,
     space management or attention to young farmers. Here enters in play one of two sections that
     compose the European Agricultural Guidance and Guarantee Fund (EAGGF).
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Construction
The effects of the arrival of the Euro in the construction sector will be determined to a large extent by the
characteristics of this sector:
   q Very little exporting activity

   q Reduced operating margins
   q   Little technological differentiation
   q   Activity mainly locally based
   q   Main client: Public Administration.
One of the principal repercussions of the introduction of the Euro in the construction industry is the
decrease in public investment, since with the reduction of the public deficit, government expenditure will
be smaller, impinging directly on investment in infrastructures. All this has favored the appearance of:
   1. New ways of financing public infrastructure (grants, private management companies, etc.)
   2. Diversification of the activities of the companies of this sector to other services such as urban,
      environmental, telecommunications, etc.
   3. Growth of the exporting activity, even though it has not grown to great scale due to lack of
      market knowledge on the part of national companies and to cultural and linguistic barriers. It
      causes European integration of the sector to be not very relevant and limited to countries and
      border zones where the linguistic and cultural affinity is higher.
   4. Concentration and entrepreneurial association for the improvement of competitiveness.
One of the principal worries of the sector in connection with the EMU is the evolution of interest rates,
since before the forecast of lower and more stable interest rates, we can speak of a development of the
financing to long term agreed with the nature of the sector. In general, a decrease in interest rates would
have three different effects:
    q An easier access to funds and to the promotion of investment and financing of infrastructures

    q Changes in negotiations with contractors who will demand greater productivity and a reduction in
       prices.
    q Greater accessibility to housing.

We can not forget about the impact that the Euro will provoke in the computer systems of companies, in
the adjustment of the prices, in the need for personnel training etc.
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Energy and Industry
Energy and industry are essential factors to guarantee competitiveness and economic development.
Because of this, the realization of the internal market and the reinforcement of economic cohesion favor
the elaboration of community policies founded on common objectives such as global competitiveness,
the safety of supply and the protection of the environment .
    q Energy

   q   Industry
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Energy
Electrical sector

With the arrival of the Euro, changes will be produced in all fields of the energy sector, although from
among them we can emphasize two, electricity and oil.
The installation process of the Euro will coincide with the liberalization of the
electricity sector. It will provoke this industry to act in a competitive framework,
one in which, in general, the following will be observed:
    q A necessary adjustment in the area of information systems, billing, fixing of
       prices, etc.
    q A reduction of the financial costs and of the technological renovation costs of
       the equipment.
    q The elimination of the exchange rate risk for European companies that invest
       in construction and exploiting.
    q There will be a greater number of electricity supply contracts.

In addition to all this, the consolidation of the European single market in the electricity sector will be
influenced additionally by factors such as the promotion of the use of alternative energies such as solar
power and wind power, the liberalization of primary sources of energy, the fiscal harmonization, or the
disappearance of the single tariffs.

Oil sector

The changes that will appear with the arrival of the Euro will be of a diverse nature:
   q There will be a functional adjustment of the processes, with technological changes, accounting and
      in the management of human resources that will be clearly observed in the questions closest to the
      final consumer as for example fuel prices in service stations.
   q The marketing of products derived from oil will need investments in the adjustment of suppliers,
      in card payment systems, etc.
   q The fixing of prices will be accomplished in function to the prices of different countries, therefore,
      with the disappearance of European currencies fluctuations, convergence in prices will appear.
   q Contracts that cover the exchange rate risk in the purchase of crude (referenced in Euros) will be
      less costly due to the greater stability that the existence of a single currency implies.
Together with electricity and oil, the Euro will bring changes to the gas industry; since there will not be
any exchange rate risk, supply contracts will be established in the long run between companies from
different countries with the consequent decrease in the price of this fuel.
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Industry

In this area, the introduction of the Euro will be a determining factor above all in reference to
competitiveness, with the result that the different industrial sectors will have to try more than ever to
achieve a greater level of innovation. It will permit them to face up to the new challenges created by the
existence of a single market.
In relationship to internal operative structures, all the industrial sectors will observe changes in what is
referred to the adjustment of invoices and tariffs, the transformation of information systems, client
communication campaigns and the training of personnel.

Iron and Steel industry

It will need a major restructuring to be competitive and capable of facing up to the changing conditions
of the market, so much as within the EU as outside of it. To achieve the reestablishment of
competitiveness and a better growth rate in this sector, there exists specific grants within the CAS (Code
of Assistance to Iron and Steel Industry), that favor those linked to investigation, protection of the
environment or the closure of companies. It is important to emphasize how in this process the European
steel industry must confront cheap imports that come from the East, the commercial pressure of newly
industrialized countries, as well as the application of antidumping measures in its exports to the U.S.A.

Chemical industry

Always pendent of oscillations in the oil prices and therefore of the quote of the dollar, it has been
rationalized in certain sectors to maintain its competitiveness related to products originating from the
Near East and North Africa. It has established an action framework at European level intended to
reinforce its competitiveness in the long run as part of actions such as the improvement of the regulatory
framework, the guarantee of effective competition and the promotion of investments in immaterial goods
together with the development of industrial cooperation.

Pharmaceutical industry

It also faces changes due to monetary union since an equalization of the selling prices of products will be
produced. Furthermore:
     q There will be a decrease in specific regulations of each country in favor of common regulations so
       that a medicine authorized in a specific country of the EU will be able to be marketed previous
       procedure in the remaining countries.
     q The multinationals companies of the sector will be faced with the decision on the location of their
       plants in Europe or in their concentration in other countries seeking economies of scale.

Data processing and electronics

It will benefit from the Euro if the companies of this sector are able to compete with large multinational
companies. Because of this, being an industry dominated by extremely strong entrepreneurial groups,
three types of situations will take place:
    q The subsidiaries of multinational companies will encounter with an equalization of prices at an
        international level, with globalization and greater competition. Therefore, manufacture costs will
        be comparable and pressure on costs will be exercised.
    q Small and medium sized companies of this sector will have an adjustment cost to the Euro
        concerning their internal systems that will be greater in relative terms. However, they will have the
        opportunity of assuming activities that the large companies subcontract.
   q   In the short term it is foreseen that demand increases for these other sectors due to the installation
       of the Euro.

Telecommunications

In relationship to the Euro, this sector will be affected in various ways:
    q The greater openness of the market will imply a greater demand for telecommunications services,
       something which will benefit the operators that can offer global services.
    q The lowering of the costs of the services will provoke a decrease in the prices.

    q The comparison of prices of similar services will provoke an increase in competition and in
       pressure by the consumers so that prices continue decreasing.
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Services
The services sector dominates the majority of the economies of developed countries in the world, being
intimately related with the set of productive systems. At a worldwide level, the EU is the greatest
exporter of services as well as, at the same time, the greatest importer of them.
We should indicate that the growing importance of this sector is the fruit of a wide range of factors,
between which figure deep transformations of productive processes, new technologies, or the multi-faced
opening of international markets.
For the study of the influence of the euro in this sector, the following subdivision has been established:
   q Trade

   q   Education
   q   Real-estate
   q   Health
   q   Transport and communications
   q   Tourism and Hostelry
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Commerce

The commercial sector is going to be one of the most affected by the arrival of the Euro due to the need
for the adjustment of collection and payment systems, cash desks, prices, labels, catalogues, etc. as well
as the adjustment of accounting and fiscal systems.
Even though the reform affects all levels of trade, it will be the retailer, the small trader who will suffer
the consequences of the change in a greater degree as he has less resources available:
    q At technical-operative level, the most outstanding measure will be the conversion of national
       currency prices to the euro together with the issue of rounding.
   q   In the strategic area, it will be where the greatest problems will be produced for the retailing trade
       since the arrival of the euro will intensify the strength of the already existing competition, resulting
       in a reduction of competitiveness with respect to large distribution companies.
The small trader must be able to adapt to the changes that the single currency brings through
re-conversion of his sector by different processes: networks training, partnership, or the utilization of the
franchise system, without forgetting the specialization and the advantages that suppose his closeness to
the consumer. Thus, the retailer will have to specify what position he adopts with respect to the
introduction of the euro, seeking always the satisfaction of the client.
The introduction of the euro will provoke in the commercial environment between others the following
changes:
   q Supply: there will be greater opportunities to make easier and more direct comparisons between
      existing prices in different countries. Furthermore, the elimination of the exchange risk and the
      reduction of the costs of the trans-border operations will make it possible that the retailers and
      their suppliers get products from all Europe in favorable conditions.
   q Financial competition: the euro will bring with it a single financial market and will increase its
      specialization, liquidity and size, giving the small merchants new opportunities of financing their
      operations.
   q Prices: a global reduction in prices will result due to the nonexistence of the exchange rate risk, to
      the simplification of the comparisons with the prices of other countries and the decrease of
      operating commissions.
The principal objective is to achieve a neutral implementation of the euro, that does not supposes any
economic damage to citizens neither to economic agents. In order to reinforce and to maintain the
confidence of the client it will be necessary that he considers himself well informed, and for this the
traders will have to make a special effort:
    1. One of the key objectives of the traders in their information campaigns is to help in the
       acceptance of new psychological prices in euros, creating a references system in the new currency
       that gives confidence to the consumer that the new price of the product is justified and that the
       value of the conversion to euros is made accurately.
    2. The merchant must make an effort to demonstrate to the client that, in his business, arbitrary prices
       rises have not been produced. As one of the principal dreads of the consumers before the arrival of
       the euro is the possibility of an automatic markup on products.
   3. The traders should have available:
         r informative booklets of general character about the implementation of the euro.
            Furthermore, it would be convenient that specific booklets were published with a view to
            comparing prices of their own products.
         r Posters in which prices appear in euros as well as in the national currency.

         r Conversion tables and calculators

         r Tests, simulations and promotions: this practice would be very beneficial for consumers to
            whom the simulations and promotions related to euros prices and receipts would help them
            to become familiarized with the new currency.
Currently, the European Commission studies how to overcome the difficulties of the traders before the
introduction in circulation of the euro in 2002. The common line to face this stage of change is in
connection with four fundamental aspects:
    q The forms in which the banks will deliver the euro coins and notes to the traders

    q The adjustment of the automatic notes distributors and the withdrawal of equipment not adapted in
      2002
    q The operation of payment terminals that have not been adapted to the euro in the points of sale.

    q The nature of the bank notes that are distributed in the cashier's windows beginning in 2002. It
      would be convenient if the distribution of "small" notes is mainly favored.
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Education

The arrival of the euro supposes a historical event since it is the culmination of the process of European
integration in the monetary area. The changeover of the national monetary systems to the euro demands
from all Public Administrations an effort of continuous information to all the collectives of the
population, adapting the contents to the special characteristics of each one.
From among the various social groups to those which special attention has to be paid at the time of
informing about the euro, the educational area has special relevancy, as educational institutions permit:
    q To integrate specific contents about the euro in different subjects, thus students will have a closer
      contact with the reality that this currency supposes.
    q Moving from information to training, since probably all that is treated in the classroom, given
      the high capacity of the educational collective to assimilate, and the better disposition of young
      people to change, passes to the family area.
The classroom is a good place for discussions, a place where children and young people can expose
openly their doubts about the euro as well as those of their parents. The approximation in classes to the
topic of the euro has the advantage of eliminating the dealing that is given to this matter in the massive
information campaigns and of treating the issue in greater depth attending to particular doubts.
Furthermore, to provide information about the euro in the schools supposes an opportunity to increase the
knowledge that students have about Europe as well as to provide them with a sense of European
citizenship.
In order to carry out all this informative labor with success, didactic materials on the euro have been
elaborated and edited, being directed at the academic population, in addition to games and other activities
in which the labor of the professorship will be essential. Precisely to facilitate them in their task and to
endow them with useful materials there is a series of didactic guides adapted to the different
educational levels.
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Real-estate
With the arrival of the euro, internal demand within the real-estate market is going to be increased due to
a scenario of economic growth with contained inflation and with controlled interest rates.
Experts in this sector consider that the euro will provoke a greater demand for secondary housings in
tourist areas and for commercial units and business premises due to the possibility that there will be a
greater setting up of businesses with the opening of markets that the EMU supposes.
Concerning regular housing, the euro is not going to change in a drastic way its current demand level.
Thus, prices in this area will increase less than those of offices, business premises and second houses.
If we consider the economic effort as the proportion of the payments of the mortgages for the purchase of
a middle sized apartment in relation to an average salary, this will remain with the arrival of the euro in
levels relatively lower than at present, provoking a greater accessibility to property.
In the mortgage's market, even though in the short term the differences between the markets of this type
at the level of the EMU will continue being large, with time it will create a convergence in each one of
them, making the systems of financing increasingly homogeneous. All this seems logical due to the
elimination of the uncertainty of exchange rates risk. Furthermore, it is foreseen that the existing
differences between the offers of financial mortgage entities depends more on the policies of each entity,
that on the price of money.
With all, the housing policies of governments will continue to influences the mortgage markets.
However, this also will suffer a change since it depends on the monetary policy of the ECB. This policy
conditions the performance margin of the governments at the time of fixing the housing regulation.
In the legislative area, it must continue the course of action of suppression of all types of legal barriers
that prevent the full development of competition in the market so that it is the most transparent possible
and facilitates a management more appropriate to the credits.
In addition to all these problems, real-estate and constructing companies before the arrival of the euro
must adapt their technical, commercial and organizational structures to the new situation.
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Health

The health policy of the Union is one of the best examples of European integration. From the entry into
force of the Treaty of Maastricht, there is a legal basis to act in the field of public health, being one of the
EU objectives the achievement of a high level of health protection.
As consequence of the modifications made by this, it is necessary to outline a new direction in the health
strategy of the Union, that envisages:
    q A health care framework including an action program.

    q The need of the fact that the health policies are integrated, that is to say, that they envisage each
       and every one of the sectors of community activity.
Concerning the way in which the euro will affect the health sector, the change of currency will not have
the same impact as on the banking or on the business sector. As in all sectors, from the 1st January, 1999
the health sector can use the euro in its financial operations, and even though it is foreseen that its use is
delayed until the end of the transitional period, during this period the health sector must confront all the
adjustments that the entry into the single currency brings in processes, in technology, and in the
organization of the administrations, organizations and centers that constitute the sector.
As a rule, they will have to draw up plans in advance with relation to the adjustment to the euro, to
train the administrative personnel and to invest in the improvement or buying of computer material.
Also they will have to be attentive to all that is related to Treasury since it is not the same a center
belonging to the Public Administration, than a private one that works for insurance companies.
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Transport and Communications

From a macroeconomic perspective, it is foreseen that the euro provides greater economic stability, that
will have an extenuating effect in the oscillations of the economic cycles. Because of this, and due to the
strong cyclical character that the transport sector possesses, that stability will affect it directly.

Transport

The transport sector can adopt several modalities depending on the environment:
   q Air and maritime

   q Land

The companies that are devoted to air and/or maritime transport tend to have a more international
character and a greater size than those of land transport. Thus, their way of operating will be affected by
the euro to a larger extent, benefiting the elimination of exchange rates. It will carry a reduction in costs
and greater ease in accomplishing transactions.
                               With respect to land transport, it tends to have a higher degree of
                               fragmentation and competition, lacking in exporting experience since even
                               though there are multinationals in the sector, the majority of the companies
                               that are dedicated to this type of transport tend to be small and to have a
                               national character. Thus, the effects of the arrival of the euro in these
                               companies will depend mainly on the following characteristic:
                            q Size

   q   Specialization in the service
   q   Elected transportation modality
   q   Degree of opening to the exterior.
It is expected that the companies most affected will be those which have relationships with the exterior.
They will see altered their ways of operating before the establishment of physical connections between
the manufacture and distribution points, and the nonexistence of frontiers. These companies will plan
their strategies based on wide ranging zones.
The current trend of the European legislation in transport matter is aimed at:
   q   the liberalization of the sector,
   q   the elimination of prices fixed by the states,
   q   increase in the rigor in the granting of transport licenses,
   q   preoccupation for the environment and the need to reduce levels of pollution.
In general, the different means of transport will suffer changes such as:
    q increase of international competition,

    q modifications of the systems in the issuing and collection of tickets,

    q lowering of the financing prices for productive material,

    q variation in the expense of fuel consumption in some countries,

    q increase in personnel expenses due to need of staff training.

The best moment to begin the adjustment of the company to the euro is one of the most discussed
problems. Taking into account what is referred to as land transport, this sector is composed of mostly
small companies. Thus, it is expected that these accomplish their incorporation to the single currency in
the last moment.

Communications

In relation to communications, as this sector has a very important cultural factor, it will continue to be
governed to a high degree by national policies. Anyway, there exists within this sector other areas in
which the service lent does not depend as much on this cultural factor. We refer to auxiliary companies
of different medias, that will be affected by increases in competition as in any other sector.
In general, industries that are related directly to the final consumer (as for example cinemas), will have to
complete an adjustment process for the period in which the two currencies will live together. For its part,
the sectors that have important investments that need financing (printing, radios) will benefit from the
existence of a financial market that is more liquid and inexpensive. Also, the companies with a very high
need for supplies of certain goods (in the case of the paper in editorials, press and magazines), will see
their supplies improved by realizing them in a stronger currency.
It is convenient to emphasize in the field of communications, the growing importance of the
telecommunications sector. It is indispensable in our current times and continues being the object of
multiple and deep structural modifications during these last few years. These changes have been imposed
by the liberalization process of the sector which has begun in all the countries of the EU.
The fundamental change in the communications sector will consist in the abandonment of its historical
monopoly position, in order to become one that is composed of multiple operators of telecommunication
services. This process will not be simple, since between other factors it will need a long time period for
its fulfillment.
The impact of the euro in the sector from an operative perspective will be emphasized, since the
implementation of the common currency will permit operators to invoice in all countries in the same
currency, thus reducing costs and favoring transparency. Furthermore, it will be necessary to take into
account the need to adapt computer systems, and data bases to avoid claims from clients. Also, public
telephone cabins and prepaid cards will have to be adapted to the euro.
In general, it will produce a progressive lowering in the costs of services that will result in a reduction of
prices. Although this decrease will be almost completely motivated by greater competition, provoked by
the entry of new operators, as they will want to obtain market share rapidly against traditional operators,
and not by the existence of a common currency, whose role at the time of provoking a decrease in prices
will be determined by the facility that consumers will have to compare prices of similar services.
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Tourism and Hostelry

Tourism is one of the most important activities for some of the countries of the EU from an economic
and social point of view. As it is an activity that exercises a great deal of indirect influence on the
economic system, and has a high degree exposure to the exterior, it will be affected by the changes that
the euro brings.
In general, it is expected that its arrival will favor international tourism within the EMU by:
    q greater prices stability that is foreseen by the disappearance of the risk of exchange rates

    q the saving of exchange commissions

    q greater transparency in comparisons between the prices of travel agencies of the different
      countries
    q the sustained growth that the EMU can provide in the long term, that will permit the generation
      of employment and to increase the revenue level of the population
In general, experts assert that the global effects of the euro in tourism will be the following:
    q simplification in commercial and administrative management of business with the existence of a
      single currency
    q the disappearance of earnings that the devaluation of the national currency provided, a practice that
      will have to be substituted by an increase in the competitiveness and by the acquisition of
      comparative advantages that have to be based on the quality of the services and the tourist
      products offered.
    q Not having costs due to exchange operations, the tourist will increase other expenses in the
      destination where he/she is.
    q The confidence of the consumers will be greater to see themselves in an internal trade zone in
      which they will not have to handle another currency than that which they usually use.
In the business area, the entry of the euro will especially affect:
    q The wholesale and retailer companies that act as travel intermediaries, due to the greater volume of
       business which they are going to deal with.
    q International transport companies

    q Hotel companies and other housing modalities

    q All those companies that are located in zones that are clearly tourist and are dedicated or obtain
       their income from the sale of goods and services related directly or in a complementary way with
       tourism.
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Social groups
By many and various reasons (illiteracy, handicap, exclusion of the customary information channels, lack
of interest, etc.), a large part of the European population can not receive suitable information on the
adjustment to the euro, and because of this, the new currency can become in this case a factor of
exclusion instead of union.
All we know that the changeover of national currencies to the euro constitutes between others a break in
customary practices (estimates of prices, the changeover of the monetary language), and a break in
symbolic references.
In order to avoid that in certain sectors of the population the sensation of exclusion grows, it will be
necessary that the authorities pay special attention to the specific needs of said collectives, finding their
problems, and designing suitable measures in order to resolve them.
With this in mind, the European Commission put into gear the "Euro made easy" project whose
principal objectives are two:
    q To try to understand the relationships of the consumers, especially of collectives in difficult
      economic or social situation, with the euro, to analyze their problems, doubts and dreads.
    q Based on the needs of those groups to create adequate instruments of information and training.

In general what is sought is to adopt measures that facilitate a safe step towards the euro, giving
answers to the questions that are outlined by each and every one of the citizens groups and to help them
face up to practical situations.
    q Disabled persons

   q   Groups with risk of social exclusion
   q   Consumers
   q   Senior Citizens
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Disabled persons

From the 1st January, 2002, the Euro will be the currency of more than 300 millions of Europeans from
the 12 countries of the EU, that will have to become accustomed to use the new notes and coins.
Public administrations together with private entities are spending time developing communication
campaigns for the general population with the intention that they recognize the notes and coins and they
become familiar with the new scale of values that the euro outlines, one in which the notions of
inexpensive or expensive will become to be defined in euros and not in the national currency.
At the time of identifying the euro, we should pay special attention to those persons that by suffering
from some mental, visual or hearing disability find greater obstacles in the moment of learning and to
handle the single currency.
In this sense, the European Commission, through the project "Euro made easy" pretends to inform those
that will have special difficulties at the time of accessing information. Because of this, it attempts to
reach a close connection with the persons implicated in the design and development of the information
and of the instruments used.
The principal characteristic of the "Euro made easy" project, in connection with these groups of persons
is the following:
     q Information or training on the euro, taking into account all the problems that could emerge
        around the topic and that will not be purely technical, that is to say, it will be important not only to
        explain problems as the conversion of national currency to the euro but also to assure these groups
        that their pensions will remain the same or that, at no time, the single currency is going to suppose
        a social exclusion factor.
     q Completed studies show that only close information will permit that each citizen is correctly
        informed. Speaking of proximity we refer, on the one hand, to the fact that the contents must be
        adapted to the needs of each group, and on the other hand, to the fact that this information must be
        transmitted through mediators that inspire confidence, (medical, persons that are used to deal with
        the public, teachers, etc.) above all persons that they belong to the same group as to those which
        the activities are directed.
In relationship to psychically disabled persons, experts in this field have designed specific learning
instruments adapted to their needs.
Concerning deaf persons or those with hearing deficiencies, a first phase emphasizes that these
persons due to their deficiency and lack of literacy with which they are usually associated, hardly receive
information on the euro. The activities with respect to this collective began with the election of a gesture
for the euro in sign language. It has continued with a series of processes for the elaboration of
information and training networks for the persons in charge of providing it.
In the case of the visually impaired, the European Visually Impaired Union has collaborated closely
with the European Commission, suggesting ideas about the design of notes and coins so that their
identification and use will be simple. As a result, coins will be differentiated among themselves by size,
weight, relief, edge, and color, none being equal. Notes will range in size from the smallest to the largest,
those of 5,10,20,50 and 100 euros will change in length and width, while those of 200 and 500 only will
change in length with respect to that of 100 euros. All will be distinguished by color, so that the persons
with serious visual problems will be able to differentiate the notes by the number that represents the
value, as it will be very large and with a color in contrast to the background of the paper, while those
who are completely blind will be able to distinguish them by a relief that appears on the front as well as
on the back of each one of them.
The European Central Bank has manufactured 28.000 kits with samples of the new euro notes to be
distributed to the trainers of those with visual, hearing or physical disabilities. These notes will have the
same size, tact and color than the real ones even though they will be only be printed on one side and will
carry an inscription "without value" to avoid falsifications. They will be numbered individually and will
include safety features, which will not be made known until September 2001.
The Commission and the respective entities in the different Member States will distribute these packages
from April 2001. They will include information tools such as games and booklets developed by citizens
who are members of associations for the blind, deaf, disabled or senior citizens.
At the same time, the various national currency factories will produce currency kits so that both sensorial
and psychical disabled citizens become familiar with them.
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Groups with social exclusion risk

Social exclusion is a phenomenon of multiple dimensions whose scope goes beyond poverty and includes
situations of discrimination and of privation of citizen's rights.
The relationship of socially excluded groups encompasses very diverse categories between those which
can be emphasized:
   q The non qualified and the illiterate

   q Physical or mentally disabled persons

   q Drug addicts

   q Criminals, prisoners and those with criminal records

   q Children or young people submitted to abuses or that grew up in households in conflict

   q Racial, religious, linguistic and ethnic minorities,

   q Refugees and immigrants

   q Beggars and vagabonds

All these groups, that in many cases, lack basic resources, see the arrival of the euro as another exclusion
element since their information with respect to the topic is scarce. And these persons in situation of
precariousness are precisely those who are the most concerned while, at the same time, are the less
sensitive to the potential benefits, since the repercussions of the advantages of the euro on their life seem
to them more than abstract.
Due to this, at the time of establishing information campaigns about the euro the circumstances of these
collectives will have to be taken into consideration, being vital the work that the different reception,
reinsertion, detoxification or assistance centers perform in this respect, whose staff will be responsible
for informing these persons at the right moment with a sufficient level of information with respect to the
euro so that they do not consider the new currency as another exclusion factor in their lives.
In this way, for example, many prisons are carrying out pilot programs in order to bring the reality of the
euro to groups of prisoners. This consists in information meetings as well as the delivery of information
material (booklets, equivalence tables of the new currencies, etc).
The same type of activities is carried out in organizations or centers of detoxification and of reinsertion,
whose monitors in addition to having informative chats accomplish other type of activities such as
markets where they can carry out transactions with replicas of the new currency. These actions of
practical type are actually beneficial since it has been proven that theory not accompanied by practice is
forgotten quickly by the majority of persons and even provokes rejection.
In relationship to the immigrants and refugees, foreigners that by their origin present problems of
language, administrative regularization, cultural uprooting and scarce or void economic resources, all
those occupational and educational activities that are accomplished to help their integration will have to
take into account the whole time the new stage that the euro brings. They will have to attempt that these
persons receive information which is as complete as possible in order that in within the realm of what is
possible they do not feel cheated or the object of fraud at any time.
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Consumers

The arrival of the euro will produce an important change. It will force us as consumers to modify our
mental accounting system in the sense that we will have to get used to see the prices of the products and
services expressed only in the new currency. Also we should be able to evaluate if they are correct,
expensive or inexpensive.
This revolution will affect numerous aspects of our daily lives and between them the area of domestic
economy. Because of this, one of the collectives that will need special attention at the time of informing
about the changes that the euro will bring will be that of those persons, men or women, that take charge
of their respective households, whom in the beginning will probably find it hard to familiarize
themselves with the new prices that they find in their daily purchases.
One of the things that at first sight will attract the consumers attention will be that the prices in euros
are numerically lower, (there will be articles that will not arrive even to cost an euro), even though this
appraisal is not real. Thus, there will be to attempt to avoid buying without having assessed the price well
beforehand, believing that the product is more inexpensive than what it actually is. Because of this, in the
first moments of contact with the euro, it will be logical that prices are translated to the corresponding
national currency to clear doubts about the value of the product we buy.
This operation will be simple and it will be possible to do it mentally if it is concerns small quantities and
that are easy to remember. However, with time and once we are accustomed to live together with the
euro, it will not be necessary to use conversions.
It will be necessary to provide to consumers all type of information about how to calculate in euros in
order that they lose their fear of the new currency and that they can verify that the change is never going
to suppose an increase in the prices of the goods or services that are offered. In relationship to the
calculation in the new currency, it will be of vital interest that the consumers know the operation of the
rules of rounding and the new psychological prices.
It is already known that to calculate in euros the price of a given product, we must divide only its value in
the national currency by the official euro exchange rate of the currency of the related country. From the
resulting quantity of that division, 3 decimals will remain to round to the second. If the third decimal is
less than 5, it is rounded down to the second decimal, that will not change (for example for the figure of
14,342 euros it would remained as 14,34 euros), while if the third decimal is equal or superior to 5, it is
rounded up to the second that will increase by a unit (the quantity of 45,768 euros would remain once the
rounding is effected in 45,77 euros).
It is possible that certain traders and companies will tend to round the prices up, seeking to obtain more
benefits due to the confusion, the ignorance or initial mishap caused by the change of the currency. Thus,
consumers will have to be attentive before these practices and to denounce them to the corresponding
organization, since that type of rounding will provoke rises in prices not wished for, increasing inflation
and damaging the economy.
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Senior citizens

The collective of senior citizens possesses a sensibility very favorable to Europe and to the euro, but in
spite of this, the doubts that emerge are very numerous and it will be necessary to answer those clearly.
Among the difficulties that are observed getting used to the euro, we can consider as the biggest ones:
  q Generalized ignorance of the appearance of the new currency: since the physical introduction
    of the euro is not real yet. Besides the appearance, the unitary value of the coins and notes is
    general unknown.
  q Uncertainty on the period of dual circulation: it is considered as the aspect that will generate
    most confusion since it will concentrate a set of dreads and anxieties not shown previously and
    above all of a practical type that are: the existence of a dual purse, in what currency will the
    change be given, the possibility of paying a purchase partially in two currencies, fear of overflow
    and queues in the cash registers, etc.
   q   Difficulty of realizing the value of things in euros: since though generally older people have less
       difficulties for mental calculation, included in the education of their time, not all of them have
       facility for such calculations and though they can try it, they can check more or less notable
       differences with the price reality that tends to carry to:
           r An untruthful illusion to the fact that prices in euros are not expensive

           r To foresee approximated mental calculations for common products of scarce unitary value
              with the risk of important differences between the estimations and the reality
           r Fear of involuntary mistakes and being confused with the new notes and coins

   q   Deep fear of deceit: mainly in the area of shopping and the relationships with the suppliers, above
       all with the retailers, who are suspected of wanting to profit from the confusion by rounding prices
       up. In this point, we can see a clear lack of knowledge by this sector of the population about the
       existence of the rules of rounding.
       On the other hand, this fear is not produced in other areas different from the commercial (wages,
       pensions, social security benefits, rents, banking operations, etc.). With respect to the topic of
       pensions, that are of vital importance for this collective, until 1st January, 2002 public pensions
       will not suffer any modification as consequence of the arrival of the euro. It will be from this date
       when they will be denominated in euros, dividing the value of the pension in national currency, by
       the type of exchange of the euro corresponding to each country.
To calm all these fears before the arrival of the euro, it will be necessary:
   q To attempt that the transitional period is not only a stage of waiting and postponing the problems
      for later, and to attempt that it is possible to be familiarized with the euro.
   q   To reinforce information in order to eliminate the uncertainties on problems relative to the euro
       that are already adopted, above all concerning:
           r The fixed character of the exchange rate

           r Calendar

           r   Values and appearance of notes and currency
   q   To try to calm down about the period in which the national currency and the euro will be living
       together.
   q   To reaffirm the neutrality of the euro concerning wages, pensions, social security benefits, etc.
   q   To develop measures of familiarization and training prior to the euro.
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Conversion
Official exchange rates

Conversion procedure

Examples
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Exchange Rates
National currency units by 1 euro

               Belgian Franc     40,3399


               Deutsche mark     1,95583


               Spanish Peseta    166,386


               French Franc      6,55957


               Irish Punt        0,787564
            Italian Lira         1936,27


            Luxembourg Franc 40,3399


            Dutch Florin         2,20371


            Austrian Shilling    13,7603


            Portuguese Escudo 200,482


            Finnish Mark         5,94573


            Greece Drachma       340,750

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Conversion and Rounding
Concerning the transformation of the different currencies to euros and especially rounding, in order to
attempt the greatest possible degree of precision in operations, the European Commission has established
that the conversion rates are defined by 6 figures.

Inverse conversions

Inverse rounding conversions (of national currency to euros), will be accomplished considering only the
first three decimals of the figure resulting from dividing the figure in the national currency by the direct
rate of conversion (always using the 6 digits of official exchange rate), that is to say:
     q if the third decimal is 5 or greater, the previous decimal, that is to say, the second, will be
        increased by one
     q and if it is less than 5, the second decimal will remain as it was.

In any case it can only have two decimals
Examples

Direct conversions
In direct conversions (from euros to national currencies), the amounts will have to be rounded up or
down to the closest fractional unit, or without this, to the closest unit, or, in accordance to the national
practices, to a multiple or fraction of the fractional unit or of the national monetary unit.

Conversion between national currency

A different issue is the conversion between the different national currencies. The amounts that should be
converted from a national currency to another, within the euro zone, will have to be changed first to
euros, and after it to the elected currency. For example, to go from Italian liras to pesetas, first the liras
will be converted in euros, dividing by the type of conversion lira/euro, and later the figure obtained in
euros will be changed to pesetas multiplying by the type of conversion peseta /euro.
Regarding the topic of conversions, it is indispensable to inform consumers well in order to avoid
distrusts, and this is achieved through actions such as communication campaigns or dual display of
prices, that though it is not obligatory, it implies large benefits. In order to follow and control the process
of adjustment to the euro, and to seek the greatest transparency in all professional activities there is what
is called Euro Observatories. They are formed by representatives of entrepreneurs and professionals, of
the Administration and of consumers and users, having as functions:
    q to analyze with detail the consequences of the effective implementation of the euro in the different
       areas,
    q to follow the transition and implementation process of the euro,

    q to form part of the information and advice actions to consumers and

    q to exercise as mediators in conflicts that emerge due to the introduction of the euro across the
       Arbitral Consumption System.
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Examples of Conversions
Inverse conversions(from national currency to euros)

As we have said, they will be accomplished considering only the first three decimals of the figure
resulting from dividing the figure in the national currency by the direct rate of conversion (always using
the 6 digits of official exchange rate), that is to say:
1.750 ptas./166,386= 10,51771 €. As the third decimal is 7, greater than 5, the second decimal, will be
increased by one, being the final figure: 10.52 €
1500 French francs/6,55957= 228,67352 €. As the third decimal is less than 5, the second decimal
remains as it was, being the final figure: 228,67€

Conversion between national currencies

In this case, amounts that should be converted from a national currency to another, within the euro zone,
will have to be changed first to euros, and after it to the elected currency.
For example, to go from Italian liras to Spanish pesetas, first the liras will be converted in euros, dividing
by the type of conversion lira/euro, and later the figure obtained in euros will be changed to pesetas
multiplying by the type of conversion peseta /euro:
2.350 Italian liras / 1936,27= 1,2136 €= 1,21 €
1,21 € X 166,386= 201,33=201 ptas.
From Spanish pesetas to Portuguese escudos:
1.750 ptas./166,386= 10,51771 €= 10,52 €
10,52 € X 200,482= 2.109,07= 2.109 Portuguese escudos
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