Should the euro’s entry to the real world be an event that impacts economies? Or is it just an interesting, if rather confusing, novelty that will swiftly be absorbed into day to day life? Much head scratching and soul searching has been spent fretting about this, but in the end it seems that a lot of paper (and trees) might have been saved.
Some commentators say there isn’t any hype and see no comparison at all with the ‘fuss’ surrounding the run-up to Y2K. One Dutch investor sighs, “There may be some extra liquidity pumped into the system in the near term, and yes that might affect some of the figures that economists look at, but really I do not expect to see more than that.”
What about the suggestion that retailers have jumped at the opportunity to put their prices up as the local currency exchange rates are removed? “It’s a terrible environment for putting up prices,” says Pictet’s De Mello, adding, “If demand had been strong then perhaps they might have been able to put up their prices and make the rises stick, but not now. Frankly, I do not see where there might be risks that bond investors should be worrying about.”
Morgan Stanley think that politicians will bristle with pride as they recall the euro’s arrival, but doubts that the capital markets would be impacted in the slightest. For some the presence of shiny coins and crisp notes might be perceived as a good thing. Martin Hueppi at Swiss group Clariden, for example, suggests that it might help boost confidence in the currency because it becomes easier to identify with. Where there is a sort of consensus is the belief that consumer spending might well have received a boost, but that this rush to spend old currency will have been borrowed from the future and would certainly not proper the euro-economy out of its slowdown stage.
There are a few investors who are more suspicious of trouble. “I have a teacher friend who works outside Rome. She tells me that her salary is to be paid in advance of the New Year in lire. I cannot for the life of me understand why the authorities should be doing this but I am slightly suspicious, I have to admit!” says another fund manager. But Hueppi does not think that Italy has dark secrets to hide about the disappearance of their lire, but instead thinks that the Italian psyche will benefit hugely from the Euro – “Just think no more 100,000 lire for a beer, it will be just 0.75 euros!”