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The color of money

The face of European currency changes with the Euro's introduction

By Stephanie Kramer

Reprinted from Value Retail News

Here's the scene: It's midmorning on a crowded market street in Berlin, as shoppers with wicker baskets slung over their arms browse among the fruit, vegetable and bread stands.

In the midst of the bustling crowd is a young man, looking uncomfortable and out of place in a dark blue suit, offering shoppers free handouts as they pass by — but whatever it is, they don't want it. Some frown at him disapprovingly; several shake their heads and a grumbling conversation forms around him.

"Einen Euro für Sie?" he asks as I approach and places something into my hand. Looking down, I see a chocolate coin wrapped in gold foil: my very first euro! As if it were Monopoly money, I stare at it and try to imagine that it's worth something. Melts in your mouth, not in your hand. Or will it?

Though Europe's new common currency was officially launched Jan. 1, 1999, the only euros we've seen since then have been chocolate ones. The "launch" was merely the beginning of a long process, an introduction that will span three years. Real euro cash and coins will not be circulated until the final phase in 2002. Starting in January of that year, the euro and the national currencies will exist side by side; by the end of June, the national currencies will go out of circulation.

In this first phase, the 11 participating countries (Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain) permanently set exchange rates for their own currencies in euros. Though cash payment is not yet an option, since the beginning of this year more than 9 million people's electronic payments have been made in euros.

But if the euro is making some headway in becoming more popular, it still has a long way to go, especially in Germany. The Federal Republic has grown up with the solid and trusty German mark, which has come to symbolize the 1950s economic miracle and postwar stability. Germans are proud of their strong currency and reluctant to part with it.

Uncertain that the euro will succeed, many Germans would have preferred to go the route of the four European Union countries that did not join in the first round. Denmark, Greece, the United Kingdom and Sweden sat out — though they may enter at a later date. Because the German government did not hold a referendum on whether to join, the already-existing hostility toward the euro is exacerbated by a feeling of "We didn't ask for it and we don't want it." Even a successful new currency would be unwelcome at this point.

Retailers seem to recognize that unless they act quickly, euro-induced sticker shock — that is, the strange, new pricing of goods — could have an adverse effect on sales. Efforts to help consumers warm up to the unwelcome new currency not only include the distribution of edible euros, but the sudden appearance everywhere, from post offices to grocery stores to banks, of colorful pamphlets bearing euro tips.

Financial institutions have long been offering lengthy brochures, and one from Commerzbank gets right to the heart of the national fear: "The currency union is not a reform, but merely a conversion. No one will become richer or poorer because of the conversion to the euro."

Reassuring words, but the majority of Germans remain unconvinced. There is concern not just about the overall success of the venture but, more specifically, worries about price gouging. Listing prices in both currencies isn't mandatory in Germany, where retailers can simply wait until 2002, when euro cash is introduced, and replace price tags overnight. Add this to Germany's collective memory of wheelbarrows full of worthless money during the horrific inflation of the 1920s and it's easy to see why retailers are facing wary customers.

Germany's exchange rate for the euro is about two to one, that is, one euro equals DM1.96. The upshot is that the currency changeover appears to slice pay checks and pensions in half. Consumers are already tightening their purse strings — especially if they believe retailers are trying to take advantage of the public's unfamiliarity with the new currency and use the opportunity to raise prices.

While banks are busy distributing handy wallet-sized conversion tables, retailers are turning their attention to price labeling. Grocery stores, in particular, are the most active, perhaps because German existenzangst is most poignantly felt in relation to food.

And, contrary to the public's expectations (and fears), many groceries and drugstores are already using dual pricing. Where shelf prices are listed only in German marks, register receipts give the total in both marks and euros. Reichelt, a major grocery chain, has prepared a snappy blue brochure with a gleaming gold euro coin on the front and a telephone hot line number on the back. The leaflet even details how to read the new cash register receipts.

For the most part, the answers found in informational brochures are straightforward, yet condescending, treating concerns as if they're unfounded, merely a result of misinformation. For example, one reason given for the three-year transition is to allow time for all the finicky vending machines that "only swallow certain coins, but don't like others at all" to be redesigned.

Apparel stores, on the other hand, seem less inclined to be the first and the best at informing the customer. In fact, they might possibly be the only place in Berlin where shoppers can escape the ubiquitous gold and blue euro brochures.

There is wide variation on dual pricing: At most of the apparel and accessories stores I visited on Kurfurstendamm, Berlin's main shopping district, prices were listed in German marks only, though the total is often printed in both currencies on receipts. One store clerk said it would be too much work to relabel everything now and that reconfiguring the cash registers to accept charge payments in two currencies is complicated enough.

Most stores appear to acknowledge the euro's launch in some form or another, but even within the same store, pricing methods can be inconsistent.

Berlin's famous upscale department store, KaDeWe, for example, lists food prices in DM and in euros, clothing prices in DM only, and all cash registers print out totals in both currencies.

Apparel retailers do agree, though, that the dual pricing hasn't made much difference to their customers. Because cash payment is still only accepted in German marks, few shoppers even take note of the euro price.

Also, according to salespeople, if there is any sticker shock, it is a pleasant one. For example, a pair of Levi's that sell for DM 112 would cost a mere 57 euros.

Stephanie Kramer is a native of Chicago. She moved to Berlin five years ago to complete a study on comparative politics in Western Europe.