An immediate contribution
to the euro's international development will come from the "PRE-INs", until
their participation in EMU enlarges the euro zone proper. The
private sector of the "PRE-INs" is likely to be affected as follows:
•
exporters to the euro, zone will have to adapt to the euro-induced lower
price environment, while importers will benefit from it;
• both exporters and importers will be less
able to impose their own currency in price listings, invoicing and payment. This increases
their exchange risk exposure;
• dual pricing and payment is likely to
develop in the retail sector, starting in tourist centres, and expanding when euro coins
and notes are introduced in the "INs".
The "domestic" use of the euro - i.e. its use between residents of the
"PRE-INs" - will also develop as local multinationals may decide on an early
changeover to the euro. A recent survey found that a number of big U.K. exporters will
encourage their U.K. suppliers to use the euro.
The
development of the euro in the "PRE-INs" is facilitated by the accommodative
stance of the financial sector and of the National Authorities - especially so in the UK
where the financial sector has adapted its payment and settlements systems so as to enable
the City of London to participate in the global euro interbank, foreign exchange and bond
markets on an equal footing with their competitors in the euro zone proper.
For the time being, banks in the "PRE-INs" are more
particularly interested in providing euro services to their corporate clients. Of course,
accounts in euro are also available to private customers as they are in any other foreign
currency. But their number has remained small so far and the use of the euro by private
individuals is likely to remain limited given the exchange risk. This could change if/when
the decision is taken to join EMU.
The countries of Central and Eastern Europe are nearest to the euro
zone. Many of them are candidates - or aspiring candidates - for accession to the Eu. In
this perspective, Hungary and Poland plan to peg their currency to the euro possibly
before the end of the year. Currency-board countries like Bulgaria and Estonia will
replace the DEM by the euro as their anchor currency and Lithuania's exchange rate peg
combines dollar and euro on a 50/50 basis.
As to the Mediterranean countries - inter
alia Egypt, Turkey, Israel, Lebanon, Tunisia, Morocco, Jordan and Algeria - the bigger
part of their trade is with the EU but, with rare exceptions, such as Tunisia and Morocco,
trade invoicing is mainly in US dollars. It is also the case for their external debt and
their foreign exchange reserves. This is likely to change for many of them. It has done so
already for the African countries of the French Franc zone which are now linked to the
euro.
Latin America and Asia, given their close links with the dollar and,
for the latter also with the Yen, represent a more difficult challenge for the euro.
However, as the globalisation of the industrial and financial sectors progresses
world-wide, a diversification movement in favour of the euro can be expected to happen in
those regions as well.
