Your Bank Account

Most people will maintain their accounts in pounds, but the main banks and building societies will present account information on customer statements in both pounds and euros. The different institutions are approaching this in different ways, but all will at least provide final account balances in both currencies. Any euro payments into customer accounts will be converted into pounds free of charge. Most big institutions will offer the option of operating euro bank accounts, but generally this will only be of interest to businesses over the next year or two.

Changing Currency

The banks and building societies have all published new charges for changing euro zone currencies and will publish them again in newspaper advertisements next Monday. It will cost less to change pounds for other euro zone currencies such as French francs and German marks than it does at the moment. This is because the financial institutions will no longer be able to charge a different rate for buying and selling currencies. However the banks have moved to safeguard some of their profits by increasing the commission they charge on these transactions.

The cost of changing pounds against non-euro currencies such as sterling and the US dollar will remain the same.

Shopping

Many of the big supermarkets are already providing notional euro translations on grocery bills and will provide real conversions from next week. However with no euro notes and coins, pounds will remain the main means of exchange, except for those who choose to open euro bank accounts and get euro cheque books. One early advantage for consumers will be that it will become much easier to compare prices across Europe. This will, over time, lead to new competition in many areas as consumers gradually start to look at whether better value is available elsewhere in Europe for major purchases such as mortgages, life assurance, or even cars.

Cashless Transactions

Consumers will have the option of opening euro bank accounts and drawing euro cheques. Euro credit cards may also become available in time. However such instruments will be of little immediate benefit. Because bank clearing systems are not yet integrated across Europe, a cheque drawn on an Irish bank whether in pounds or euros will remain a very inconvenient form of payment to anyone outside the state. Likewise, pound credit cards are widely acceptable internationally and there will be little immediate benefit in changing to euros. It will still remain the decision of the local merchant what to accept.

Investment

Investors will be among of the first to feel the impact of the euro. From next Monday, all share prices on the Stock Exchange will be quoted in euros, although stockbrokers will continue to accept payment in pounds. It will also become much more attractive to invest in other euro zone states, as the exchange rate risk of doing so will disappear.

A number of financial institutions are already marketing euro funds, investing funds on behalf of the public across the euro-zone.

Your Mortgage

We have already seen a big fall in the cost of borrowing, as Irish interest rates moved down to the level in the core EU economies. The final round of these reductions will be passed on to borrowers early in the New Year. All the signs are that interest rates will remain low throughout next year. Although significant further reductions are unlikely, the downward trend in interest rates across Europe and the increased competition on the Irish market will keep downward pressure on borrowing rates over the coming months. It will probably not be too long before some borrowers are offered mortgage rates of under 5 per cent. The other impact of the euro-zone will be more attractive pricing and greater availability of longer-term fixed rate mortgages. This is because the financial institutions will be able to raise long-term finance much more readily in the big euro zone financial market.

Your Savings

What is good news for borrowers is bad for savers. Returns have already dropped substantially over the past year and are unlikely to improve in the short-term. If the euro zone does develop as a low inflation, low interest rate area, then savings' rates could remain low in the long-term. This will increasingly push savers to look towards other products, such as those linked to equity markets.

The Changeover

Over the next three years, the use of euros will become more and more commonplace. Increasingly we will all be exposed to dual pricing items priced in both euros and pounds. These will include items such as electricity, gas and telephone bills, lottery tickets, public sector pay slips and a range of other products. The momentum of dual pricing will grow in the run-up to the introduction of euro notes and coins on January 1st, 2002. When the final changeover is made, the financial institutions will automatically convert all accounts from pounds to euros.

January 2002

In three years time, euro notes and coins will finally move into circulation. They will circulate alongside pound notes and coins for a maximum of six months - the final length of the dual circulation period has still to be decided, but it will probably be a good deal less than this maximum. By the end of June 2002, at the latest, pound notes and coins will disappear and the changeover will be complete. This will prove a big challenge for retailers, who will have to run two tills during the final changeover period.