Are You EURO READY?

• Author: Parker, Mike
• Position: CODA Financials chief operating officer Mike Parker on North American companies operating in the Euro zone

If you have operations in the euro zone or are doing business with euro countries, failure to become euro-compliant will cause problems throughout your operations.

The euro was adopted in 1999 by 12 out of 15 European nations to be the single currency of the European Monetary Union. On Jan. 1, 2002 -- when these nations start conducting all business transactions in euros -- legacy currencies such as the French franc and German mark will disappear completely. Concerns have emerged that as the date approaches, many North American companies will discover that they cannot comply with demands for doing business and paying taxes in euros. This could have a serious impact, even effectively shutting down their European operations.

FE asked Mike Parker, the chief operating officer of CODA Financials, to discuss what companies can still do to avoid interruptions and potential business losses.

Why should United States' companies be concerned about the euro?

Parker: The stakes for U.S. companies -- especially those with European operations -- are huge. Right now, the U.S. does about $1 trillion worth of trade annually with the countries of the European Monetary Union (E.M.U). That's twice as much as is traded with Canada, and three times as much as with Japan. Of the 15 countries in the E.M.U., 12 are adopting the euro; Denmark, Sweden and the United Kingdom are not. The euro will make it easier for U.S. companies to sell and source products and to raise capital in Europe, but only if they are fully prepared for dealing in euros, which most aren't.

Why are there problems now, three years after the adoption in 1999?

Parker: After the euro was adopted, countries faced the enormous logistics problem of eliminating all their coins and bills and replacing them with the new euro coins and bills. So, although the euro was legally adopted as their currency and they began using it for many business transactions, they held off using it for most retail transactions. To prepare for the full conversion in 2002, the euro countries plan to mint some 50 billion coins and print some 14 billion notes.

What's the worst-case scenario for a U.S. company doing business in Europe if it isn't "euro ready" by Jan. 1, 2002, and how likely is it?

Parker: The worst case is that the company won't he recognized as a going business, Companies with operations in the euro zone will have to do their bookkeeping in euros as it will be virtually impossible -- and illegal -- to do...