View from the British Touchline as Kick-Off Draws Nearer for Euro X1
Byline: SUSIE PINE-COFFIN
NEXT week 11 European countries will adopt a single currency. Britain will remain outside the monetary union because many business leaders and top economists warn of dire consequences for our economy if we join. The countries that adopt the euro are likely to enjoy low interest rates of about 3 pc initially. But, against this, Europe has the right to set taxes, which could mean paying more income tax and having VAT imposed on essentials such as children's clothes and books. Money Mail looks at how the single currency across the Channel will affect you.
ONE euro is expected to be worth about 70p when it is launched on January 1. But you will not be able to put euro notes and coins into your pocket until January 2002 because not enough of them have been made.
You will be able to get a euro mortgage, euro credit cards, smart cards, bank accounts and cheque books. You will also be able to wire money, invest and shop in euros.
Eleven countries are giving up their national currencies to replace them with the euro. They are Austria, Belgium, Finland, France, Germany, Holland, Ireland, Italy, Luxembourg, Portugal and Spain.
From January 1, existing currencies will be fixed against the euro and their interest rates will be set by the European Central Bank.
Meanwhile, Britain, Denmark and Sweden can watch from the sidelines.
HIGH Street banks are scrambling to offer euro banking facilities from next year. But because of the inherent exchange rate risk of converting sterling into euros, do not rush out to open a euro account.
Lloyds TSB is offering euro current accounts from January. It will charge a maintenance fee of [pounds sterling]5 per month on the account and [pounds sterling]5 to process each cheque.
Midland launches a current account with no maintenance charges until 2000, thereafter it will YOU could borrow your mortgage money in euros.
With lower interest rates expected in the euro-zone, this idea may look attractive on the surface. But be warned. The amount you owe could rise dramatically if the pound falls against the euro. Abbey National, charge [pounds sterling]2.50 per month. It will charge 60p to process a cheque and 35p for automated transfers.
Barclays will have euro products but a spokesman says: 'They will be of benefit only to customers who say own a house in France or are going to study in one of the euro-zone countries.' Citibank launches a euro current account in January.
SHOPPING TRAVEL PENSIONS SAVINGS IT COULD become more expensive for us to change money when buying euro-zone currencies.
Money changers will be forbidden to set different buying and selling prices.
At the moment they make about 6 pc from a mixture of commission and the buying/selling spread. So for every [pounds sterling]100 of currency we buy we pay [pounds sterling]106.
From next year, money changers within the euro-zone are likely to adopt a flat commission fee of 4 pc.
However, sterling will still float against the euro and the money changers will still be able to set separate buying and selling prices.
Some people fear that they may try to increase their overall profit when changing sterling to 8-10 pc, meaning that it could cost as much as [pounds sterling]110 to buy [pounds sterling]100 worth of euros.
Credit and debit cards are a good alternative.
You may also consider euro travellers' cheques, though these will still be subject to commission charges of around 2 pc, plus the difference between the buying and selling price.
UK law prevents investors receiving tax relief on non-British pension schemes.
However, pension expert Robin Ellison, a partner with the law firm Eversheds, is challenging this situation with a test case in the European Court.
Although Britain probably has the best range of pension products in Europe, the onerous regulations and complicated tax laws make them more expensive to administer than some of those on offer in Europe. …