The euro has come into being after a long and difficult gestation. It was conceived as being the ultimate and logical conclusion of the Single European Market. It was criticised for being politically driven, the forerunner of a European federal state. Moreover, it was seen as another example of eurocentricity gone mad which would further damage Europe's peripheral areas, including Ireland. On the other side of the debate, it was welcomed by the trading sector as providing certainty about the value of foreign receivables, bringing lower interest rates and facilitating a pan-European approach to marketing.

Very importantly, it would also provide lower transaction costs. The banks are now arguing that exchange rate risk was only one part of the costs associated with changing currencies, as affirmed by the Secretary General of the European Banking Federation last week, and that administration, transport and security costs still remain. This is a strange claim, given that the euro as a physical currency does not yet exist.

The European Commission is clearly of the view that Europe's banks may have "an understanding" not to compete by fixing charges relating to euro transactions. It authorised a series of "dawn raids" on banks by commission inspectors seeking evidence of collusion.

What is the situation in Ireland? The following are the findings of a survey carried out by the Irish Exporters Association.

First, as the banks themselves have pointed out, the costs of doing business in currencies within the euro zone are now less than they were prior to January 1st. This is to be welcomed. More to the point, however, is the surprising discovery that bank operational charges for handling euro transactions are higher than those for transactions with non-EMU participating countries - the UK, USA - when foreign exchange risk is factored out.

Euro drafts received from European buyers cost more to lodge. A draft on a European bank drawn in euros will incur handling charges of up to £100, whereas the handling costs of drafts other than euro range from a minimum of 25p to a maximum of £5. Charges relating to electronic transfers in euros can be twice as high as those for sterling after a relatively low threshold is reached.

One significant piece of advice for exporters receiving euro bank drafts from their importer in Europe is that these should be drawn on an Irish, rather than a European, bank. Thus, they avoid paying charges when lodging them to their account in Ireland and eliminate the delay in clearing the draft.

Another major source of dissatisfaction is the delay in clearing drafts and cheques in euros drawn on a European bank. This can range from six to thirty days and generally exceeds the time taken to clear sterling drafts. It appears that cheques in Europe are essentially used for domestic payments. The lack of cross border linkages and common standards between Europe's domestic cheque clearing systems, unlike those that operate in Ireland and the UK, is depriving traders of a major benefit - a quick clearance of cheques.

The Commission is concerned that the euro is not being taken up as quickly as it might and one inference is that there is a market failure caused by artificial pricing on the part of the banks. The exporting sector is taking the view that the euro represents opportunities to develop European markets but that the banking sector is not passing on the full benefits in terms of transaction costs. The European Commission has been taking a tough stance on the issue and has given notice that March 31st is the deadline for additional information to be provided by the banks on the scale and structures of their charges.

The action by the Director of Consumer Affairs has already caused the banks in Ireland to revise their charges. There is still some distance to go before the euro realises its full potential.

Colum MacDonnell is chief executive of the Irish Exporters Association