Category Archives: Practical aspects of introducing the Euro

The euro provides numerous advantages for citizens: a single currency for euro zone countries, the same costs for both national and cross-frontier bank transfers, and a stable business environment. The process leading to the single currency started well before euro notes and coins were introduced in the first Member States in January 2002.

Information and communication strategy on the euro and EMU

Information and communication strategy on the euro and EMU

Outline of the Community (European Union) legislation about Information and communication strategy on the euro and EMU

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Economic and monetary affairs > Practical aspects of introducing the euro

Information and communication strategy on the euro and EMU

Document or Iniciative

Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on the implementation of an information and communication strategy on the euro and the Economic and Monetary Union [COM(2004) 552 final – not published in the Official Journal].

Summary

Long before the introduction of the euro as the single currency on 1 January 2002, the Commission was aware of the importance of an information strategy on the euro. This communication outlines the strategy to be implemented two years after the introduction of the euro, in particular, with a view to:

  • the enlargement of the European Union on 1 May 2004 which will expand the euro area;
  • the need to consolidate the single currency by increasing public acceptance;
  • greater positive perception by third countries of the EU and its economic role.

Information and communication with European citizens

The information strategy on the euro is part of the “Information and Communication Strategy of the European Union” [COM (2002)350 – not published in the Official Journal] and its implementation [COM (2004) 196 – not published in the Official Journal. It is part the overall approach to Member States’ communication policy and it must add a tangible European dimension to the democratic debate in the Member States.

The aim is to increase public knowledge within and outside the EU on the working of EMU and to contribute to a smooth changeover in the Member States which adopt the euro. The Commission feels it will achieve its objectives by:

  • creating public awareness and understanding of the requirements for EMU to function, for example sound public finance and coordination of economic policies;
  • providing neutral and factual information that will enhance the citizens’ understanding of the euro;
  • contributing to a smooth changeover in the Member States which adopt the euro;
  • providing the media, economic agents and policy-makers in third countries with the information they need concerning EMU.

Role of the key players: Member States and European institutions

The Commission bases its communication strategy on decentralised activities involving the sources of information closest to the public. The information activities must reflect the culture, language and concerns of the citizens. The Commission feels that it is mainly for the Member States to define and carry out the activities because they are the best placed to create information tools and products and to encourage the regional and local authorities, public interest services and civil society networks to relay information.

The Commission’s role will consist of:

  • ensuring consistency of the messages;
  • stimulating and coordinating the communication activities of the Member States and civil society organisations;
  • proposing a range of information tools and implementing specific actions;
  • organising and supporting transnational communication initiatives and information activities in third countries;
  • managing its own centralised activities such as conferences, information products and public relations, regular assessments, etc…

The Commission, Member States and the European Central Bank (ECB) will coordinate their communication activities. Partnerships between the Commission and Member States, which are allocated a considerable part of the Community budget, can be concluded in one of three forms:

  • Strategic partnerships: the Member State and the Commission agree on the details of a communication programme and the division of tasks between the two partners. The two partners each pay the cost of the activities they undertake and thus, there is no direct financial link between the Commission and the Member State;
  • Management partnerships: the Member State manages the whole campaign on behalf of the Commission in accordance with the EU’s Financial Regulation;
  • Ad hoc partnerships: the Commission contributes to expenses incurred by the Member State.

Interinstitutional cooperation between the Commission, the Council and the Parliament will be organised by an interinstitutional group on information.

In order to facilitate the setting up of partnerships with the new Member States, the Commission makes provision in this Communication for dividing the latter into groups according to progress made towards EMU as assessed on the basis of the convergence reports. The adoption of the single currency by a country following accession implies that detailed conditions will be met, and the Commission will adapt its communication strategy to the timetable for the future introduction of the euro.

The European institutions and the new Member States must agree on objectives, communication strategies, target groups, messages, media, etc. as well as financial aspects and monitoring. The Commission makes provision for twinning programmes between the old and new Member States, the use of information relays, the organisation of conferences and seminars etc.

Meeting the public’s needs

Since 1 January 2002, the Commission has organised opinion polls on the introduction of euro coins and notes. The following conclusions emerged:

  • the euro area: four years after the introduction of euro coins and notes, European citizens are now largely at ease with their new currency. However, the Commission feels that additional efforts must be made to explain the architecture of EMU, the reasons why certain economic policies are necessary and the benefits deriving from the single currency;
  • Denmark and the United Kingdom: the two countries enjoy an “opt-out”. In these countries, the Commission bases its communication policy on the fact that it is for the national governments to decide whether or not to apply to adopt the euro;
  • Sweden: following the no vote in the referendum on the euro in September 2003, the Swedish Government is not planning any specific information activities. The Commission’s Representation in Sweden will provide brochures and practical information.
  • in the new Member States: the question of participation in the euro and EMU is directly linked to accession, and seen as a consequence. The Commission encourages the implementation of a communication strategy similar to the one adopted previously for the introduction of the euro. During the first phase, the changeover to the euro is placed in the broader context of the history of European integration. In the second phase, governments, banks and large undertakings will be encouraged to start preparing themselves quickly for the introduction of the single currency. In the last phase, information campaigns will become more intensive and larger-scale. They will target the general public and be adapted to the specific needs of different population groups e.g. the elderly, young people, the disabled, the economically disadvantaged, etc. Opinion polls show that citizens have mixed feelings about the introduction of the euro in their countries. However, respondents are aware of the practical advantages of the euro but they wish to be more fully informed on the matter. Extensive information campaigns should overcome hesitations in connection with the euro.
  • Non-member countries: a survey [PDF ] conducted by the Commission via its delegations shows a growing awareness of the euro. The Commission is therefore basing its communication policy on the stability of EMU and the benefits of the euro and the use of the euro internationally, etc.

The Commission is aware that the general public needs up-to-date information. The communication strategy is both a multimedia and multidisciplinary instrument: publications on paper, leaflets, Internet, CD-ROM, local information tools (info-bus, exhibitions, information evenings etc.) conferences, seminars, television, radio, etc.

 

Five years of Euro banknotes and coins

Five years of Euro banknotes and coins

Outline of the Community (European Union) legislation about Five years of Euro banknotes and coins

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Economic and monetary affairs > Practical aspects of introducing the euro

Five years of Euro banknotes and coins

Document or Iniciative

Communication of 28 December 2006 from the Commission to the Council, the European Parliament, the European Economic and Social Committee, the Committee of the Regions and the European Central Bank: Five years of euro banknotes and coins [COM(2006) 862 final – Not published in the Official Journal].

Summary

The European Commission reviews the introduction on 1 January 2002 of euro banknotes and coins into the daily life of citizens.

Informing citizens about the euro remains crucial

Surveys carried out among citizens show a lack of general information about the advantages of the euro, with insufficient information and even misconceptions remaining very widespread. The European Commission believes that renewed efforts are required to inform the general public about the euro, as the following still remain:

  • lack of awareness of some of the euro’s benefits: only a quarter (23 %) of euro-area citizens know that no extra charges apply when withdrawing money with a bank card in another euro-area country, or when paying with a bank card (27 %) or executing a bank transfer (16 %) within the euro area;
  • firmly-anchored misconceptions: a large majority of respondents in the euro area believe that the euro contributed to an increase in prices. In the ten Member States which joined the European Union in May 2004, 45 % of respondents believe that the euro will lead to higher inflation. This stands at odds with the ECB’s records, which show that annual inflation in the euro area has remained below 2.4 % since the introduction of the euro in 1999;
  • dual display of prices: for day-to-day purchases, a clear majority of citizens (57 %) calculate in euros, while one in five still count in their former national currency. However, for high-value purchases, such as a car or a house, a large proportion of citizens (40 %) calculate using their former national currency. The Commission repeats its recommendation of 2002 that any remaining dual display practice in the euro area – except in Slovenia – should be discontinued as soon as possible. Even if dual price display helps consumers in the early stages of the changeover to the euro, the practice becomes counterproductive if it continues for too long.

Continuous improvement of euro banknotes and coins

Euro banknotes and coins are the subject of continuous improvement in terms of their quality, reliability and user-friendliness. The European Central Bank started preparing the next series of banknotes shortly after the euro was brought into circulation, in order to ensure that the most up-to-date security features were used.

The number of counterfeit banknotes and coins that have been detected is very low compared with the numbers in circulation, and the European Commission emphasises that the number of counterfeit US-dollar banknotes is much higher.

Ensuring the coherence of the euro’s visual aspects

Euro coins have one common side, the same for all Member States in the euro area, and one national side, which differs from one Member State to another.

National side. In 2003 the Council of the European Union imposed a moratorium until the end of 2008 on changes to the national side of euro coins intended for circulation. Exceptions to this are made when a Head of State represented on a coin changes or when commemorative 2-euro coins are issued to celebrate particular events, subject to certain constraints concerning the quantity issued and how often this is done. Commemorative coins are intended for circulation, but have a different national side. To take an example, all Member States in the euro area agreed to issue a 2-euro commemorative coin to celebrate the 50th anniversary of the signing of the Treaty of Rome on 25 March 2007.

Before the moratorium expires at the end of 2008, the Council must make a new decision as to the national sides of euro circulation coins. In 2007 the European Commission will carry out a survey among euro-area citizens in order to collect people’s opinions and preferences in this respect.

As a final point, Member States are authorised to issue collectable euro coins, for example coins minted in precious metals. These coins are only legal tender in the issuing country and are not intended for circulation.

Common side. The common side of euro coins bears a map of Europe depicting the Member States of the former EU-15. Enlargement on 1 May 2004 entailed 10 new Member States joining the EU. The Council therefore decided on 7 June 2005 [PDF ] [FR] that the common sides of the 10, 20 and 50 cent coins and the 1 and 2 euro coins should be changed, so that in the future they depict all EU Member States. The smallest denominations of 1, 2 and 5 cents are not affected by this change, as they show Europe’s position on a globe.

Slovenia was the first country to introduce coins with the new common side on 1 January 2007. The twelve euro-area countries which introduced euro banknotes and coins in January 2002 are currently preparing production of the new coins. Most of them are expected to switch to the current common-side design in 2007, with a few others joining them in 2008 at the latest.

Production and storage of banknotes and coins

Euro banknote production is organised on a decentralised basis with pooling, this means that the European Central Bank (ECB) allocates banknote production on an annual basis to the euro-area national central banks. Each denomination is thus produced by a limited number of printing works and each bank is responsible for providing only one or a few denominations. This increases efficiency by achieving economies of scale.

Logistical stocks and a common strategic stock of euro banknotes, the Eurosystem Strategic Stock, ensure the continuity of banknote supply. These reserves may, for example, be used to provide the initial quantity of euro banknotes necessary for the changeover in Member States joining the euro area, as was the case in Slovenia on 1 January 2007.

The ECB aims to establish a single Eurosystem tendering procedure for the procurement of banknotes, starting at the latest in 2012.

Euro coin production falls within the competence of Member States. Decisions are therefore taken on a decentralised basis, reducing the efficiency which is gained by pooling, in particular with respect to the coordination of production and/or storage of coins. For example, one country may decide to produce extra coins while another has excess stocks of the same denomination.

The Commission suggests that possible improvements should be considered, especially concerning the 1, 2 and 5 cent coins, which represent approximately 80 % of new coin production. These coins generate little monetary income and the production costs and related expenditure (transport, packaging, etc.) are relatively high compared with their face value. Since the different national sides to some extent prevent the exchange and/or transfer of coin stocks between countries, some Member States may be prepared to envisage the possibility of using low denomination coins with a ‘standard’ national side.

Finally, the European Commission suggests that the possibility of creating a specific EU budget line for euro coinage projects and activities of common interest should be considered.

Euro used in scriptural form (1999), introduction of coins and banknotes (2002)

On 1 January 1999, the euro became the single currency of eleven Member States, followed by Greece on 1 January 2001. Between 1999 and 2001, the euro could only be used in scriptural form, for example for cheques and bank transfers. Few initially made use of this possibility and in day-to-day life the introduction of the euro as the single currency passed relatively unnoticed, as consumers in the twelve countries concerned continued to use national banknotes and coins to carry out transactions. Euro coins and banknotes were introduced into circulation in twelve Member States on 1 January 2002. Since 1 January 2007, Slovenia has been a part of the euro area.

Production and issuing of euro banknotes are the exclusive responsibility of the European Central Bank. The Member States are responsible for the production and minting of euro coins. Both euro banknotes and coins are put into circulation by the national central banks in the euro area.

 

Euro banknotes: denominations, specifications, reproduction, exchange and withdrawal

Euro banknotes: denominations, specifications, reproduction, exchange and withdrawal

Outline of the Community (European Union) legislation about Euro banknotes: denominations, specifications, reproduction, exchange and withdrawal

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Economic and monetary affairs > Practical aspects of introducing the euro

Euro banknotes: denominations, specifications, reproduction, exchange and withdrawal

Document or Iniciative

Decision of the European Central Bank of 20 March 2003 on the denominations, specifications, reproduction, exchange and withdrawal of euro banknotes (ECB/2003/4).

Summary

In its Decision ECB/2003/4, the European Central Bank (ECB) establishes the rules on the technical specifications of euro banknotes. It also specifies the cases in which the reproduction of banknotes is authorised, and also the arrangements under which damaged banknotes can be exchanged.

This Decision only concerns euro banknotes. The rules on the technical specifications of euro coins are governed by Regulation (EC) No 975/98.

Denominations and technical characteristics of euro banknotes

The first series of euro banknotes comprises seven denominations: 5, 10, 20, 50, 100, 200 and 500 euros.

The technical characteristics of these banknotes are as follows:

5 euros

  • dimensions (mm): 120 x 62
  • colour: grey
  • design: classical

10 euros

  • dimensions (mm): 127 x 67
  • colour: red
  • design: romanesque

20 euros

  • dimensions (mm): 133 x 72
  • colour: blue
  • design: gothic

50 euros

  • dimensions (mm): 140 x 77
  • colour: orange
  • design: renaissance

100 euros

  • dimensions (mm): 147 x 82
  • colour: green
  • design: baroque and rococo

200 euros

  • dimensions (mm): 153 x 82
  • colour: yellow-brown
  • design: “iron and glass” architecture

500 euros

  • dimensions (mm): 160 x 82
  • colour: purple
  • design: modern 20th century architecture

The motifs on the reverse side of the banknotes are: the symbol of the EU, the name of the currency in the Roman and Greek alphabets and the initials of the ECB in their official language variants.

Reproduction of euro banknotes without risk of confusion to the public

The Decision authorises all or part of banknotes to be reproduced in certain cases, provided that there is no risk of the public mistaking the reproductions for genuine euro banknotes. The following are deemed lawful:

  • one-sided reproductions whose size is at least 125 % or at most 75 % of that of a genuine banknote;
  • two-sided reproductions whose size is at least 200 % or at most 50 % of that of a genuine banknote;
  • reproductions made of a material clearly different from the paper used for banknotes.

Reproductions which the public might mistake for genuine euro banknotes are prohibited. The Decision lays down strict criteria for intangible reproductions made available on websites, because paper printouts of those reproductions might be mistaken for genuine banknotes.

Exchange of mutilated or damaged euro banknotes

The national central banks (NCBs) exchange mutilated or damaged euro banknotes when more than half of the banknote is presented, or when half or less of the banknote is presented if the applicant can prove that the missing part has been destroyed. The exchange of mutilated or damaged banknotes is also subject to the following conditions:

  • where doubt exists as to the applicant’s legal title to the banknotes or as to their authenticity, the applicant must provide identification;
  • when ink-stained, contaminated or impregnated banknotes are presented, the applicant must provide a written explanation as to the kind of stain, contamination or impregnation;
  • when banknotes have been discoloured by an anti-theft device, they must be presented by a professional banknote-handling entity such as a credit institution or a bureau de change (Article 6(1) of Regulation (EC) No 1338/2001) and the entity must provide a written statement concerning the nature and cause of the invalidation;
  • when banknotes have been mutilated or damaged in bulk by an anti-theft device, they must be presented in sets of 100 euro banknotes, provided that the amount of banknotes presented is sufficient to form such sets.

Where NCBs know or have sufficient reason to believe that the euro banknotes have been intentionally mutilated or damaged, they must refuse to exchange the banknotes and must withhold them in order to avoid their return into circulation and prevent the applicant from presenting them to another NCB for exchange. The same applies where NCBs know or have sufficient reason to believe that a criminal offence has been committed. In that case, NCBs must present the banknotes in question to the competent authorities to initiate a criminal investigation (or to support an ongoing criminal investigation). Unless otherwise decided by the competent authorities, the banknotes will be returned to the applicant at the end of the investigation and can then be exchanged.

However, NCBs may exchange the banknotes if they consider that the applicants are bona fide or if the applicants can prove that they are bona fide. Banknotes which are mutilated or damaged to a minor degree, e.g. by having annotations or numbers placed on them will not be considered intentionally mutilated or damaged.

Withdrawal of euro banknotes

The Decision stipulates that the withdrawal of a euro banknote type or series will be regulated by a decision of the Governing Council published for general information in the Official Journal of the European Union and other media.

Replacement of previous Decisions

Decision ECB/2003/4 repeals the previous Decisions ECB/2001/7 and ECB/2001/14. References to Decisions ECB/1998/6, ECB/1999/2 and ECB/2001/14 are to be construed as references to Decision ECB/2003/4.

References

Act Entry into force Deadline for transposition in the Member States Official Journal

Decision ECB/2003/4

26.3.2003

OJ L 78, 25.3.2003

Related Acts

Guideline ECB/2003/5 of the European Central Bank of 20 March 2003 on the enforcement of measures to counter non-compliant reproductions of euro banknotes and on the exchange and withdrawal of euro banknotes [Official Journal L 78, 25.3.2003].

The Guideline specifies the measures applicable to non-compliant reproductions of euro banknotes and to the exchange and withdrawal of banknotes.

Decision of the European Central Bank of 16 September 2010 on the authenticity and fitness checking and recirculation of euro banknotes ECB/2010/14 [Official Journal L 267 of 9.10.2010].

This Decision species the rules which must be complied with by the professionals responsible for checking the quality of euro banknotes and their circulation. These rules are set by the European Central Bank. In particular, they relate to the machines to be used for the authentication and circulation of banknotes. Furthermore, only banknotes in a good condition may be placed in circulation. Suspect counterfeit banknotes must be returned to the national competent authorities.

Common guidelines: the national sides of euro coins

Common guidelines: the national sides of euro coins

Outline of the Community (European Union) legislation about Common guidelines: the national sides of euro coins

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Economic and monetary affairs > Practical aspects of introducing the euro

Common guidelines: the national sides of euro coins

As the new Member States gradually introduce the euro, the number of national sides of euro circulation coins will increase. For the national sides of both normal coins and commemorative coins, this Recommendation lays down common guidelines to strengthen the overall coherence of the euro coinage system.

Document or Iniciative

Commission Recommendation 2005/491/EC of 3 June 2005 on common guidelines for the national sides of euro circulation coins [Official Journal L 186 of 18.7.2005].

Summary

In this Recommendation, the European Commission lays down common guidelines for the national sides of euro coins. The Ecofin Council of 7 June 2005 [PDF ] welcomed these common guidelines, which were drawn up in close cooperation with the Member States.

Indicating the issuing Member State and specifying the information appearing on the national side

The national sides of all denominations of euro circulation coins must indicate the Member State issuing the coin. This may be done by indicating the name of the Member State or by an abbreviation of it.

Also, the national side should not repeat any indication of the denomination, or any parts thereof. Nor should the name of the single currency or of its subdivision appear on the national side, unless such indication stems from the use of a different alphabet.

On the other hand, the edge lettering of the two-euro coin may bear an indication of the denomination, but only if the figure “2” and/or the term “euro” is used.

Informing the other Member States about new national sides

Under the Recommendation, before the design of a new national side of euro coins is formally approved, the Member States are to inform each other of the design, including the edge letterings.

New designs are to be forwarded by the issuing Member State to the European Commission. The Commission will then inform the other Member States without delay via the relevant subcommittee of the Economic and Financial Committee. All relevant information on new national coin designs will be published in the Official Journal of the European Union.

Applying the Recommendation to normal and commemorative coins

The common guidelines apply to national sides and edge letterings of euro circulation coins. They apply to both normal and commemorative euro coins issued after the adoption of this Recommendation (on 3 June 2005).

The Recommendation is addressed to all the Member States participating in the euro as referred to in Article 1 of Regulation (EC) No 974/98.

The common guidelines also apply to the monetary agreements which the Community has signed with the Principality of Monaco, the Republic of San Marino and the Vatican City State. Under the agreements, those countries are allowed to issue certain quantities of euro coins for circulation.

Extending the euro zone

Following the enlargements of the European Union in May 2004 and in January 2007 (to 27 Member States), several of the new Member States have started to prepare themselves for adoption of the euro. These preparations include the selection of the national sides of their future euro coins.

 

The successful introduction of the euro in Slovenia

The successful introduction of the euro in Slovenia

Outline of the Community (European Union) legislation about The successful introduction of the euro in Slovenia

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Economic and monetary affairs > Practical aspects of introducing the euro

The successful introduction of the euro in Slovenia

Document or Iniciative

Communication of 4 May 2007 from the Commission to the Council, the European Parliament, the European Economic and Social Committee, the Committee of the Regions and the European Central Bank – The introduction of the euro in Slovenia [COM(2007) 233 final – not published in the Official Journal].

Summary

Following the Council Decision of 11 July 2006, Slovenia introduced the single currency on 1 January 2007. In this Communication, the Commission outlines the main lessons to be learnt by countries adopting the euro in future.

Ensuring a quick changeover: the “big bang” scenario

Slovenia’s “Masterplan” for the euro changeover is based on the so-called “big-bang” scenario, whereby euro banknotes and coins are introduced on the same day as the euro is adopted (1 January 2007 in the case of Slovenia). By contrast, the countries which adopted the euro earlier (eleven countries in 1999, and Greece in 2001) did not introduce banknotes and coins until 1 January 2002. Between 1999 and 2001, the euro could only be used as bank money in these countries (for cheques or bank transfers, for example).

The European Commission favours the “big-bang” approach for new countries joining the euro zone. Given that euro cash has been available since 2002, this approach appears to be the most appealing one because of its simplicity in terms of communication and information.

Both the Slovenian tolar and the euro were in circulation at the same time in the period from 1 January to 14 January 2007. After this period of dual circulation, the euro became the sole legal tender. Those still in possession of tolar banknotes and coins can exchange them for euros at branches of the national central bank.

The backflow of tolar cash started in November and December 2006, and was remarkably fast, especially for tolar banknotes. The return of legacy currency had caused severe bottlenecks during the first-wave transition in 2002.

Supplying banks and retailers with euros

Before the euro changeover date (” Day”), banks and other financial institutions have to be supplied with sufficient quantities of euro banknotes and coins by the central bank, a process called frontloading. In turn, the banks try to ensure that businesses involved in cash-related operations, and retailers in particular, are supplied with euro cash before Day to allow them to give change exclusively in euro, thus avoiding the recycling of legacy currency. As they bring the new euro cash into circulation, banks and retailers at the same time need to cope with the rapid backflow of legacy cash.

The Bank of Slovenia received a total of 94.5 million banknotes with a face value of 2 175 million from the Eurosystem’s logistical stocks. A total of 296.3 million euro coins with a face value of 104 million were supplied by the Mint of Finland. Slovenia does not have its own national mint and selected the Finnish Mint as its coin supplier following a public tender procedure.

The conversion of financial administrative systems

The some 2.3 million bank accounts held by private persons and by businesses, associations and other legal entities were successfully converted into euro.

With regard to the conversion of administrative and financial systems to the euro, the Commission confirms that the “big-bang” scenario is much more demanding than the ” Madrid scenario ” which was applied during the first changeover wave. At the time, public administrations and private businesses benefited from a three-year transitional period extending from 1999 to 2001 (one year in the case of Greece) to convert these systems to the euro. Slovenian administrative bodies and businesses were expected to operate exclusively in tolar up to 31 December 2006 and switch all their systems to the euro as of 1 January 2007. This challenge was met because the administrations and business were able to prepare themselves adequately and in good time. No particular problems were experienced or reported.

Monitoring prices

The dual display of prices started in March 2006 and will continue until mid-2007. The Slovenian Consumers’ Association has been monitoring prices (“PriceWatch”) and has asked consumers to report price rises so that these can be published and possible abuses limited.

In January 2007, the Statistics Office of the Republic of Slovenia (SORS) released its first analysis of the impact of the changeover on prices in December 2006. The impact of unusual price increases in restaurants, bars and coffee shops was estimated to be no more than 0.12 %. The impact on the other expenditure groups was also estimated at 0.12 percentage points. For January 2007, SORS highlighted some other unusual price increases for the same purchases, as well as for recreational and sports services.

Based on the information provided by SORS, Eurostat considers that the likely impact of the changeover on consumer prices during and after the changeover period could be in the order of 0.3 %. The fall in the all-items annual HICP inflation rate in January 2007 to 2.8 %, and the further fall in February 2007 shows that the changeover effects, although noticeable, do not seem to be of such a magnitude as to drive consumer price inflation as measured by the all-items HICP. These observations are very similar to those made during the previous changeover to the euro. Eurostat will update its conclusions concerning the impact of the changeover if necessary, as further information becomes available.

Informing citizens is crucial: perceived inflation and actual price changes

In Slovenia, perceived inflation rose in January and February 2007 despite the fact that prices overall actually decreased during these two months. These observations are very much in line with those made during the first changeover to the euro. In Slovenia’s case, however, there was a slight decrease in perceived prices in March. This decrease may be due to intensified communications efforts by the Slovenian authorities.

If perceived inflation continues to decrease, the situation in Slovenia may be different to the one observed in the euro zone, where perceived inflation continued to climb steeply and consistently for almost a full year after euro banknotes and coins were introduced in 2002. Five years on, this disparity has still not been eliminated entirely.

The Slovenian changeover experience shows once again that perception, expectation and reality with respect to price changes do not necessary go together. It is clear that a change of currency affects people’s value scales and triggers a gradual mental adjustment process. Public perception of prices remains a key concern for future changeovers.

 

EMU@10: successes and challenges after 10 years of Economic and Monetary Union

EMU@10: successes and challenges after 10 years of Economic and Monetary Union

Outline of the Community (European Union) legislation about EMU@10: successes and challenges after 10 years of Economic and Monetary Union

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Economic and monetary affairs > Practical aspects of introducing the euro

EMU@10: successes and challenges after 10 years of Economic and Monetary Union

Document or Iniciative

Communication from the Commission of 7 May 2008 to the European Parliament, the Council, the European Economic and Social Committee, the Committee of the Regions and the European Central Bank : EMU@10 – successes and challenges after 10 years of Economic and Monetary Union [COM(2008) 238 final – Non published in the Official Journal].

Synthesis

At the end of its first decade, the euro is a success story and represents the most tangible result of European integration. Low and stable inflation and interest rates over the past ten years have boosted investment in the euro area. Fiscal consolidation has continued and job creation has been at record levels. However, output and productivity growth have been lower than in other developed economies, and concerns about income distribution have grown. In the future, EMU faces challenges linked to ongoing globalisation, an ageing population, rising food and energy costs and the effects of climate change. .

Ten years of monetary and economic stability and integration

EMU has fostered economic and market integration by removing exchange rate risks and lowering cross-border transaction costs, helping to develop the single market and integrate product markets. Establishing itself as the world’s second currency after the US dollar, the euro is a powerful catalyst for financial market integration. The Single Euro Payments Area (SEPA) will eliminate differences between national and cross-border retail payments.

A record 16 million jobs were created during the first decade of EMU, while unemployment fell to around 7 %, the lowest in more than fifteen years. In addition, EMU has brought significant benefits to European Union Member States engaged in a catch-up process, by providing an environment of macroeconomic stability and low interest rates coupled with the support of the Cohesion Policy and Structural Funds.

A single monetary policy, conducted by the European Central Bank (ECB), combined with national yet coordinated fiscal policies ensures macroeconomic stability. Currency fluctuation and exchange rate realignments within the euro area have become a thing of the past. Furthermore, monetary policy has cemented long-run inflation expectations: inflation averaged around 2 % in the first decade of EMU, falling from 3 % in the 1990s and 8 to 10 % in the 1970s and 1980s. This has contributed to improving the euro area’s resilience against adverse external developments.

The Stability and Growth Pact (SGP) improved budgetary discipline and the euro-area economy has pursued a faster track of economic and financial integration than the rest of the EU. Supporting macroeconomic stability, fiscal consolidation has been impressive over the past years and has culminated in a deficit of only 0.6 % of GDP in 2007 compared to an average of around 4 % in both the 1980s and 1990s.

EMU’s remaining challenges, amplified by new global trends

Although the first decade of EMU has been a positive picture overall, there are still unfulfilled expectations and remaining challenges, such as globalisation, rising food and energy prices and the ageing population. At around 2 % per annum; potential growth remains too low and there are still substantial differences across countries in terms of inflation and labour costs. At the international level, a clear strategy is needed so that the euro area can project a strong voice in international economic fora in an increasingly globalised world. Finally, the public image of the euro does not fully reflect EMU’s successful economic performance. In some countries, citizens believe that prices have increased significantly because of the euro. Indeed, even if overall inflation was only marginally affected at the time of the changeover, occasional abusive price increases in specific sectors and countries have tarnished the image of the single currency.

To address the challenges for the next decade, it is necessary to build on existing macroeconomic stability while raising potential growth and furthering the welfare of euro-area citizens, ensuring a smooth adjustment capacity as EMU expands to take on new members and protecting successfully the interests of the euro area in the global economy. To do this, the Commission has outlined a three-pillar agenda:

  • Domestic: deepening and broadening macroeconomic surveillance and better integrating structural policies into the overall policy co-ordination process within EMU;
  • External: enhancing the euro area’s role in global economic governance by developing common positions on international issues and by consolidating representation, with the ultimate objective of a single seat for the euro area in the relevant international financial institutions and fora;
  • Promoting effective governance of EMU: putting into practice both agendas requires a more effective system of economic governance.

Background

In May 1998, the Council took the decision to move to the third and final phase of Economic and Monetary Union (EMU) and to introduce the single currency, the euro. Used since 1 January 1999 as book money, euro banknotes and coins were introduced on 1 January 2002 in 12 Member States. At present, 17 out of 27 are part of the euro area.

The impact on Community policies, institutions and legislation

The impact on Community policies, institutions and legislation

Outline of the Community (European Union) legislation about The impact on Community policies, institutions and legislation

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These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Economic and monetary affairs > Practical aspects of introducing the euro

The impact on Community policies, institutions and legislation

Document or Iniciative

Commission Communication of 5 November 1997: The impact of the changeover to the euro on Community policies, institutions and legislation [COM (97) 560 final – Not published in the Official Journal].

Summary

EXCHANGE RISK

At the time the communication was drawn up, the budget was cast in ecus but both revenue (resources) and expenditure are wholly or partly realised on the basis of national currency values.

  • On the revenue side, the contributions are paid by the Member States in national currency;
  • On the expenditure side, the appropriations are generally committed and paid in ecus, with the exception of the payment obligations under the Guarantee Section of the EAGGF and the administrative budget.

Operations carried out in national currency result in the Community budget having to bear the exchange risk, since the exchange value in ecus can fluctuate.

With the introduction of the euro, the participating Member States will have their currency in common with the Community budget. This will have the effect of completely removing the exchange risk for operations still carried out in national currency. However, as far as the “pre-in” countries (Denmark, the United Kingdom and Sweden) are concerned, the exchange risk would persist for this type of operation.

AGRICULTURAL POLICY

The agri-monetary regime will be affected in different ways by the introduction of the euro:

  • For the participating countries, it will no longer be necessary to convert amounts (the Community will reimburse in euros any expenditure made in euros by the Member State concerned); however, there remains a difference between the rates used in the agri-monetary regime and the fixed and irrevocable conversion rates. This situation will have to be rectified in a manner still to be determined.
  • For the “pre-in” countries, there will still be a need for a conversion rate, but the system could be adjusted.

Adjustments to the agri-monetary regime will also apply to the fisheries sector.

EUROPEAN ADMINISTRATION

Administrative expenditure represents 3.5% of the total budget (1996 figures), consisting primarily of pensions and salaries, which are paid in national currency (mainly Belgian and Luxembourg francs).

The introduction of the euro will eliminate the exchange risk for the Community budget as regards all salaries and pensions paid to persons resident in participating Member States.

Given the political significance of the remuneration of Community staff, it is proposed that pay slips be expressed in euros and that salaries and pensions be paid in euros in the participating countries as from 1 January 1999.

COMMUNITY LAW

The most immediate consequence of the transition to the euro for Community legislation is that the ecu will be replaced by the euro (at a rate of 1:1) without any action needing to be taken at either Community or national level.

To cater for cases where the common figure in ecus is accompanied by a clause governing conversion to the respective national currencies, the Commission has drawn up certain guidelines in order to ensure consistency in the interpretation of such clauses.

Certain legal clauses need to be dealt with individually, such as those which refer to specific interest rates (e.g. in the context of penalty clauses) that will no longer be available once the euro has been introduced.

As regards agreements with third countries, references to the ecu will automatically be converted to euros without any specific action having to be taken by any party. It would be advisable to run an information campaign for the benefit of the parties concerned in advance of 1 January 1999.

OTHER CONSEQUENCES

From the operational point of view, the transition will affect the following:

  • treasury management and financial management: the treasury department of the Commission will no longer have to purchase huge amounts of ecus on the currency markets and the management of accounts and of foreign currency transactions will be greatly simplified;
  • statistics: some of Eurostat’s statistical time series will be rescaled; new statistical aggregates will be produced for the euro area;
  • informatics: the “Euro/Year 2000” working group is dealing with the relevant issues in this field.

The changeover work to be carried out in the Community institutions will largely take place before 1 January 1999, in contrast to the changeover at national, regional and local level, where the adaptation work necessitated by the changeover will be spread over the entire length of the transitional period, and in a few instances will even be concentrated at the end of this period (1 January 2002).

Preparations for public administrations

Preparations for public administrations

Outline of the Community (European Union) legislation about Preparations for public administrations

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Economic and monetary affairs > Practical aspects of introducing the euro

Preparations for public administrations

Document or Iniciative

Commission working paper of 16 December 1997: Preparations for the changeover of public administrations to the euro [SEC (97) 2384 final – Not published in the Official Journal].

Summary

As regards the practical arrangements for the changeover of national public administrations, the scenario adopted at the Madrid European Council meeting provides that:

“The generalisation of the use of the euro for public sector operations will occur in all participating Member States at the latest when the euro banknotes and coins are fully introduced. The time frame will be laid down in Community legislation and might leave some freedom to individual Member States.”

Given the often considerable structural differences between Member States’ constitutions and legal systems, the Commission has refrained from proposing harmonised changeover measures for national public administrations, except for the two regulations which form the legal framework for the euro.

Under these arrangements, national administrations may offer private economic agents the option of using the euro unit for all their financial flows and communications with the State. In countries which intend to offer this option a provision usually stipulates that, once a company has chosen the euro unit before the end of the transitional period, it cannot revert to the national currency unit.

The preparations so far made for the changeover to the euro can be summarised as follows:

  • ten Member States have published a national changeover plan or, in one case, a comprehensive draft transition law;
  • a majority of Member States intends to give companies, and in many cases individuals, the option at least partially to communicate and to execute financial flows with public administrations either in the national currency unit or in the euro unit from January 1999 onwards;
  • the range of these “euro options” varies from one Member State to the other. They cover areas such as company accounting and reporting, the founding of companies with their capital in the euro unit, the redenomination of an existing company’s capital into the euro unit, or tax and social security declarations and payments;
  • Member States expecting to participate in 1999 intend to continue to operate internally (i.e. budgets and internal accounting) in the national currency unit until the end of the transitional period in December 2001. There is, however, a discernible trend towards the parallel publication of major government data in the euro unit;
  • depending on the individual structures of Member States, coordination with regional and local authorities has become an essential element of national changeover preparations.

The paper also contains a technical fact sheet for each country, giving an overview of the current state of the preparations carried out by public administrations.

Information strategy for the euro

Information strategy for the euro

Outline of the Community (European Union) legislation about Information strategy for the euro

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Economic and monetary affairs > Practical aspects of introducing the euro

Information strategy for the euro

1) Objective

To recall the very high priority that needs to be given to communication and information activities, so as to prepare all citizens for the move to the single currency and to encourage and assist the economic and financial community, both public and private, to prepare and set in train the procedures necessary for the move to the euro.

2) Document or Iniciative

Commission communication of 6 February 1998 on the information strategy for the euro [COM (98) 39 final – Not published in the Official Journal].

3) Summary

The successful introduction of the single currency depends on two main areas:

  • the technical preparations necessary throughout the economy;
  • preparing all citizens to understand, accept and use the euro.

These are the two priority aspects of a communication strategy for the euro.

Much work in the field of communication has already been done by the national and European public authorities and by various socio-economic groups. The following are examples of Community actions:

  • “The euro, one currency for Europe”, an element in the PRINCE programme (information programme for the European citizen);
  • the EURO area on the EUROPA Internet server.

Several Member States have also launched large-scale communication activities involving television and the mass distribution of information materials.

Similarly, the major business federations and many banks have already circulated extremely detailed information booklets on the introduction of the euro to their members and customers.

This first stage in the communication process has enabled three major objectives to be attained:

  • the certainty of the changeover to the single currency and its irreversibility are now acknowledged;
  • all the key players have begun the preparations necessary for the introduction of the euro;
  • the euro now has an image (notes, coins and symbol).

One main lesson can be drawn from this first stage: in order to be fully effective, information activity must use the information multipliers and concentrate on providing practical information at grass-roots level.

The euro communication strategy should now be built around three crucial periods:

  • 2 May 1998: the announcement of the Member States which are qualified to adopt the single currency will constitute a major historic and media event which will create a very heavy demand for information;
  • the 1st January 1999 will have to be used to shift the information effort into a higher gear at a time when the public and everyone involved in economic activity will be showing a great deal of interest and will be highly receptive;
  • an information campaign with major coverage should be planned for 2001, just before euro notes and coins are actually introduced and national currencies withdrawn.

Communication on the euro must be guided by the principle of subsidiarity (so that all citizens find information about their concerns at grass-roots level) and managed under a partnership:

  • partnership with the Member States, which makes it possible to devise a message and instruments that are tailored to national cultures and structures;
  • partnership with information multipliers, which target their communication and whose task it is to distribute practical and specialised information.

The Commission’s action will be organised along the following lines:

  • providing information, basic material and technical support for the media and for specialised audiences;
  • taking part in the framing and implementation of national communication plans for the euro through the conclusion of part-financing agreements with the Member States;
  • ensuring that information activities on the euro are consistent across the Community;
  • encouraging and taking part in cross-border activities, and information and communication activities on the euro intended for non-member countries.

So far, information activities have been targeted on the financial sector, large firms and government departments. All of them are actively engaged in preparations. The communication effort must now be directed to new priority target groups: the general public, small and medium-sized enterprises, local and regional authorities, elected representatives, civil servants and non-member countries.

All the available media will have to be used actively:

  • radio and television, which are particularly effective tools for mass communication with the general public;
  • brochures and leaflets, for which the public demonstrates steady interest;
  • the Internet and modern methods of communication, which enable information to be disseminated more and more effectively and economically;
  • systems for providing direct and swift answers to the questions asked by members of the public (telephones, fax numbers, electronic mail, etc.);
  • tools for communicating at grass roots level, such as organised travelling exhibitions or “eurobuses”.

Experience has shown how difficult it is to devise tools or messages on the euro, which are likely to have the same impact in all Member States and on all types of audience. A few common principles should guide the communication strategy for the euro: the importance of disseminating practical, concrete information, of contributing to a climate that enables the general public to understand and accept the euro, and of assessing the impact on opinion of action taken.

4) Implementing Measures

5) Follow-Up Work

Convergence in the European Union in 1997

Convergence in the European Union in 1997

Outline of the Community (European Union) legislation about Convergence in the European Union in 1997

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These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Economic and monetary affairs > Practical aspects of introducing the euro

Convergence in the European Union in 1997

1) Objective

To determine whether a high degree of sustainable convergence has been achieved, by examining whether each Member State fulfils each of the four criteria laid down in Article 121(1) of the Treaty.

2) Document or Iniciative

Commission report of 25 March 1998 on progress towards convergence [COM (98) 1999 final – Not published in the Official Journal].

3) Summary

Remarkable progress towards the achievement of a high degree of sustainable convergence has been made in all Member States since the beginning of the second stage of economic and monetary union (EMU). This progress gathered momentum during 1996 and 1997, when efforts to achieve convergence (especially in the budgetary field) were intensified in many Member States.

Compatibility of national legislation

National legislation, including the statutes of national central banks, must be compatible with Articles 108 and 109 of the Treaty and with the Statute of the European System of Central Banks (ESCB) set out in Protocol No 3 annexed to the Treaty. The compatibility requirement relates to the independence of national central banks, their objectives (price stability), their integration into the ESCB and other monetary matters. Member States must ensure the compatibility of their legislation at the latest at the date of establishment of the European Central Bank (ECB).

As of March 1998, the situation in eight Member States (Belgium, Germany, Greece, Ireland, Italy, the Netherlands, Portugal and Finland) can be regarded as compatible with the Treaty requirements.

In a further four Member States compatibility will be ensured provided that current government proposals are enacted (in Spain, France, Luxembourg and Austria).

In the case of Sweden, since the government’s proposals with a view to EMU include amendments to the constitution, they cannot be adopted before the end of 1998. Neither do they guarantee full integration of the Riksbank into the ESCB.

Denmark having given notification of its decision not to take part in the third stage of EMU, it will be treated, in accordance with Protocol No 12 attached to the Treaty, as a country with a derogation. As such, it is merely required to ensure the independence of its central bank, something which it has done.

By virtue of its opt-out, the United Kingdom is under no obligation to make its legislation compatible.

Price stability

The reference value for price stability (calculated as the arithmetic average of the inflation rates in the three best performing Member States, namely France, Ireland and Austria, plus 1.5 percentage points) was 2.7%.

In January 1998 fourteen Member States (Belgium, Denmark, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal, Finland, Sweden and the United Kingdom) had average inflation rates below this reference value. In view of the institutional and behavioural changes brought about by the EMU process, there are strong reasons for believing that the current inflation performance of these fourteen Member States is sustainable.

Greece has achieved regular and significant progress in bringing the inflation rate down but, with an average inflation rate of 5.2% in January 1998, it still remains well above the reference value.

Government budgetary position

The assessment of this criterion is directly linked to decisions taken under the excessive deficit procedure.
As of March 1998, five Member States (Denmark, Ireland, Luxembourg, the Netherlands and Finland) are not the subject of a Council decision on the existence of an excessive deficit and so already fulfil this criterion.
On the basis of the results for 1997, the Commission recommends that the Council abrogate the excessive deficit decisions for Belgium, Germany, Spain, France, Italy, Austria, Portugal, Sweden and the United Kingdom.
In all, therefore, the deficits in fourteen Member States in 1997 were either below or equal to the 3% of gross domestic product (GDP) reference value.

While the government debt ratio was below the 60% of GDP reference value in 1997 in only four Member States (France, Luxembourg, Finland and the United Kingdom), almost all the other Member States have succeeded in reversing the earlier upward trend. Only in Germany, where the debt ratio is just above 60% of GDP and the exceptional costs of unification continue to bear heavily, was there a further small rise in the debt ratio in 1997.
Conditions are in place in all Member States for a sustained decline in debt ratios in future years.

Greece has made substantial progress in recent years in reducing the imbalances in its public finances: it has reduced the government deficit from almost 14% of GDP in 1993 to 4.0% in 1997 and is expected to reach 2.2% in 1998; the government debt ratio has been stabilised and a first reduction took place in 1997 when the debt ratio fell by 2.9 percentage points to 108.7% of GDP. It must keep up its budgetary correction efforts if the Commission is to recommend abrogation of the excessive deficit decision for Greece.

Exchange rates

In practical terms, a country fulfils this criterion if its currency has participated in the exchange-rate mechanism (ERM) of the European Monetary System (EMS) for at least two years while remaining within the ±2.25% fluctuation margin around its central rate.

As of March 1998, ten currencies (the Belgian franc, the Danish krone, the German mark, the Spanish peseta, the French franc, the Irish pound, the Luxembourg franc, the Dutch guilder, the Austrian schilling and the Portuguese escudo) comply strictly with this criterion.

The vast majority of participating countries remained clustered close to their ERM central rates in the period under review (March 1996 to February 1998); only the Irish pound remained far above its central rate for an extended period of time. It was revalued by 3% against the other ERM currencies in March 1998.

The Finnish markka joined the ERM in October 1996 and the Italian lira re-entered the mechanism in November 1996, i.e. less than two years ago. However, they did not experience severe tensions in the two years under review.

The Greek drachma, the Swedish krona and the pound sterling did not participate in the ERM during the review period. However, the Greek drachma entered the ERM in March 1998.

Long-term interest rates

Long-term interest rates can be seen as forward-looking indicators which reflect the financial markets’ assessment of underlying economic conditions and cannot be directly influenced by national authorities. In January 1998 the reference value (calculated as the arithmetic average of the long-term interest rates of the three best performing Member States in terms of price stability plus two percentage points) worked out at 7.8%.

Fourteen Member States (Belgium, Denmark, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal, Finland, Sweden and the United Kingdom) had average long-term interest rates below the reference value.

Greece has also experienced declining interest rates over recent years, but at 9.8% the level of the long-term interest rate still remains well above the reference value.

Summary table

Do the Member States fulfil the convergence criteria?

1997 Rate of inflation Government budgetary position Exchange rate Interest rates
Belgium Yes yes1 yes yes
Denmark Yes yes yes yes
Germany Yes yes1 yes yes
Greece No no no2 no
Spain Yes yes1 yes yes
France Yes yes1 yes yes
Ireland Yes yes yes yes
Italy Yes yes1 yes3 yes
Luxembourg Yes yes yes yes
Netherlands Yes yes yes yes
Austria Yes yes1 yes yes
Portugal Yes yes1 yes yes
Finland Yes yes yes4 yes
Sweden Yes yes1 no yes
United Kingdom Yes yes1 no yes

1 Abrogation of the Council Decision on the existence of an excessive deficit is recommended by the Commission.
2 The Greek drachma only joined the exchange-rate mechanism in March 1998.
3 Although the Italian lira only re-entered the exchange-rate mechanism in November 1996, it has demonstrated sufficient stability over the last two years.
4 Although the Finnish markka only joined the exchange-rate mechanism in October 1996, it has demonstrated sufficient stability over the last two years.

4) Implementing Measures

5) Follow-Up Work

Commission recommendation for a Council recommendation in accordance with Article 121 (2) of the Treaty [COM(1998) 1999 final – Not published in the Official Journal].

On the basis of its convergence report, the Commission recommends that the Council should find that the following eleven Member States fulfil the necessary conditions for adopting the single currency, the euro, from 1 January 1999: Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland.

Greece does not fulfil any of the convergence criteria mentioned in the four indents of Article 109j(1) of the Treaty; consequently, it does not fulfil the necessary conditions for adopting the single currency.

Sweden does not fulfil the convergence criterion mentioned in the third indent of Article 109j(1) of the Treaty: the Swedish krona (SEK) has never participated in the ERM and has fluctuated against the ERM currencies. Consequently, Sweden does not fulfil the necessary conditions for adopting the single currency.

The United Kingdom and Denmark had already notified the Council that they would not be taking part in the third stage of economic and monetary union.

Council Decision 98/317/EC of 3 May 1998 in accordance with Article 121 (4) of the Treaty [Official Journal L 139 of 11.05.1998].

This Council Decision follows the Commission recommendation and gives the verdict that Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland meet the conditions necessary for adoption of the single currency on 1 January 1999.