Tag Archives: Economic and Monetary Union

European system of national and regional accounts in the Community

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European system of national and regional accounts in the Community

Outline of the Community (European Union) legislation about European system of national and regional accounts in the Community

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Budget

European system of national and regional accounts in the Community

Document or Iniciative

Council Regulation (EC) No 2223/96 of 25 June 1996 on the European system of national and regional accounts in the Community [See amending acts].

Summary

The European system of national and regional accounts (“ESA 1995”) makes it possible to describe the total economy of a region, country or group of countries, its components and its relations with other total economies.

The ESA is focused on the circumstances and needs of the EU. It can therefore serve as the central framework of reference for the social and economic statistics of the European Union and its Member States.

Content of the ESA

The ESA 1995 comprises two sets of tables:

  • the sector accounts *;
  • the input-output framework * and the accounts by industry *.

The purpose of this Regulation is to set up the ESA 1995 by providing for:

  • a methodology on common standards, definitions, classifications and accounting rules, that is intended to be used for compiling accounts and tables on comparable bases between the Member States for the purposes of the Community;
  • a programme, Eurostat, for transmitting on precise dates the accounts and tables compiled according to the ESA 1995.

Use

The Commission uses the national accounts aggregates for Community administrative and budgetary calculations. The ESA applies to all Community acts in which reference is made to it or to the definitions it lays down.

Key terms used in the act
  • Sector accounts: these provide, by institutional sector, a systematic description of the different stages of the economic process: production, generation of income, distribution of income, redistribution of income and use of income, as well as financial and non-financial accumulation; they also include balance sheets to describe the stocks of assets, liabilities and net worth at the beginning and at the end of the accounting period.
  • Input-output framework and accounts by industry: these describe in more detail the production process (cost structure, income generated and employment) and the flows of goods and services (output, imports, exports, intermediate consumption and capital formation by product group).

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Regulation (EC) No 2223/96 20.12.1996 – OJ L 310 of 30.11.1996
Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal
Regulation (EC) No 2516/2000 7.12.2000 – OJ L 290 of 17.11.2000
Regulation (EC) No 359/2002 20.3.2002 – OJ L 58 of 28.2.2002
Regulation (EC) No 1392/2007

30.12.2007

–

OJ L 324 of 10.12.2007
Regulation (EC) No 400/2009

10.06.2009

–

OJ L 126 of 21.5.2009
Regulation (EC) No 715/2010

31.08.2010

–

OJ L 210 of 11.8.2010

Subsequent amendments and corrections to Regulation 2223/96 have been incorporated in the basic text. This consolidated version  is for reference purpose only.

Related Acts

Council Regulation (EC, Euratom) No 1150/2000 of 22 May 2000 implementing Decision 94/728/EC, Euratom on the system of Community own resources [Official Journal L 130 of 31.5.2000].
See consolidated version

Council Regulation (EC) No 479/2009 of 25 May 2009 on the application of the Protocol on the excessive deficit procedure annexed to the Treaty establishing the European Community [Official Journal L 145 of 10.6.2009].
See consolidated version

Council Regulation (EEC, Euratom) No 1553/89 of 29 May 1989 on the definitive uniform arrangements for the collection of own resources accruing from value added tax [Official Journal L 155 of 7.6.1989].
See consolidated version

Council Directive 89/130/EEC, Euratom of 13 February 1989 on the harmonisation of the compilation of gross national product at market prices [Official Journal L 49 of 21.2.1989].
See consolidated version consolidated version

Stability and growth pact and economic policy coordination

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Stability and growth pact and economic policy coordination

Outline of the Community (European Union) legislation about Stability and growth pact and economic policy coordination

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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 > Stability and growth pact and economic policy coordination

Stability and growth pact and economic policy coordination

The Stability and Growth Pact is intended to ensure that Member States maintain budget discipline in order to avoid excessive deficits. It therefore contributes to monetary stability. Member States coordinate their economic policies at European level.

STABILITY AND GROWTH PACT

Implementation of the pact

  • Resolution of the Amsterdam European Council on the stability and growth pact
  • Surveillance of budgetary policies
  • The corrective arm: the excessive deficit procedure
  • Requirements for budgetary frameworks of the Member States

Implementation of the pact

  • A European Economic Recovery Plan
  • Reporting of planned deficits by Member States
  • European financial stabilisation mechanism

ECONOMIC POLICY COORDINATION

Basic provisions

  • Resolution of the European Council on economic policy coordination (1997)
  • Reinforcing economic policy coordination
  • Streamlining of annual economic and employment policy coordination cycles

Council recommendations

  • Broad guidelines for economic policies
  • Broad Economic Policy Guidelines (2008- 2010)
  • Broad economic policy guidelines (2005- 2008)
  • Broad economic policy guidelines 2003-2005
  • Broad economic policy guidelines (2002)
  • Broad economic policy guidelines (2001)
  • Broad economic policy guidelines (2000)
  • Broad economic policy guidelines (1999)
  • Broad economic policy guidelines (1998)
  • Broad economic policy guidelines (1997)
  • Broad economic policy guidelines (1996)

Public finances in Member States

  • Ensuring the effectiveness of the preventive arm of the Stability and Growth Pact: Public Finances in EMU – 2007
  • Long-term sustainability of public finances in the EU
  • Revising the Stability and Growth Pact: Public Finances in EMU 2006
  • Public finances in Member States in 2005
  • Public finances in Member States in 2004

The European economy

  • The European economy: 2007 Review
  • The European economy: 2006 review – strengthening the euro area
  • The European economy: 2004 Review
  • The OECD and the examination of EC economic policies

Declaration on the Euro area

  • 2009 Annual Statement on the Euro Area
  • 2007 Annual Statement on the Euro Area

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

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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

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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

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.

Changes to the national sides of euro coins

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Changes to the national sides of euro coins

Outline of the Community (European Union) legislation about Changes to the national sides of euro coins

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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

Changes to the national sides of euro coins

The Commission Recommendation lays down common rules for changes to the national obverse sides of euro coins. From 2004 onwards, Member States can issue two-euro commemorative coins to celebrate significant events or personalities. The moratorium for normal national sides is maintained until 2008.

Document or Iniciative

Commission Recommendation 2003/734/EC of 29 September 2003 on a common practice for changes to the design of national obverse sides of euro circulation coins.

Summary

This Recommendation, drawn up in close cooperation with the Member States, sets out a common framework for changes to the design of the national sides of euro circulation coins. It covers both normal and commemorative euro coins.

No changes to the national side of euro coins until the end of 2008

The Commission recommends that the national sides of normal euro coins intended for circulation should not be modified before the end of 2008, except in the event of a change in the head of state depicted on a coin.

In a communication of 28 December 2006 entitled “Five years of euro banknotes and coins” [PDF] the Commission reaffirmed the visual coherence of the euro.

Issue of commemorative coins authorised from 2004

On 23 November 1998 the Council decided that “there should be a moratorium on issues of commemorative coins intended for circulation in the early years of the new notes and coins”. The Commission recommended that the issue of commemorative coins should be authorised from 2004. The Council meeting of 8 December 2003 welcomed the Commission Recommendation (see “Related acts”).

From 2004, therefore, Member States may issue commemorative euro coins for circulation and these are legal tender in all the Member States of the euro area. The issue of these coins is subject to certain conditions:

  • Only the national side may be modified.
  • The number of issues is limited to one per Member State per year.
  • The two-euro coin is the sole denomination that may be used for such commemorative issues.
  • The total number of coins put into circulation must not exceed the higher of the following ceilings:

– 0.1 % of the total number of two-euro coins brought into circulation by all the Member States in the euro area; this ceiling may be raised to 2 % if a highly symbolic event is commemorated, in which case the issuer should refrain from launching another similar commemorative coin issue for a period of four years;

– 5.0 % of the total number of two-euro coins brought into circulation by the issuing State.

The design of the national side of commemorative coins is subject to the following conditions in particular:

  • The national side should bear twelve stars surrounding the design.
  • The year must be indicated.

The Commission should be informed about intended changes at least six months before the coins are issued. The Economic and Financial Committee must approve all issues of commemorative circulation coins having an envisaged issuing volume exceeding the 0.1 % referred to above. All relevant information on new designs will be published in the Official Journal of the European Union.

Applying common practice under monetary agreements

The Community has signed monetary agreements 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. The common practice should therefore also apply to coins issued by those countries.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Commission Recommendation 2003/734/EC 1.1.2004 – OJ L 264, 15.10.2003

Related Acts

Conclusions of the Council meeting on general affairs and external relations on 8 December 2003 [Not published in the Official Journal].
In its conclusions the Council welcomes the Commission’s recommendations, presented on 29 September 2003. The Council agreed to the following:

  • the Member States should not change the national side of their euro circulation coins until the end of 2008, except where the head of state depicted on a coin changes;
  • the moratorium on issuing commemorative circulation coins should be lifted. That moratorium was introduced by the Council meeting on economic and financial affairs (the Ecofin Council) on 23 November 1998. Thus, from 2004 the Member States may issue commemorative two- euro coins subject to certain conditions, such as the issuing volume.

Commemorative coins in chronological order:

Greece – Olympic Games in Athens 2004 [Official Journal C 91 of 15.4.2004].

  • Design: Ancient statue depicting a discobulus about to throw the discus and the five Olympic rings.
  • Issuing volume: a maximum of 50 million coins.

Finland – Enlargement of the European Union by ten new Member States [Official Journal C 243 of 30.9.2004].

  • Design: Stylised pillar with shoots growing upwards.
  • Issuing volume: a maximum of one million coins.

Luxembourg – Grand Duke Henri [Official Journal C 243 of 30.9.2004].

  • Design: Effigy and monogram of Grand Duke Henri.
  • Issuing volume: a maximum of 2.49 million coins.

Republic of San Marino – Bartolomeo Borghesi [Official Journal C 298 of 3.12.2004]

  • Design: Bust of Bartolomeo Borghesi (historian and numismatist).
  • Issuing volume: a maximum of 110 000 coins.

Italy – Fifth decade of the World Food Programme [Official Journal C 313 of 18.12.2004]

  • Design: A globe bearing the inscription “WORLD FOOD PROGRAMME”, from which emerges an ear of maize, an ear of rice and an ear of wheat, representing the world’s basic sources of nourishment.
  • Issuing volume: a maximum of 16 million coins.

Vatican City State – 75th anniversary of the founding of the Vatican City State [Official Journal C 321 of 28.12.2004]

  • Design: A schematic representation of the perimeter walls of the Vatican City with St Peter’s Basilica in the foreground.
  • Issuing volume: a maximum of 100 000 coins.

Luxembourg – 50th birthday of Grand Duke Henri, 5th anniversary of his accession to the throne and 100 years of the death of Grand Duke Adolphe [Official Journal C 11 of 15.1.2005]

  • Design: Effigies of Grand Duke Henri and former Grand Duke Adolphe.
  • Issuing volume: a maximum of 2.8 million coins.

Belgium – Belgium-Luxembourg Economic Union [Official Journal C 61 of 11.3.2005]

  • Design: Effigies of Grand Duke Henri of Luxembourg and King Albert II of Belgium.
  • Issuing volume: a maximum of 6 million coins.

Austria – 50th anniversary of the Austrian State Treaty [Official Journal C 61 of 11.3.2005]

  • Design: A reproduction of the signatures and seals in the Austrian State Treaty.
  • Issuing volume: a maximum of 7 million coins.

Spain – 4th centenary of the first edition of “The Ingenious Nobleman Don Quixote of La Mancha” [Official Journal C 131 of 28.5.2005]

  • Design: Don Quixote holding a lance, with windmills in the background. The coin bears the word “ESPAÑA”.
  • Issuing volume: 8 million coins.

Republic of San Marino – 2005: World Year of Physics [Official Journal C 244 of 4.10.2005]

  • Design: Free interpretation of the allegorical painting known as “La fisica antica” or the study of the planets, depicting Galileo Galilei. The twelve stars of the European Union are depicted on the outer ring.
  • Issuing volume: 130 000 coins.

Finland – 60th anniversary of the United Nations and 50th anniversary of Finland’s membership of the United Nations [Official Journal C 244 of 4.10.2005]

  • Design: The inner part of the coin depicts a dove of peace formed of pieces of a jigsaw puzzle. The twelve stars of the European Union are depicted on the outer ring.
  • Issuing volume: 2 million coins.

Italy – 1st anniversary of the signing of the European Constitution [Official Journal C 283 of 16.11.2005]

  • Design: The inner part of the coin shows a representation of Europa and the bull. Europa holds a pen and the text of the European Constitution. The words “COSTITUZIONE EUROPEA” form a semicircle on the lower part of the outer ring. The twelve stars appear on the upper part of the outer ring.
  • Issuing volume: 18 million coins.

Vatican City State – 20th World Youth Day held in Cologne in August 2005 [Official Journal C 283 of 16.11.2005]

  • Design: The inner part of the coin shows a representation of Cologne cathedral with a comet in the upper part of the design. The words “XX GIORNATA MONDIALE DELLA GIOVENTÙ” form a semicircle. The twelve stars appear on the upper part of the outer ring.
  • Issuing volume: 100 000 coins.

Luxembourg – 25th birthday of the heir to the throne, Grand Duke Guillaume [Official Journal C 20 of 27.1.2006]

  • Design: the left-hand side of the inner part depicts the effigy of His Royal Highness Grand Duke Henri looking to the right superimposed on the effigy of the hereditary Grand Duke Guillaume, on the right-hand side of the inner part. The date 2006 appears below both effigies.
  • Issuing volume: 1.1 million coins.

Germany – Schleswig-Holstein [Official Journal C 33 of 9.2.2006].

  • Design: The inner part of the coin shows a representation of the “Holstentor”, the landmark gate of the town of Lübeck. The twelve stars form a semicircle on the upper part of the outer ring, interrupted by the year of mintage “2006” at the top of the coin. The words “BUNDESREPUBLIK DEUTSCHLAND” form a semicircle on the lower part of the outer ring.
  • Issuing volume: 30 million coins.

Italy – XX Olympic Winter Games – Turin 2006 [Official Journal C 33 of 9.2.2006].

  • Design: the foreground shows a skier racing, against a background of stylised graphic elements: the monogram of the Italian Republic “RI” at the top left, below it the letter “R” and an image of Turin’s landmark Mole Antonelliana building. The twelve stars of the EU encircle the design.
  • Issuing volume: 40 million coins.

Belgium – Atomium [Official Journal C 53 of 3.3.2006].

  • Design: The inner part of the coin shows a representation of the Atomium. Twelve stars surround the design on the outer ring of the coin. The monogram “B” appears at the top of the coin between two stars and the year of mintage “2006” at the bottom of the circle between two stars.
  • Issuing volume: 5 million coins.

Finland – 100th anniversary of universal and equal suffrage [Official Journal C 248 of 14.10.2006].

  • Design: The inner part of the coin shows faces. The twelve stars of the European flag are depicted on the outer ring.
  • Issuing volume: a maximum of 2.5 million coins.

Republic of San Marino – 500th anniversary of the death of Christopher Columbus [Official Journal C 248 of 14.10.2006].

  • Design: A portrait of Christopher Columbus and a representation of the three Caravels; above the portrait the inscription “SAN MARINO” and the wind rose.
  • Issuing volume: 120 000 coins.

Vatican City State – 5th Centenary of the Pontifical Swiss Guard [Official Journal C 260 of 28.10.2006].

  • Design: The coin features a Swiss guard taking the solemn oath on the Swiss Guard flag.
  • Issuing volume: a maximum of 100 000 coins.

Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal, Slovenia and Finland – 50th anniversary of the signing of the Treaty of Rome [Official Journal C 65 of 21.3.2007].

  • Design: The centre of the coin shows the Treaty signed by the six founding Member States on a background evoking the paving, designed by Michelangelo, of the Piazza del Campidoglio in Rome where the Treaty was signed on 25 March 1957. The translation of the word ‘Europe’ appears above the book.
  • Issuing volume: varies according to the Member States (from 0.4 million in Slovenia to 30 million in Germany)

Germany, Mecklenburg-Vorpommern [Official Journal C 76 of 4.4.2007].

  • Design: the inner part of the coin shows the Schwerin castle. The words ‘Meckenburg-Vorpommern’ appear underneath it. Twelve stars form a semi-circle on the upper part of the outer ring, intercalated by the vintage year ‘2007’ above the coin. The words ‘Bundesrepublik Deutschland’ form a half-circle on the lower part of the outer ring.
  • Issuing volume: 30 million coins.

Republic of San Marino – Bicentennial of the birth of Giuseppe Garibaldi [Official Journal C 233 of 5.10.2007].

  • Design: The inner circle of the coin features a portrait of Giuseppe Garibaldi. The inscription ‘SAN MARINO’ and the year mark ‘2007’ are engraved along the circle on the left and right hand sides respectively.
  • Issuing volume: 1 30 000 coins.

Monaco – 25th Anniversary of death of Princess Grace [Official Journal C 172 of 25.7.2007].

  • Design: On the inner part of the coin there is an effigy of Princess Grace in profile facing to the left. ‘MONACO’, followed by the mint mark, the year ‘2007’ and the engraver’s mark, is engraved in an arc in the bottom right of the inner part. The coin’s outer ring depicts the twelve stars of the European flag.
  • Issuing volume: maximum 20 001 coins.

Vatican City State – 80th anniversary of Pope Benedict XVI [Official Journal C 233 of 5.10.2007].

  • The inner part of the coin features a bust of His Holiness Benedictus XVI in profile facing to the left.
  • Issuing volume: 100 000 coins.

Germany – Hamburg [Official Journal C 13 of 18.1.2008].

  • The inner part of the coin features St Michael’s church, Hamburg. The name of the federal State ‘HAMBURG’ is inscribed beneath the church.
  • Issuing volume: 30 million.

The introduction of euro banknotes and coins: one year on

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The introduction of euro banknotes and coins: one year on

Outline of the Community (European Union) legislation about The introduction of euro banknotes and coins: one year on

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 introduction of euro banknotes and coins: one year on

Document or Iniciative

Commission communication: The introduction of euro banknotes and coins — one year after [COM(2002) 747 final – Official Journal C 36 of 15.02.2003].

Summary

In the very first year of its existence in cash form, the euro quickly became part of the everyday life of Europe’s citizens. Most of them feel happy with the euro. Only one in five still has difficulties.

NOTES AND COINS IN CIRCULATION

Notes. At the beginning of January the euro-area’s central banks put 7.8 billion notes into circulation. The amount in circulation then fell, but rose again to reach 7.42 billion in October. The total value of notes in circulation reached 320.9 billion, or 4.5% of the euro area’s GDP.

The 50 note is the most common, both in number and in total value. It represents one third of the total value in circulation. In some Member States discussion arose about whether 1 and 2 notes should be introduced in addition to or as a replacement for the 1 and 2 coins. But the surveys show that 83.7% of citizens find the number of different denominations of banknotes just right (Eurobarometer survey, November 2002).

Coins. At the beginning of January the euro-area’s central banks put 40.4 billion coins into circulation. This amount dropped after mid-January, reaching 38.2 billion at the end of October. In value terms, this represents 11.9 billion. The number of coins per inhabitant varies widely among euro-area Member States, reflecting different national payment habits.

Some discussion of the usefulness of the low-value coins, especially the 1- and 2-cent coins, arose in some Member States. In Finland the law requires euro cash payments to be rounded to the nearest five cents and production and use of the 1- and 2-cent coins are therefore limited. According to the Eurobarometer poll, 53.5% of the euro-area population believes that the number of different denominations of coins is just right. The small coins also played an important role in helping to ensure that price conversion from national currency units was done correctly.

Cross-border euro flows. Euro notes and coins migrate as a result of travel, cross-border shopping and the redistribution process between national central banks, commercial banks and retailers. The mix of euro notes and coins (the origin of notes is identified by their serial number) will increase over time and probably reach an equilibrium level, but it is unclear at what pace this will happen. Some patterns are already emerging: it appears that coins of different denominations mix at different rates and that the high-value coins are more prone to migration. The number of “foreign” coins also varies from one place to another, e.g. it is different in urban and rural areas and in border regions.

Collector’s coins. The Member States have retained their right to mint euro-denominated collector’s coins that often contain precious metals and which have a nominal value and are legal tender. Unlike euro coins in circulation, collector’s coins will be legal tender only in the Member State which issued them. Their technical specifications must differ from the characteristics of “normal” coins. By the end of 2002 80 euro-denominated collector’s coins had been issued, with their face values ranging from 25 cents to 400 euros.

Medals. Medals also exist but do not have legal-tender status. To avoid confusion, they must not be denominated in euros, or bear the euro symbol or any design similar to the euro coins in circulation.

Commemorative coins. Member States may also issue euro-denominated commemorative coins. These are legal tender throughout the euro area. Their technical properties, sizes and face values correspond exactly to those of euro coins. The design on the national side may, for example, commemorate a special national event. In order to allow European citizens to familiarise themselves with the new currency and to avoid any possible confusion, Member States have agreed not to issue commemorative coins during the early years following the introduction of euro notes and coins.

Use of nickel. The 1 and 2 coins still contain a small amount of nickel, but 85% of coins are nickel-free, which is a vast improvement on national currencies. Nickel is used for security reasons, mainly in the central part of the coins, to make them less prone to counterfeiting and to allow them to be reliably identified in vending machines. Compared with the old national currencies, the 1 and 2 coins release only about half as much nickel.

Counterfeiting. The Commission and the Member States have set up a network of institutions for the fight against counterfeiting, with the participation of the European Central Bank (ECB) and Europol. Owing to the state-of-the-art security features of euro notes and coins, euro counterfeiting has remained at levels well below those for the old national currencies. In the first half of 2002 the ECB recorded only 7% of the number of counterfeit notes recorded in the same period in 2001. The number of counterfeit coins is negligible.

THE CITIZEN AND THE EURO

Calculating in euros. According to the Eurobarometer poll, 51.5% of euro-area residents have no difficulty using the euro. This result ranges from 71.7% in Ireland to 36.5% in France. 42.2% of respondents calculate mainly in euros when making purchases. Only exceptional purchases (a house or a car) are still mainly calculated in the old national currency.

Dual display of prices. The dual display of prices facilitated the changeover to the euro. The Eurobarometer poll shows that a slight majority (50.6%) no longer want shopkeepers to continue with the dual display of prices. Continued dual display is a mixed blessing. On the one hand, it helps people to adapt to the new currency but, on the other, it delays the mental conversion of the population to the euro. The Commission therefore recommends phasing out dual display by 30 June 2003 at the latest, including on bank statements.

General satisfaction. 49.7% of euro-area citizens consider themselves to be very or rather happy that the euro has become their currency, as against 38.7% who are quite unhappy or very unhappy. The figures vary significantly depending on the Member State, ranging from 84.2% who are satisfied in Luxembourg to 27.8% in Germany. More than two thirds find it easy to handle the various euro coins. An overwhelming majority (92.6%) say that they have no difficulty with the different national sides of the coins but find them a welcome source of diversity. In addition, 92.8% find the various euro notes easy to handle.

Cross-border trade and price transparency. The introduction of euro notes and coins strengthens the integration of markets in the European Union (EU) by eliminating exchange-rate risk, reducing transaction costs, and abolishing a psychological barrier to cross-border trade through price transparency. Since the changeover to the euro, 12% of European consumers are more interested in buying goods in another EU country. The attitude of companies has changed even more significantly: on average, 32% of businesses in the EU indicate that they are more interested in selling their goods abroad.

IMPACT OF THE EURO CHANGEOVER ON INFLATION

Medium- to long-term effect. The introduction of the euro will have a beneficial medium- to long-term effect on prices, as a result of much easier comparison of prices across the euro area, improved functioning of the single market and a more competitive environment, which will foster economic efficiency. This should be reflected in lower consumer prices.

Pattern of consumer prices. In January 2002, when euro notes and coins were introduced, overall inflation as measured by the Harmonised Index of Consumer Prices (HICP) rose noticeably, from 2% in December to 2.7% in January. It subsequently fell to 1.8% by June, the lowest in more than two and a half years.

Possible impact of the euro changeover on inflation. Eurostat published estimates of the inflationary impact of the changeover to euro cash on three occasions. Most of the observed inflation could be explained by factors not linked to the euro, such as normal inflation patterns, bad weather affecting fruit and vegetable prices, increased energy prices, increases in administered prices and taxes. According to these studies, this left a range of 0 to 0.2 percentage point that could be attributed to the changeover to the euro.

However, the studies also point to significant price jumps in the services sector (hotels, repairs, haircuts, etc.). For example, prices in the cafe and restaurant sector recorded a year-on-year increase of 4.3%.

Actual and perceived inflation. Many consumers associate the changeover with a general rise in prices. According to the November 2002 Eurobarometer survey, 84.4% of respondents thought that prices had been converted to the detriment of consumers, while 10.9% thought that prices had been rounded up and down equally. There are several explanations for the discrepancy between actual and perceived inflation.

First, consumers tend to form their perception about inflation on the basis of frequently bought goods and services (cafes, restaurants, repairs, haircuts, newspapers, etc.) and it was these goods and services which registered unusually large price increases following the changeover. Prices for other goods and services have recorded smaller rises or have even been falling (computers, cameras, etc.). These developments can offset one another in a comprehensive index like the HICP.

A second reason might be “menu costs”. These are the costs of changing prices, and this factor could have led to an unusually high proportion of firms changing prices at the turn of the year. If such price adjustments involved upward rounding and concerned the items used by consumers to form their perception, then the discrepancy between actual and perceived inflation does not come as a surprise.

OVERVIEW BY SECTOR

Banking industry. The introduction of the euro seems to have slightly changed customer behaviour with regard to the choice of means of payment. According to the available statistics, payments by credit card, debit card or electronic purse rose significantly in 2002. It is not possible to clearly isolate the euro’s effect on the general increase in the use of such payment instruments in recent years. The withdrawal of the eurocheque system contributed to these developments.

Cash amounts withdrawn at automatic teller machines (ATMs) have increased in a number of countries. This can be explained by the new banknote denominations and rounding effects.

With regard to cross-border withdrawals, the picture is diverse. Some Member States report an increase in such transactions, others a drop. This is because monetary union allows citizens to travel abroad with cash. Moreover, since 1 July 2002, the EU Regulation on cross-border payments (BG) (CS) (ET) (GA) (LV) (LT) (HU) (MT) (PL) (RO) (SK) (SL) has required charges for cross-border withdrawals to be the same as for national withdrawals.

As regards dual display of amounts, notably on account statements, many banks have continued this practice during 2002 and are considering extending it into 2003.

Retail sector. The retail sector played an important role during the changeover by distributing euro notes and coins and withdrawing the old national currencies. The dual display of prices greatly contributed to facilitating the changeover to the new currency, with many retailers deciding to continue this service throughout 2002.

Cash-in-transit sector. The CIT (cash-in-transit) sector played a key role in the changeover to the euro. Difficulties continue to hamper the transfer of cash from one country to another since the relevant rules have not yet been harmonised. The cash centres responsible for counting and sorting cash were under heavy pressure for several months.

Vending industry. Although the vending industry tried to adapt its vending machines as early as possible, some operators indicated temporary turnover losses at the beginning of the year. Cash-based machines, accounting for the vast majority of all vending machines, presented the biggest challenge. Operators frequently decided to replace their validation mechanisms, which represented a significant investment. It was easier to adapt electronic-purse systems.

Automatic validation of coins. As regards the validation of euro coins, whatever their origin, this posed no problem for the machines since the coins meet the demanding requirements of modern validation. Typically, vending machines accept all coin denominations except the 1- and 2-cent coins. Prices are generally rounded to the nearest 5 cents and price adjustments in both directions were observed.

EURO CASH OUTSIDE THE EURO AREA

It appears that the use of the euro has been increasing, particularly in European countries outside the euro area. In other continents its use is mostly confined to tourist areas.

Situation in Denmark, Sweden and the United Kingdom. A majority of European citizens outside the euro area have already held euro notes or coins in their hand, while many people have noticed products in their country labelled in euros. In Denmark, businesses are prepared to accept cash payments in euros and 13% even practice dual pricing. In Sweden a large number of shops, hotels and restaurants accept euro cash payments, especially along the border with Finland. The Swedish town of Haparanda has even decided to adopt the euro as the currency of payment. Prices are displayed in Swedish kronor and in euros, and the town’s budget is presented in the two currencies. The Swedish Government has set the date of 14 September 2003 for a referendum on entering the third stage of economic and monetary union (EMU). In the United Kingdom, especially in London and tourist areas, the euro is sometimes accepted for payments and dual pricing is practised occasionally.

Candidate countries. The introduction of euro cash has had some impact in the candidate countries as well. Ultimately, these countries are set to adopt the euro as their national currency. Shops, hotels and restaurants in most of them accept euros and in tourist areas prices are often displayed in euros. The use of the euro is most widespread in Bulgaria and Turkey, where it can be considered a parallel currency, together with the US dollar.

Other European countries. The Community has concluded agreements with Monaco, San Marino and the Vatican City authorising them to issue a certain quantity of euro coins. However, they are not authorised to issue euro notes. In Andorra the euro is circulating as the means of payment in place of the French franc and the Spanish peseta, as the country does not have a national currency. The euro is also used for payments in Kosovo and Montenegro, where it has replaced the German mark. In many countries, especially in the Balkans and eastern Europe, the euro as well as the US dollar are commonly used for transactions.

Africa. The euro is important in transactions in countries where the domestic currency is linked to the euro by a fixed exchange rate regime. This is the case in all countries belonging to the CFA zone (the Central African Economic and Monetary Union and the West African Economic and Monetary Union), as well as in Cape Verde and Comoros.

America. The entire American continent is strongly US-dollar-oriented and the introduction of euro cash has had only a limited impact. In the French overseas departments and territories (French Guiana, Guadeloupe, Martinique, etc.) the euro is the official currency. In the Dominican Republic, Cuba and Surinam payments in euros are possible, especially in tourist areas.

Asia and Oceania. In the Middle East the euro has had a very limited impact. Only in Israel is the use of the euro somewhat more common. In Asia the introduction of the euro has had a more significant impact. In Thailand, South Korea and Laos the euro is widely accepted in shops, restaurants and hotels. However, the US dollar remains predominant in international transactions. In Oceania, on the other hand, the euro is not yet accepted as a means of payment, except in the French territories in the region. In Australia and New Zealand the euro is seen as an alternative to the US dollar on international markets.

 

Review of the introduction of euro notes and coins

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Review of the introduction of euro notes and coins

Outline of the Community (European Union) legislation about Review of the introduction of euro notes and coins

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Economic and monetary affairs > Practical aspects of introducing the euro

Review of the introduction of euro notes and coins

Document or Iniciative

Commission Communication to the European Council: Review of the introduction of euro notes and coins [COM(2002) 124 final – Not published in the Official Journal].

Summary

The introduction of euro notes and coins was the largest-ever currency-changeover operation. More than 15 billion notes and 51 billion coins were produced and exchanged against 9 billion national currency notes and 107 billion national-currency coins. The operation, which took place essentially between the beginning of September 2001 and the end of February 2002, went smoothly and can, therefore, be regarded as a major success.

This major success was due in part to perfect coordination between the Community institutions. The Commission, through its recommendations and proposals, gave a strong and coordinated boost to the measures taken by the participating Member States. It set up networks comprising the heads of the national administration task forces and the communication directors in the finance ministries. It also acted as an information point. For its part, the European Central Bank (ECB) effectively coordinated the measures taken by the national central banks. To ensure the smooth introduction of the euro, action was taken to mobilise financial institutions, sales outlets, the police, transport firms and, above all, the public in Europe, whose cooperation was essential. The Commission, the different ministries involved, banks and trade associations spent over half a billion euros on information campaigns for the general public between 1996 and 2001.

The introduction of euro notes and coins and the withdrawal of national currencies took place more rapidly than initially expected thanks to good organisation. By the end of the first week in January euro payments accounted for most cash payments and by the end of the second week very little national currency remained in circulation.

The operations

Frontloading and sub-frontloading operations. As of September 2001 banks and sales outlets were frontloaded and sub-frontloaded with the first notes and coins. Member States were free to decide when to begin the operations. By 31 December 132.1 billion euro notes, equivalent to 21 % of total production, were distributed to banks. More than 73 % of the total production of coins was distributed to banks between September and December, although there were differences between Member States. All the operations went smoothly.

Frontloading. The sub-frontloading of sales outlets with notes and coins began in September in a number of countries. The opportunity given to sales outlets to be sub-frontloaded with small quantities so that their payout-desk staff could receive training was not widely taken up. Overall, participation by the 2.8 million sales outlets in the euro area in sub-frontloading operations was very uneven. While virtually all traders were sub-frontloaded in Ireland, the figure in Italy was below 10 %. On average, banks sub-frontloaded only 9 % (in value terms) of the notes they received. The results were slightly better for coins. It is interesting to note that the participating countries with the best results were those that offered incentives and/or took steps to alleviate logistical constraints (Germany, Ireland, the Netherlands and Austria).

Coins. In order to acquaint themselves with the new coins, individuals were able to buy from mid-December small kits containing coins the value of which varied between Member States. The kits were a great success and the general public bought them with great enthusiasm. Over 150 million kits were sold. Contrary to fears, individuals fully observed the ban on using coins before 1 January 2002. They were only a few isolated cases involving vending machines.

In all, 6 billion notes (40 % of production) and 37.5 billion coins (73.5 % of production) were distributed via frontloading. The success of frontloading made a decisive contribution to the rapid take-up of the euro at the beginning of 2002.

Distribution of notes and coins in January 2002. The new notes and coins were distributed primarily via withdrawals from automated teller machines (ATMs), via withdrawals at financial institutions and via change given in sales outlets. On average, 80 % of ATMs had been converted to the euro by 1 January 2002. By 4 January virtually all ATMs were dispensing only euros. Technically, the operation went smoothly, except for some problems in Italy and Finland. The number of withdrawals was very high during the first week, reflecting the enthusiasm and curiosity of individuals, and then after two weeks started to fall back to normal levels. No serious supply problems were encountered at ATMs.

Exchange od old national currencies. During the first ten days of January, consumers flocked to their bank to withdraw euros or to exchange their old national currency (“legacy currency”), causing queues to form. In some countries the volume of euros supplied to individuals at counters was higher than that supplied via ATMS. In Germany, Spain and Luxembourg banks were even open on 1 January.

Role of traders. In order to give change, traders required a much larger cash float since they were unable to give change using the legacy currency. Generally speaking, sales outlets complied with this rule. The situation regarding the distribution of notes and coins to sales outlets was strained during the first week on account of the large number of consumers using large-denomination notes for their purchases. Longer queues were inevitable. The 7 585 cash-transport vehicles in service in the euro area thus operated at full stretch during that time. Generally speaking, there were only isolated shortages of certain denominations of notes and coins. Member States’ central banks provided mutual assistance when that was needed. For instance, France acquired 100 million 50 cent coins from Spain and the Bank of Portugal received several million notes of different denominations from the Eurosystem.

The assessment is, therefore, a positive one since the combination of these three channels enabled the single currency to be distributed very rapidly to the 300 million inhabitants of the euro area.

Use of the euro for cash payments. In the first few days consumers tended to spend their legacy currencies before using the euro. The legacy currencies swiftly disappeared from circulation as traders and banks, which had a “mopping-up” effect, gave change in euros. The share of the euro in cash payments averaged some 20 % by the end of 2 January, 55 % by the end of 4 January and 95 % by 16 January. The total volume of cash payments was high in the first two weeks of January and then began to return to normal as the legacy currencies were withdrawn from circulation. All the other adaptations such as the conversion of accounts, cards and electronic payment terminals were satisfactory. Ireland and the Netherlands were the countries that were quickest to change over to euro payments and virtually all payments were effected in euros by 8-10 January. Other countries including Belgium, Spain and France only just exceeded the 70 % mark by that time.

Recovery of legacy currencies. Legacy currencies were returned for the most part in a matter of weeks. One third of the notes in circulation were recovered by 31 December 2001 and the 75 % mark was exceeded on 8 February. The actual circulation of legacy currencies was much lower: bottlenecks at temporary storage depots led to delays in counting notes at central banks.

Recovery of coins. The withdrawal of coins was even slower: by 22 February only 27.9 % of national coins (in value terms) had been recovered as a result of coins being held in storage pending counting. With the help of publicity campaigns, central banks withdrew before the end of 2001 around 9 % of coins in circulation. It is now clear that some notes and, in particular, a large number of coins will never be recovered, having been lost or hoarded by collectors. In most Member States the period for recovering legacy currencies is limited (see table below).

Other matters associated with the introduction of euro notes and coins

Price stability. According to consumer surveys, a large proportion of the public (67 %) felt that more often than not prices had been rounded upwards on the occasion of the changeover to the euro, while 28 % felt that price increases and decreases had balanced one another out. Only 1.9 % took the view that prices had been rounded downwards. The inflation figures published by Eurostat show that, although annual inflation rose from 2 % to 2.7 % between December and January, this increase was attributable to several factors not linked to the euro, such as increases in certain taxes, higher oil prices and higher prices for fruit and vegetables. According to Eurostat, the currency changeover accounted for only between 0 % and 0.16 % of the monthly price trend. Voluntary price stability agreements were generally complied with.

Security. Despite an unprecedented number of cash-transport operations and a doubling in the number of notes and coins in circulation, the number of incidents was well below normal. Between September and December only 27 robberies of euro notes and 17 robberies of euro coins were reported. The effectiveness of security measures was very satisfactory.

Production quality. The quality control of the production of euro notes and coins was very effective. Only a few cases of defect were detected and the probability of receiving one of these defective euros is extremely small. The presence of nickel in 1-euro and 2-euro coins had been criticised but the tests carried out showed that there was no allergic reaction.

Counterfeiting. Euro notes and coins are better protected against counterfeiting than any of the old national currencies. Only some fifty or so forgeries of notes were detected in January, an exceptionally low figure, and only two poor-quality forgeries of coins were identified.

Conversion of vending machines. The adaptation of vending machines proceeded less smoothly. Many vending-machine operators underestimated the speed at which the new currency would replace the legacy currencies and suffered from declining turnover because some of their machines had not been converted. The time lost could not be made up rapidly because of shortages of trained staff. There were a few cases where euro coins produced in other participating countries were rejected because equipment had not been properly adjusted.

Introduction of the euro in third countries. In December 2001 26 central banks and financial institutions outside the euro area had frontloaded a total of some 4 billion euros in order to ensure that euro notes would be available in the first days of January. A large number of national notes, in particular German notes, were hoarded or used in central and eastern Europe. They began to be returned in 2001.

Public reactions

The public’s assessment of the effectiveness of preparations was largely positive: on average, three quarters of the public considered themselves to have been well or very well prepared on 1 January 2002. A majority considered that the early changeover of bank accounts to the euro helped them to become acquainted with the new currency. When it came to handling euros, one out of every five people stated at the end of January that the changeover was still posing difficulties (only one out of every 35 people claimed to be experiencing many difficulties). Most people had no problem recognising or handling the different euro coins, with Ireland being the one exception.

Thinking in terms of the euro. The transition to the euro did not alter the purchasing behaviour of 77 % of the public. Many consumers still had difficulty in memorising euro prices. Most of them continued to think in terms of the legacy currency, compared with a minority of 28 % that already think in terms of the euro. However, people used calculators and converters only to a modest degree. A majority felt that dual pricing should cease at the end of the period of dual circulation. The figures do though differ significantly between countries.

General satisfaction. Generally speaking, 60 % of people considered that the changeover to the euro would bring more advantages than disadvantages. This view was even more strongly shared by the under-24s. Moreover, a large majority said they felt more European thanks to the euro. Four out of five individuals felt that the changeover to the euro went well or very well. Lastly, over two thirds of the general public were happy that the euro was their currency and it was only in Germany, Greece and Austria that there was a higher proportion of dissatisfied individuals.

Preparation of small and medium-sized enterprises (SMEs)

Overall, the concerns that SMEs may have been poorly prepared were not justified. Even those that were slow to prepare seemed to have managed to switch to the single currency at the last minute. At the time of the changeover, 95 % of SMEs already kept accounts in euros. Most of them said that they did not encounter any difficulties in switching to the euro. A few problems were encountered with IT systems, the setting or display of prices and invoicing. Overall, there were no unpleasant surprises, with 95 % of SMEs feeling that the changeover went as planned or even better than planned. One enterprise in five expected the euro to have a positive impact on their business.

The changeover in figures: main national provisions

– Exchange at banks after legal tender Redemption by central banks after legal tender
Belgium 31/12/2002 Notes: Indefinitely
Coins: 31/12/2004
Germany 28/02/2002 Indefinitely
Greece to be decided by each bank Notes: 01/03/2012
Coins: 01/03/2004
Spain 30/06/2002 Indefinitely
France 30/06/2002 Notes: 17/02/2012
Coins: 17/02/2005
Ireland to be decided Indefinitely
Italy 30/06/2002 01/03/2012
Luxembourg 30/06/2002 13/12/2004
Netherlands 31/12/2002 Notes: 01/01/2032
Coins: 01/07/2007
Austria 28/02/2002 Indefinitely
Portugal 30/06/2002 Notes: 30/12/2022
Coins: 30/12/2002
Finland to be decided by each bank 29/02/2012

National sides and issuance of euro coins

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National sides and issuance of euro coins

Outline of the Community (European Union) legislation about National sides and issuance of euro coins

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Economic and monetary affairs > Practical aspects of introducing the euro

National sides and issuance of euro coins

Document or Iniciative

Commission Recommendation 2009/23/EC of 19 December 2008 on common guidelines for the national sides and the issuance of euro coins intended for circulation [Official Journal L 9 of 14.1.2009].

Summary

The Commission makes recommendations to Member States participating in the Economic and Monetary Union (EMU) concerning the issuance of euro coins intended for circulation after approval from the Council. These recommendations apply to national sides and edge letterings of both regular and commemorative euro coins intended for circulation.

The common sides of the euro coins bear the name of the currency and the denomination of the coin.

National sides of coins intended for circulation
In compliance with these common guidelines, national sides bear the name of the State issuing the coin, but do not give an indication of its denomination, or the name of the currency (except in the case of the use of a non-Latin alphabet). The design chosen to decorate the national side is surrounded by the twelve stars of the European flag. This design should not be modified, except in cases where the Head of State referred to on a coin changes. Issuing Member States are, however, allowed to update their national sides of euro coins in order to fully comply with this Recommendation.

The edge lettering of 2-euro coins can bear an indication of the denomination and/or the term “euro”.

Coins are to be put into circulation at face value. A minor proportion of them, intended for collectors, may be sold at a higher price.

Commemorative 2-euro coins

The design on the national side may be used to commemorate subjects of major national or European relevance. These commemorative coins are also intended for circulation.

When this type of coin is issued, certain rules should be respected:

  • only the 2-euro coin should be used;
  • ceilings established by the State and for the year should limit the volume of coins issued;
  • the total number of commemorative coins should not exceed 0.1 % of the 2-euro coins put into circulation during the previous year in all participating States. Alternatively 5 % of the total number of 2-euro coins brought into circulation by the issuing Member State concerned up to the beginning of the year preceding the year of issuance of the commemorative coin. If a global subject is commemorated, the ceiling may be increased to 2 % of the total number of 2-euro coins in circulation in all participating Member States;
  • the edge lettering should be the same as on regular coins.

Information procedure

The issuing Member State sends designs to the Commission six months before the issue date. The Commission can then ensure that the guidelines contained in this Recommendation have been respected.

The Commission informs participating States via the Economic and Financial Committee’s relevant subcommittee. If and when the Commission considers that the guidelines of this Recommendation have not been complied with, the subcommittee will decide whether to approve the design.

Relevant information on euro coin designs will be published in the Official Journal of the European Union.

Context

Recommendation 2003/734/EC and Recommendation 2005/491/EC are repealed and replaced by the new Recommendation. They also concerned the modification and bringing into circulation of national sides of euro coins.

Towards a single currency: a brief history of EMU

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Towards a single currency: a brief history of EMU

Outline of the Community (European Union) legislation about Towards a single currency: a brief history of EMU

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Economic and monetary affairs > Practical aspects of introducing the euro

Towards a single currency: a brief history of EMU

The first appeal for a European currency prior to the 1929 crash

On 9 September 1929 the German politician Gustav Stresemann asked the League of Nations the following question “Where are the European currency and the European stamp that we need?” Six weeks later, on 25 October, the New York Stock Exchange experienced its “Black Friday”: the international economic crisis began. It caused enormous economic upheaval internationally, business closures and an unprecedented level of unemployment.

The States responded to the crisis with a policy of “beggar-thy-neighbour”, taking deflationary measures to boost export competitiveness and introducing tariff barriers for products imported from abroad. This policy made the economic crisis worse. While in the short term it was beneficial to the State concerned, in the long term it had serious economic consequences: inflation, falling demand, rising unemployment and slower growth in world trade.

The end of the Second World War: a new start

In 1944, while the Second World War was still laying waste to Europe, a conference on the restructuring of international financial and monetary relations took place at Bretton Woods in the United States. Over forty countries participated: on 22 July 1944 they signed the Bretton Woods Agreements. These agreements lay down rules and procedures governing the world economy. They led to the establishment of the International Bank for Reconstruction and Development (“BIRD”, which has now become part of the World Bank) and the International Monetary Fund. Furthermore, the Bretton Woods Agreements put in place the gold standard monetary system. This system provides stable exchange rates based on gold which becomes the reference standard. Only the US dollar is convertible into gold and the other currencies are indexed to the dollar.

The world underwent profound changes after the Second World War. The experiences of war gave rise to an awareness that international cooperation was crucial to avert further suffering. The United Nations (UN) was thus set up in 1945. In Europe, the first foundations for what would later become the European Union were laid by three Treaties bringing together six signatory States (Germany, Belgium, France, Italy, Luxembourg and the Netherlands):

  • the Treaty establishing the European Coal and Steel Community (ECSC), signed on 18 April 1951;
  • the Rome Treaties, i.e. the Treaty establishing the European Economic Community (EEC) and the Treaty establishing the European Atomic Energy Community (EURATOM), signed in March 1957.

Creation of Economic and Monetary Union

At the summit in The Hague in December 1969, the Heads of State and Government defined a new objective of European integration: Economic and Monetary Union (EMU). A high-level group chaired by Pierre Werner, Prime Minister of Luxembourg, was thus given the task of drawing up a report on how this goal might be reached by 1980.

The Werner group submitted its final report in October 1970. It envisaged the achievement of full economic and monetary union within ten years according to a plan in several stages. The ultimate goal was to achieve full liberalisation of capital movements, the total convertibility of Member States’ currencies and the irrevocable fixing of exchange rates. The report therefore envisaged the adoption of a single European currency as a possible objective of the process, but did not yet regard it as a goal in itself. Furthermore, the report recommended that the coordination of economic policies be strengthened and guidelines for national budgetary policies drawn up.

In March 1971, although being unable to agree on some of the key recommendations of the report, the Six gave their approval in principle to the introduction of EMU in several stages. The first stage, involving the narrowing of currency fluctuation margins, was launched on an experimental basis and did not entail any commitment regarding the continuation of the process.

The collapse of the Bretton Woods system and the decision of the US Government to float the dollar in August 1971 produced a wave of instability on foreign exchanges which called into serious question the parities between the European currencies. The EMU project was brought to an abrupt halt.

In March 1972 the Six attempted to impart fresh momentum to monetary integration by creating the “snake in the tunnel“: a mechanism for the managed floating of currencies (the “snake”) within narrow margins of fluctuation against the dollar (the “tunnel”). Thrown off course by the oil crises, the weakness of the dollar and the differences in economic policy, the “snake” lost most of its members in less than two years and was finally reduced to a “mark” area comprising Germany, the Benelux countries and Denmark.

Creation of the European Monetary System (EMS)

Efforts to establish an area of monetary stability were renewed in March 1979, at the instigation of France and Germany, with the creation of the European Monetary System (EMS), based on the concept of fixed, but adjustable exchange rates. The currencies of all the Member States, except the United Kingdom, participated in the exchange-rate mechanism.

The principle was as follows: exchange rates were based on central rates against the ecu (“European Currency Unit”), the European unit of account, which was a weighted average of the participating currencies. A grid of bilateral rates was calculated on the basis of these central rates expressed in ecus, and currency fluctuations had to be contained within a margin of 2.25 % either side of the bilateral rates (with the exception of the Italian lira, which was allowed a margin of 6 %).

Over a ten-year period, the EMS did much to reduce exchange-rate variability: the flexibility of the system combined with the political resolve to bring about economic convergence, achieved sustainable currency stability.

With the adoption of the Single Market Programme in 1985, it became increasingly clear that the potential of the internal market could not be fully exploited as long as relatively high transaction costs linked to currency conversion and the uncertainties linked to exchange-rate fluctuations, however small, persisted. Moreover, many economists denounced what they called the “impossible triangle”: free movement of capital, exchange-rate stability and independent monetary policies were incompatible in the long term.

Introduction of the EMU

In June 1988 the Hanover European Council set up a committee to study economic and monetary union under the chairmanship of Jacques Delors, the then President of the European Commission. The other members of the committee were the governors of the national central banks, who were therefore closely involved in drawing up the proposals.

The committee’s report, submitted in April 1989, proposed to strengthen the introduction of the EMU in three stages. In particular, it stressed the need for better coordination of economic policies, rules covering national budget deficits, and a new, completely independent institution which would be responsible for the Union’s monetary policy: the European Central Bank (ECB).

On the basis of the Delors report, the Madrid European Council decided in June 1989 to launch the first stage of EMU: full liberalisation of capital movements by 1 July 1990.

In December 1989 the Strasbourg European Council called for an intergovernmental conference that would identify what amendments needed to be made to the Treaty in order to achieve the EMU. The work of this intergovernmental conference led to the Treaty on European Union, which was formally adopted by the Heads of State and Government at the Maastricht European Council in December 1991 and signed on 7 February 1992.

The Treaty provides for the EMU to be introduced in three stages:

  • stage No 1: (from 1 July 1990 to 31 December 1993): the free movement of capital between Member States;
  • stage No 2: (from 1 January 1994 to 31 December 1998): convergence of Member States’ economic policies and strengthening of cooperation between Member States’ national central banks. The coordination of monetary policies was institutionalised by the establishment of the European Monetary Institute (EMI), whose task was to strengthen cooperation between the national central banks and to carry out the necessary preparations for the introduction of the single currency. The national central banks were to become independent during this stage;
  • stage No 3: (underway since 1 January 1999): the gradual introduction of the euro as the single currency of the Member States and the implementation of a common monetary policy under the aegis of the ECB. Transition to the third stage was subject to the achievement of a high degree of durable convergence measured against a number of criteria laid down by the Treaties. The budgetary rules were to become binding and a Member State not complying with them was likely to face penalties. A single monetary policy was introduced and entrusted to the European System of Central Banks (ESCB), made up of the national central banks and the ECB.

The first two stages of EMU have been completed. The third stage is currently underway. In principle, all EU Member States must join this final stage and therefore adopt the euro (Article 119 of the Treaty on the Functioning of the EU). However, some Member States have not yet fulfilled the convergence criteria. These Member States therefore benefit from a provisional derogation until they are able to join the third stage of EMU.

Furthermore, the United Kingdom and Denmark gave notification of their intention not to participate in the 3rd stage of EMU and therefore not to adopt the euro. These two States therefore have an exemption with regard to their participation in EMU. The exemption arrangements are detailed in the protocols relating to these two countries annexed to the founding Treaties of the EU. However, the United Kingdom and Denmark reserve the option to end their exemption and submit applications to join the 3rd phase of EMU.

Currently, 17 of the 27 Member States have joined the third stage of EMU and therefore have the euro as a single currency.

The second stage of the EMU

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The second stage of the EMU

Outline of the Community (European Union) legislation about The second stage of the EMU

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Economic and monetary affairs > Practical aspects of introducing the euro

The second stage of the EMU

In accordance with the Treaty, the second stage began on 1 January 1994 with, in particular, establishment of the European Monetary Institute (EMI), based at Frankfurt am Main. The tasks of the EMI were twofold:

  • strengthening cooperation between the national central banks and the coordination of Member States’ monetary policies (during this stage, monetary policy remains in the hands of the national authorities);
  • carrying out the necessary preparatory work for establishment of the European System of Central Banks (ESCB), which is to conduct the single monetary policy from the beginning of the third stage, and for introduction of the single currency.

During the second stage, Member States must ensure that their national law is compatible with the Treaty and with the Statute of the ESCB, with special reference to independence of their national central bank. They must also make significant progress towards convergence of their economies, since the move to the third stage is conditional on fulfilment of the four convergence criteria laid down in the Treaty. The Commission established annual reports on the state of convergence between Memeber States

The monetary turmoil experienced in 1995, largely caused by the slide in the value of the dollar, in fact strengthened the Member States’ political determination to go ahead with EMU. That determination took shape at the Madrid European Council of 15 and 16 December 1995, which confirmed that the third stage of Economic and Monetary Union was to go ahead on 1 January 1999 in accordance with the convergence criteria, the timetable, the protocols and the procedures laid down in the Treaty. On the basis of the discussions initiated by the Commission’s Green Paper, the fifteen Heads of State or Government spelled out the scenario and the timetable for introducing the single currency, which they decided to call the euro.

Rounding off two years of intensive work by all the EU institutions, the Dublin European Council of 13 and 14 December 1996 noted that there was political agreement on all the necessary foundations for setting the single currency in place:

  • the legal framework for the use of the euro;
  • the Stability and Growth Pact for ensuring strict budgetary discipline;
  • the structure of the new Exchange-Rate Mechanism for those Member States not joining the euro zone.

At the same time the EMI presented the designs of the banknotes that will be put into circulation from 1 January 2002. The euro has now become a tangible reality for the general public.

Throughout 1996 and 1997 the economic upturn, against a background of closer nominal convergence, interest and inflation rates at exceptionally low levels, and stable exchange rates (the Finnish markka joined the EMS Exchange-Rate Mechanism in October 1996 and the Italian lira returned to the ERM in November), enabled there to be a general improvement in the state of public finances, paving the way for the majority of Member States to switch to the euro in 1999.

Greece's membership in the single currency

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Greece’s membership in the single currency

Outline of the Community (European Union) legislation about Greece’s membership in the single currency

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 > Institutional and economic framework of the euro

Greece’s membership in the single currency

Document or Iniciative

Council Decision of 19 June 2000 in accordance with Article 122(2) of the Treaty on the adoption by Greece of the single currency on 1 January 2001 [Official Journal L 167 of 7 July 2000].

Summary

At the time of the transition to the third stage of economic and monetary union (EMU), Greece did not fulfil the convergence criteria (Decision No 98/317/EC) and was covered by a derogation laid down in Article 122 of the Treaty. Every two years, or at the request of the Member State concerned, a report by the Commission and the European Central Bank (ECB) examined whether the convergence criteria were met. Greece requested that the derogation be repealed on 9 March 2000.

In its decision, the Council took the view in the light of the Commission and ECB report that:

  • Greece fulfilled the criterion relating to the average rate of inflation; during the previous year, the inflation rate reached 2 %, which was lower than the reference value (2.4 %);
  • Greece was not the subject of a decision on the existence of an excessively high government deficit (Decision 2000/33/EC), as the annual government deficit did not exceed the reference value (3 % of GDP) and the government debt ratio was approaching the reference value (60 % of GDP) at a satisfactory rate;
  • Greece had been a member of the exchange-rate mechanism of the European Monetary System (EMS) and subsequently of ERM II for two years without devaluing its currency’s central rate;
  • Greece met the criterion of the long-term interest rate; over the previous year, the interest rate reached 6.4 %, which was lower than the reference value (7.2 %);
  • Greek domestic legislation, including the statute of the national central bank, was compatible with the Treaty and the Statute of the European System of Central Banks (ESCB).

The Council therefore considered that Greece had achieved a high level of sustainable convergence and that it fulfilled the necessary conditions for the adoption of the single currency. The derogation relating to Greece was repealed on 1 January 2001.

References

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

Council Decision 2000/427/EC

01.01.2001

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OJ L 167 of 07.07.2000

Related Acts

Council Regulation (EC) No 1478/2000 of 19 June 2000 amending Council Regulation (EC) No 2866/98 on the conversion rates between the euro and the currencies of the Member States adopting the euro.

By this Regulation, the Council set the conversion rate between the Greek drachma and the euro at 340.750 drachmas per euro, as of 1 January 2001.