Following the introduction into circulation of €-denominated notes and coins on January 1, the Commission will be carrying out an intensive monitoring exercise. During the first three weeks of the year national authorities will be making daily reports on the movements of currency, and any problems. Banks and major retailers will also be reporting daily; and the Commission will publish a synthesis. Twice-weekly reports will then be made until the end of February.
Some Reported Problems
Recent stories in the press indicate that there can be confusion as to whether sums are being denominated in national currency or in €. The Irish Times of 21 November reported on a lucky Dubliner moving to Spain, who asked his bank to transfer I£ 1500 to a Spanish account. This, the bank calculated, was worth some 300 000 pesetas. They then transmitted €300 000.
A This is the first in a series of Briefings on progress in introducing euro notes and coins, prepared for Parliament's Economic and Monetary Affairs Committee. Material is drawn mainly from the European press.nother source of error appears to be arising from the Single Currency's use of two units: the € itself and the cent. A woman was reported in Libération of 14 November, for example, as having apparently been charged €4190 for a parking offence. The correct amount was €4.19 ; but the decimal marker had somehow moved. Similar problems are most likely in countries which have hitherto used only one unit: Italy, Spain, Greece, Portugal and also, perhaps, Belgium and Luxembourg. They will add to the difficulties often caused by the use of the « , » in some countries and of the « . » in others.
Problems may arise from the sudden introduction of large-denomination € banknotes, combined with reluctance by retailers to hold adequate cash "floats". ATMs will be issuing €5 notes only in Germany, Luxembourg, the Netherlands and Portugal, and in some places only €20 and €50 notes will be available. At the same time, retail outlets are being discouraged from holding euros by the risks involved. Italian shops face a fine of €25 000 for every incident of notes lost and a further €3 000 for each note that goes missing though only in cases of "evident negligence", the central bank has now clarified.
The risk that counterfeits will enter circulation together with genuine euro notes has been increased by the reported thefts of €s: 3 in Germany, 2 in Italy and one in the Netherlands. This may have given criminals time to copy some of the security features, only revealed in September. El Mundo fears that Spain will be particularly vulnerable because of the large numbers of foreign tourists.
The conversion of parking meters, vending machines, etc. is giving rise to anxieties. In the early weeks of January some may continue to take only the national coins which are being withdrawn from circulation. Stories have also appeared about various foreign coins which resemble euros. It is alleged, for example (NCR Handelsblad), that some machines may not be able to distinguish between the 10 baht coin from Thailand and the €2 piece, which is worth eight times as much. More sophisticed machines, however, will be able to distinguish electro-magnetic differences.
Stories have re-surfaced in the French press about the nickel content of €1 and €2 coins, which might cause skin disease in those allergic to the metal. Authorities have pointed out, however, that the proportion of nickel is only 5%, the same as in the case of 1 and 5 French Franc coins. "You would have to sleep on €1 a €2 coins for a week for any effects to appear".
Opinion polls show public anxiety about price rises falling from the peak of 61% reported by the May Eurobarometer, but still above 50% (e.g. "Wird alles teuro?" in Stern of 15 November). Anxiety continues to be highest among the elderly. The main source of identified price rises is not incorrect application of the rounding rules, but a resetting of prices, with the € as "lead currency".
Nevetherless, La Libre Belgique of 28 November reported 10 instances of shops being fined for mathematically incorrect "rounding up" of prices from BEF to €.
Moreover, the Belgian authorities themselves do not appear to be blameless. La Dernière Heure of 22 November noted a circular from Belgium's Attorney General which advocated converting fines at the rate of BEF 40 to the € rather than 40.3399: i.e. that fines should rise by 0.84975%.
In Ireland, however, government has ruled that fares on publicly-owned buses and trams shall all be rounded down. This has not, however, just been to set a good example. It had been pointed out that a mathematically-precise conversion would have meant a commuter having to carry at least 5 euro-denominated coins to pay the exact fare.
But the situation in Italy seems to be different. The Corriere della Sera of 15 November reported a dispute between the Comitato interministeriale per la programmazione economica ("CIPE") and many city local authorities. The latter want to introduce flat-rate bus and underground fares of €1 from January 1, ostensibly for the sake of convenience – but this is an overall price rise of 30%.
La Stampa of 22 November drew attention to the important fact that the effects of rounding vary inversely with the amount involved. Where sums over Lire 4000 are converted, the maximum effect on prices will be between +0.71 and -0.75%. But the effect on cheaper products, which form a larger proportion of poorer people's expenditure, could be over 5% up or down.
The Economist of 1-7 December also draws attention to the problem of the "disappearing peseta", which arises where businesses use large numbers of low-value components which need to be priced separately for the allocation of costs among suppliers. For example, an item that now costs 0.83 pesetas converts to €0.004988, which rounds down, using the official rounding rules, to €0! To get a real figure (one cent) the price would have to rise to 0.84 pesetas.
Surveys conducted in a number of countries show prices rising, but emphasise the difficulty of differentiating those caused by conversion to euros from those caused by other inflationary pressures. La Dernière Heure of 13 November reported a 2% inflation rate in Belgium. Nevertheless, a survey of bakeries, coffee-shops, restaurants and small shops showed average rises of 3%, with some increases of nearly 20%. A survey of 1000 prices in the German Land of North-Rhine Westphalia, reported on 30 November, found that the number of price falls (13%) exceeded the price rises (12%); but that 72% of the rises could be attributed to euro conversion, and only 23% of the price reductions. In Finland, a survey by the Ministry of Finance found that the rounding up of prices as a result of dual pricing had been responsible for under 0.1 of a percentage point in the 3.4% rise in the consumer price index. The survey, however, was conducted as long ago as May.
Banks will generally be closed on January 1, but some may be open to the public for a period in Luxembourg, Germany and Spain. They will be open for retailers only in Austria and the Netherland; and the Bank of Finland will open for an hour at midnight.
The main distribution will be by Automatic Teller Machines (ATMs), and most should already be loaded with €-notes on the first day. However, the loading rate in Greece, France, Spain, Ireland, Italy, Portugal and Finland will be less than 100%, with Finland and the South of Italy still below 100% after the first week. Not all banks, even in the same country, will be converting in the same way. In Belgium, Dexia and Bacob will give BEF until 22.00 on December 31, and €20 notes from 06.00 on 1 January. Fortis will give BEF until 23.00 on 31 December, and both € notes and BEF 1000 and 2000 from 06.00 the next day. KBC will dispense € notes from midnight on 31 December.
The Italian government has decided to send a free euro/lire converter to every Italian family – a decision which has not, however, been universally welcomed. The Corriere della Sera of 4 December reports anger from traders who had stocked up with converters for sale as Christmas presents prior to the government announcement.
AAccepted, but not loved
A poll carried out for the Wall Street Journal, and published on 11 December, shows that euro area citizens are prepared to adapt to the €, but would prefer to keep their national currencies. A majority for the € was found only in Italy and Belgium. Polling was in September/October.
n extra burden is being placed on the Greek central bank by the need to supply euros to the whole Balkan area. It is estimated that some 6 billions-worth of D-Marks are currently circulating in the area, which will need to be changed into euros. The Greek central bank belongs to a "club" of 16 central banks in the area, which includes that of Russia. La Stampa of 3 December also reminds readers that Kosovo, Bosnia Herzegovina and Montenegro will also be, in effect, converting to the euro on January 1, since their currency is currently the D-Mark.
But the change may at least give Greeks respite from the tax man. Tax offices throughout the country may close until 15 January while the TAXIS software is converted to operate in euros.
National notes and coins
The Italian Treasury expects to gain nearly €3 million as a result of a 2.5% tax to be imposed on repatriated lire, most of which were illegally exported earlier this year. The Spanish press reports large increases in the purchase of luxury goods like cars, jewellery and second houses, as "black" money is unloaded. Registrations of high-price cars rose dramatically in October (BMW +41%, Audi +43%, Porsche +48%, Maserati +49%; Ferrari +67%).
For its part, the Irish budget expects to receive an extra €370 million from the issuance of €-denominated coins. This will be the profit made by the Irish central bank, arising because the value of the coins is higher that the cost of minting them. The government could gain another €240 million as a result of Irish currency notes not being exchanged into eurosthrough having been lost, forgotten, destroyed or kept as souvenirs.
In fact, over 80% of French citizens, according to one poll, will be keeping some francs assouvenirs. In Italy, the Treasury will actually be issuing two new gold coins denominated in lire, one of 50 000, the other of 100 000, representing the pulpit of St. Andrew in Pistoia and the castle of Caserta. The lower House of the Italian Parliament has discussed the possibility of melting down collected coins to make a lasting memorial to the lira.
Across the euro area as a whole, 350 000 tonnes of national coins need to be collected and melted or crushed. The number of French coins is 6 to 8 billion. The Germany figure is 250 coins per head.
Most people, however, are unlikely to try changing small amounts of low-denomination coins into euros, and charities could greatly benefit. In the European Parliament's various buildings you will find large transparent containers into which you are asked to put loose change. In this way you can get rid of all those 1 LUF/BEF or 10 French centimes coins, and at the same time help to fund UNICEF. Look closely, though, at the accompanying leaflet. Two of the coins shown are a British one penny and a British twenty penny piece. Does UNICEF know something that we don't?
Most of the national currencies being replaced are not that old, considering the numerous currency reforms over the years. Most names, however, go back at least to the Middle Ages. The franc was first minted in 1360 to pay ransom to the English for the release of King John II of France. The mark was a unit for measuring metals, as were the lira, the pound and the peseta. The s(c)hilling and p(f)enny/ig, old germanic coins, were taken in Ireland and the UK before decimalisation to be the Roman solidus and denarius (hence “lsd” for pounds, shillings and pence). The doyen d’age is the Greek drachma, which goes back at least to fifth century BC Athens. Its end leaves the Babylonian measurement of weight, the shekel, undisputed as the world’s oldest extant currency.
Stories in the French press, however, indicate that people are not so much worried about losing the word "franc" as about the more popular terms.Libération of 30 November carried an open letter to Wim Duisenberg, wondering whether "dix balles" (FF10) will now mean €10. Will there also be new definitions of the "thunes" (FF5), "briques" (FF10 000) and "patates" (FF1 million)? If the old names die (as "tanner" and "bob" did in the UK), it won't perhaps be long before there are new ones. "Je te fiche mon billet, mon cher Wim, que le nom 'euro' ne sera pas longtemps celui du trottoir."
The "parallel €" and other news
On 4 December the Northern IrelandAssembly debated whether to adopt the € as a second legal currency, alongside the £ Sterling. Whatever its legal status, however, the € is certain to circulate as a parallel currency north of the border, like the I£ before it. A similar situation is likely in the Isle of Man, while the € will replace the parallel French Franc in the Channel Islands. Meanwhile, on the UK mainland, business leaders in the Kentish town of Ashford were reported by the Financial Times of 7 December to be preparing for the general acceptance of the € in shops and restaurants. More generally in the UK, a number of large hotel and retail chains have already made arrangements to accept and handle euros a development which is inelegantly called "euro creep".
The € is also likely to enter Sweden from neighbouring Finland. The Financial Times of 4 December reported on efforts by the mayor of Haparanda, a small town on the Finnish border, to pay Finns working for the local council in € rather than crowns. He has been advised by lawyers, however, that this would breach the Swedish constitution.
Die Zeit of 22 November reported the vice-president of the Hungarian central bank, György Szapáry, to have forecast that Hungary will meet the Maastricht convergence criteria, and be ready for the €, by 2004. The article observed, however, that an early "Euroisierung" of central and eastern Europe is strictly frowned upon by the current EU authorities.
Is the plural of “euro”, in Italian, “gli euro” (as officially stated on the euro web-site) or “gli euri” (an Italian decision reported by the Financial Times on 15 November)? When writing down a figure of more than one euro, do you add an “s” or not? It appears that you do in Spanish, French and Portuguese, but not in the rest (in Finnish you add an “a”). Finally, if “EUR” is the official abbreviation of “euro”, what is the official abbreviation of “cent”? Answer: there isn’t one; but “c” or “ct” is suggested.
A sample of French national assembly members were asked by Le Parisien in early December to answer two questions: how much is FF20 in euros? and how much is €20 in francs? Only 20% could give the correct answers.
Elements of the national cash changeover plans: Government plans and related information, via http://www.europa.eu.int/euro/html
Big Bang, Little Impact: the euro changeover, Deutsche Bank, 21 July 2001, 44pp.
The introduction of the euro and the rounding of currency amounts, Commission DGII, 1998.
European Parliament, Directorate-General for Research: Economic, Monetary and Budgetary Affairs Division.