INTRODUCTION OF THE EURO
Report on the preparations for the introduction of euro notes and coins.
Second report on the preparations for the introduction of euro notes and coins.
|Forwarded to the Council:
||(a) 3 April 2001|
|Deposited in Parliament:
||(a) 25 April 2001
(b) 10 October 2001
|Basis of consideration:
||(a) EM of 4 May 2001
(b) EM of 11 October 2001
|Previous Committee Report:
|To be discussed in Council:
(b) 16 and 19 October 2001
23.1 Euro notes and coins will be introduced on
1 January 2002 in the 12 participating Member States. The Commission
estimates that the majority of the population will have received
euro banknotes from banks by 5 January and in some countries even
earlier. The replacement of national currencies by the euro is
expected to be largely completed within a couple of weeks, perhaps
as early as the end of the first week. The Commission describes
the introduction of the euro in the following terms:
"At 00.00 on 1 January
2002, the national currencies will cease to exist. ... National
notes and coins will continue to be used in most countries for
a further eight weeks at the most, but it will no longer be possible
to make payments in the old national currency units by card, cheque
or transfer. Businesses will have to operate entirely in euros.
ATMs [Automated Teller Machines] will supply euros, and traders
will endeavour to give change in euros, even if payment is made
in the old national currency unit. From the end of the first week
of January, most cash transactions will normally be in euros.
At the end of the second week, the process of introducing the
euro will have been largely completed."
23.2 Document (a) gives an account of the state
of preparations for the introduction of the euro in the 12 participating
Member States as at April 2001.
23.3 The chapter on state of progress with preparations
notes, amongst other things, that, overall, large businesses were
making satisfactory progress but small and medium-sized enterprises
(SMEs) were tending to underestimate the scale of work that needed
to be done; the provision of information needed to be improved,
particularly for SMEs. This was reflected in the fact that almost
one business in three in the euro area had not realised that 1
January 2002 is the final date for operating entirely in euros.
As regards financial institutions, the report notes that the banking
community was pursuing an active policy of preparing for the euro,
which included the early conversion of customers' accounts and
the rapid adaptation of automated teller machines in 2002. As
regards public administrations, the report notes that all participating
Member States had published a euro changeover plan for public
administrations and a plan for the exchange of notes and coins.
23.4 The report notes that the general public was
becoming more knowledgeable about the general timetable for the
changeover to the euro, but that, on the whole, members of the
public in a number of countries had not come to grips particularly
well with the main elements of the changeover and were unfamiliar
with the new scale of values. This unfamiliarity with the euro
persisted despite national and Community information campaigns.
23.5 In the chapter on work in progress and ways
forward, the report notes that the main areas of work included:
ensuring the security of the new notes from counterfeiting; helping
the general public, especially vulnerable groups, prepare for
the euro's introduction; and ensuring that businesses do not exploit
the introduction of the euro by increasing prices unjustifiably.
23.6 The Commission considered that dual pricing
was the most obvious way for consumers to check price stability.
In drawing on good practice in Member States, the report identifies
some ideas that could be put into practice in participating Member
States and could usefully be copied elsewhere, such as, making
freely available simple conversion tools and kits of euro coins.
23.7 Document (b), which was published in October
2001, provides an update on the state of preparations for the
introduction of the euro, looks closely at a number of major operations
and identifies what the Commission considers as the best practices
for ensuring a troublefree changeover.
23.8 The report makes clear that significant progress
has been made since the earlier report. However:
"the situation is still
rather uneven: the state of preparation varies appreciably between
economic operators. While national administrations have nearly
completed their preparations, local authorities do not appear
to be as far advanced. Preparations by SMEs are also moving rather
slowly, with significant numbers not sufficiently aware of deadlines
or costs. General public awareness has improved considerably but
remains insufficient overall. The use of the euro has increased
slightly, particularly in transactions with the public authorities.
But businesses are not turning to the European currency readily
and its use by private individuals remains very low. Communication
efforts are being intensified. The Eurosystem has launched an
extensive campaign with a budget of _80 million, using all media.
Information campaigns by Member States and the Commission are
being stepped up and will peak in December, with a Community contribution
of _28 million."
23.9 The report notes that the production of euros
is on schedule and that by the end of August 2001 more than 11
billion euro banknotes and by the end of September 46.8 billion
euro coins had already been produced, quantities that cover the
overall requirements for the initial launch:
"Simulations show that
the majority of the population will have received euro banknotes
from banks by 5 January and in some countries this period will
be even shorter. The pace of introduction will therefore be even
faster than initially planned. The November 1999 Council declaration
set the target of completing the bulk of the exchange operations
in two weeks; in actual fact it will probably take only half that
time. Euro coins will be available from 14 December at the earliest
and will also be brought into circulation rapidly in the first
days of January.
23.10 The report identifies that the main risk as
the storage and transport of euro cash, but notes that most Member
States are addressing this and that several are drawing up contingency
plans. As regards the public's concern that the changeover will
be used as a cover for unjustified price increases, the report
"the risk of price rises
is, broadly speaking, very slight or even nonexistent. To
keep it as low as possible, the Commission would ask the national
authorities and traders to honour their undertakings to keep prices
stable when changing over to the euro and consumers to remain
vigilant. Together with the ECB and the Council, the Commission
will keep a close watch on prices. It calls on Member States to
publish appropriate indications as frequently as possible in 2002."
23.11 As regards the protection of the euro against
counterfeiting, the report states that
has been made in establishing a comprehensive framework for protection
against counterfeiting of euro banknotes and coins. Implementation
of the relevant texts (Council Regulation, framework decision,
etc.) is monitored by the Community institutions."
23.12 The Explanatory Memorandum of 11 October 2001
from the Economic Secretary to the Treasury (Ruth Kelly) summarises
the report's detailed findings:
"Preparations by businesses
According to the latest surveys by the Federation of European
Accountants and the Union of Industrial and Employers' Confederations
of Europe large businesses have attained a satisfactory level
"SMEs. The degree of readiness for the
euro among SMEs in Europe is generally lagging far behind that
of large firms. Member States and trade associations must step
up their efforts as a matter of urgency so that advantage is taken
of the remaining months to catch up. Small firms, particularly
those in the distributive sector, should be the focus of special
attention. Euro area governments and trade associations need to
raise awareness in this sector and ensure that all SMEs are aware
that 31 December 2001 is the cutoff point after which all
noncash transactions will have to be made in euro. The Commission
emphasises the importance of preparations in the retail sector.
Training is particularly important for cash handlers, who will
deal with the public throughout the introduction of euro cash
and the withdrawal of legacy cash.
"Euro use. Businesses in general are
still not making much use of the euro for their payments, their
bank accounts and their accounting. The Commission reports that
euro use averages 26 per cent by businesses in domestic transactions
and 33 per cent in cross border trade. The Commission estimates
that some 30 per cent of businesses have euro accounts. The Commission
recommends that authorities encourage greater euro use in the
"Financial Institutions. The Commission
reports that banks in several euro area countries have already
started or are about to start extensive account conversion, mostly
by tacit customer agreement, and recommends that other euro area
banks follow suit.
"Front Loading. Distribution
of cash to banks and post offices began in September 2001 and
will continue during the final quarter 2001. The Commission state
that no major security incidents have so far been reported.
The Commission reports that banks forecast that an average of
48 per cent of their retailer customers will submit orders for
the euro cash in the final quarter 2001. The Commission recommends
that retailers be encouraged to subfrontload by offering
flexible debit terms.
"Distribution of cash outside the euro area.
The European System of Central Banks will distribute euro notes,
and in some cases coin, to the banking sector outside the euro
area under strict guidelines. The Commission also sets out elements
of national cash distribution plans and identifies issues related
to security and the integrity of the cash supply.
"Automated Teller Machines (ATMs). The
Commission reports that the euro area countries estimate around
80 per cent of ATMs will dispense euro notes from 1 January 2002.
Some 68 per cent will not be dispensing any further national currency
from that date.
"Withdrawal of legacy currency. (Note:
Dual currency periods vary but by 28 February 2002 at the latest
national currencies in all euro area countries will cease to be
legal tender. National central banks will continue to exchange
national currency for longer periods.) The Commission reports
that some 76 per cent of banks in the euro area will exchange
national currency for euros free of charge during the dual currency
period subject to prior notice for a large amount or, in some
cases, payment into the customer's account. After the dual currency
period some 57 per cent of banks in the euro area will continue
to do likewise. 83 per cent will not charge handling fees for
retailers depositing national currency notes and 76 per cent for
"National administrations. The Commission
reports that central government preparations are advanced and
efforts now focus on early changeover of utilities billing, public
contracts, civil servants payslips and staff training.
Local authorities do not appear to be as far advanced as national
administrations. The Commission notes that it is difficult to
gauge whether the overall state of preparations is satisfactory,
particularly in the smallest local administrations (there are
some 70,000 local administrations in the euro area). The Commission
reports that the legal framework for the cash changeover in local
government has been finalised throughout the euro area. Local
initiatives continue where local public administrations retain
competence. The Commission identifies a number of examples of
local government activity to expand public awareness of the euro.
"Preparation of the general public. National
communication campaigns are being used to raise awareness amongst
the general public in the euro area. Knowledge of the date on
which euro notes and coins will be brought into circulation improved
substantially in the second half of 2001 although the European
public is still not very sure about the length of the period of
"Most of the people living in the euro area
now know the exact conversion rate of the national currency into
the euro. The Commission states that the progress made in informing
the public is substantial but still insufficient. The efforts
already made by Member States must therefore be continued and
"On the whole, most people living in the euro
area are confident in their ability to acquaint themselves with
the new currency. A significant number (34 per cent) are afraid
of not recognising euro notes and coins.
"The Eurosystem campaign launched on 30 August
precisely to promote euro notes and coins will probably reduce
these percentages very significantly. One of the main sources
of concern for consumers is price rises when the euro is introduced,
a concern today shared by two thirds of the European public. Since,
apart from national differences, women and the socially disadvantaged
are on the whole relatively worried, participating Member States
should direct a specific information effort at them.
"The Eurosystem campaign.
The European Central Bank and the twelve national central banks
are conducting an extensive campaign in the final quarter 2001
to ensure that euro area citizens are familiar with the visual
appearance and security features of the new euro notes and coin.
Cooperative efforts with the European Blind Union continue
for the visually impaired. The Commission recommends cooperation
at local level between local government and trade associations
to reinforce these efforts.
"Good Practice. The Commission elaborates
forty examples of good practice considered important or useful
in facilitating changeover operations in the euro area. Examples
include: dual pricing, early changeover of bank accounts and utility
bills, rapid conversion of ATMs, deferred debiting for subfrontloaded
cash to retailers, practical training of cash handlers, commitment
by retailers to good practice in maintaining price stability,
avoiding mixed payments in change and continuing dual pricing
at least until the end of dual circulation periods."
23.13 The Commission calls on Member States and
trade associations to apply these good practices wherever possible
in order to facilitate the introduction of euro notes and coins.
The Government's view
23.14 The Government states that there are no policy
implications arising from the reports.
23.15 Although the UK is not one of the 12 participating
Member States, UK businesses and citizens will nevertheless be
affected by the introduction of the euro on 1 January 2002. In
noting these two documents, including the forty examples of best
practice that the October report mentions, we recognise that they
have no policy implications for the UK. We clear the documents.
64 Subfrontloading is the redistribution by banks
of some of the notes and coins they receive to traders, which
began in September in Germany, Luxembourg, Austria and, for the
largest shops, in Spain. Subfrontloading operations will
be spread over the period between October and December in other