Putting euro banknotes and coins into circulation
Prof. Eugenio Domingo Solans, Member of the Governing Council and the Executive Board of the European Central Bank. Speech delivered at the Euro 2002 Information Campaign conference, hosted by the Banco de Portugal. Lisbon, 15 May 2001.
Putting euro banknotes and coins into circulation from 1 January 2002 should be guided by one basic principle: achieving a smooth and fluid substitution of banknotes and coins denominated in escudos with the new banknotes and coins in euro. Attaining this objective is a challenge, not only for national and Community authorities and the Eurosystem - that is to say, for the European Central Bank (ECB) and the national central banks of the euro area, in our case the Banco de Portugal - but also for European, and thus Portuguese society as a whole. It is a complex and important logistical operation which marks the culmination of the process of European Monetary Union. To attain this objective, all citizens will have to work together.
To ensure a smooth and fluid substitution of escudos with euro, Portuguese citizens must appreciate the benefits to be derived from this operation. Only then will a receptive attitude be adopted and full co-operation ensured. We have to make sure that people understand that the introduction of the new euro banknotes and coins is not only necessary but also advantageous for all. I shall not deny that the substitution of escudos with euro will cause us all a certain inconvenience, but there is no doubt that it will be worthwhile. It is comparable with introducing improvements in one's own home: during the works, we suffer inconvenience, but, afterwards, we are happy with the end result and think it is a shame that we were not able to do it beforehand.
We have had the euro as our currency since 1 January 1999 and it is, in fact, already used in many transactions and valuations. The anomaly, or disadvantage, is that for cash payments and, therefore, for the fixing of many prices, we still have to use figures expressed in escudos. This disadvantage, or imperfection, will disappear with the introduction of euro banknotes and coins, such that all transactions will be conducted, and all prices expressed, in the same currency unit rather than two different ones. The conclusion is clear: the euro cash is not being introduced to make our lives difficult but, on the contrary, to make them easier, to remove an anomaly which is disadvantageous and to put the finishing touch to European Monetary Union.
To ensure that the cash changeover is successful, the priority at present is to keep the public well informed. The media, both public and private, should play an important role in this respect. I should like to thank the media in advance for their efforts, their co-operation and the positive focus which I am sure they will give to this operation.
To facilitate the provision of information, the Eurosystem prepared and has begun to unfold the Euro 2002 Information Campaign, under the slogan "the EURO. OUR money", "EURO. A nossa moeda". Indeed, it is within this framework that this conference has been organised by the Banco de Portugal, just as other such conferences in the other 11 euro area countries. The Campaign, with its slogan "EURO. A nossa moeda", is more specialised than, and complements, the one being organised by the Ministry of Finance. As part of the campaign, a website has been designed (www.euro.ecb.int) on which detailed information on the euro banknotes and coins and their imminent introduction has been available since the beginning of this year in the 11 official Community languages. I recommend that you visit this euro website and encourage your children to play the euro games in the section dedicated to them, and then we will end up learning from them.
Concrete initiatives involving groups or institutions with which the Eurosystem wishes to form "partnerships" also fall within the Euro 2002 Information Campaign. This is because we understand that such "partners" can and should play a significant role in introducing euro banknotes and coins, thus reinforcing the impact of our information campaign. I am referring in this context to credit institutions, large non-financial corporations, retailers, educational bodies, etc. The Eurosystem is making available to all interested parties the necessary means to facilitate the effective provision of information and develop sound communication with their public. We do not need to point out that we are especially concerned with those groups which could find it "less easy", I would say, to adapt to the euro, such as the elderly, the disabled, the deaf and dumb, the blind, etc. They will receive information tailored to their needs and - it will not be for the first time - maybe even end up giving us all a lesson in adapting to and accepting the euro.
The Euro 2002 Information Campaign will gradually be stepped up and eventually draw to a close in the final months of this year and the first weeks of 2002 with the detailed explanation of the design and configuration of the new banknotes and coins, the security features of the euro banknotes which the public should know, the denominations of the notes and coins and the main aspects of the cash changeover. I shall further expand upon some of these points below.
With regard to the design and configuration of the euro banknotes, the first fact which ought to be mentioned is that, for any given denomination, the euro banknotes will be identical, irrespective of the country where they were put into circulation; they will thus circulate and be accepted in all euro area countries. Hence there will be no national differences on either of the two sides of the banknotes. By contrast, only one of the sides of the coins for each denomination will be identical, and the other will differ from country to country. The general appearance of the coins of the same denomination, as well as their structure and technical characteristics (shape, diameter, thickness, weight, colour, metallic composition, conductivity, etc.), will be identical in all cases. This means that they will be easy to identify, although having a different design on one side and, of course, they will circulate and be accepted in all euro area countries. The diversity will not lead to confusion.
The euro banknotes will incorporate the most state-of-the-art security features. Those which should be known by the public will be communicated by September, but not before, for reasons of security. Reproductions of euro banknotes which may already be viewed on the website do not contain the security measures and certain features have been altered on purpose, so that only an idea of the general appearance is given. It may therefore be hoped that nobody will be duped by possible reproductions of these fictitious samples. There is a simple rule for the general public, which the media would be encouraged to propagate, namely not to accept any euro banknote before 1 January 2002, given that the banknotes - not the coins - will not be distributed to the public before the bell strikes midnight on New Year's Eve.
Wherever there are banknotes, and - in particular - where a currency is widely used at the international level, as is the case with the euro, there will be risks of counterfeiting. Although the euro banknotes incorporate the latest and most sophisticated security features, and despite the fact that all kinds of measures are being taken in collaboration with the European Commission, Europol and the national authorities, this will not be sufficient to minimise the risk of counterfeiting to the full. Equally essential will be the active collaboration of the public, who - especially at the beginning, until they are as familiar with the euro as they are at present with escudos - will need to pay particular attention to the banknotes they receive.
With regard to the denominations of the euro banknotes and coins, there will be a significant change of scale with respect to escudos, in accordance with the conversion rate of EUR 1 to PTE 200.482, which is irrevocably fixed since 1 January 1999. The significant difference in value between the euro and the escudo as units of account gives the Portuguese an advantage which is not shared by many euro area countries and which will help to avoid confusion during the dual circulation period. The amounts in figures, very distinct in each case, should not lead to doubt as to whether you are dealing with euro or escudos; for example, an electricity bill for an amount in the region of 100 is evidently in euro.
The change of scale means that cents are to return and are not worthless: 50 euro cent are equal to PTE 100. Thus the public need not accept rounded amounts and should pay and be paid "to the cent". With the euro, the expression "not worth a cent" will become meaningful once again in our language. At the other end of the scale, there will be fewer millionaires than there are at present with the escudo. With regard to the cents, the older generation will be at an advantage since it will have already used them in the past and will be able to help the younger generation to cope with them without difficulty.
In short, there will be seven denominations or face values of euro banknotes - EUR 5, EUR 10, EUR 20, EUR 50, EUR 100, EUR 200 and EUR 500 - and eight denominations or face values of the coins: 1 cent, 2 cent, 5 cent, 10 cent, 20 cent, 50 cent, EUR 1 and EUR 2. Note that both the euro banknotes and coins, without exception, follow the basic sequence: 1-2-5: 1-2-5, 10-20-50, 100-200-500 (1 cent-2 cent-5 cent, 10 cent-20 cent-50 cent, EUR 1-EUR 2-EUR 5, EUR 10-EUR 20-EUR 50, EUR 100-EUR 200-EUR 500). It is important to bear in mind the very high denomination of some euro banknotes and to stress that there is no exception to the 1-2-5 sequence for the euro denominations, in contrast to the situation at present with the escudo. Neither coins of 25 euro cent, nor banknotes of EUR 25 will exist, whereas, by contrast, there will be coins of 20 euro cent and EUR 20 banknotes.
With regard to the main aspects of the substitution of national banknotes and coins with euro, it must be borne in mind in the first instance that there will be certain differences between the various countries given that the changeover scenarios, the financial structure and the habits of the public, etc. are not the same across the whole of the euro area. The principles of subsidiarity and decentralisation apply across the European Union and justify the existence of national solutions when the adoption of a joint solution is not strictly necessary. In particular, those travelling frequently between euro area countries should be aware of this, since, for example, although the dual circulation period when both the national currencies and the euro will be accepted as legal tender will end on 28 February 2002 in Portugal, it will end earlier in some countries. Nor are the last dates for exchanging the old national banknotes and coins for euro, and other conditions governing such exchange, uniform across countries. In Portugal, for example, escudos may continue to be exchanged for euro free of charge until 30 June 2002 in credit institutions and, with regard to banknotes, for up to twenty years in the Banco de Portugal. By contrast, in other countries, the dates are distinct and some Eurosystem central banks have periods which are, certainly, long but the exchange is limited, especially with regard to coins.
Focusing on Portugal, it should be stressed that euro banknotes and coins will enter into circulation on 1 January 2002 and, from this moment onwards - and only from this moment onwards - they will have legal tender status, that is to say, they will have to be accepted for any transaction. Thus, the gradual withdrawal of escudos, which may remain in circulation until 28 February 2002, will begin. From 1 March 2002 the escudo will no longer be in circulation and should not be accepted for settling transactions. It will become purely a collector's item. Nonetheless, credit institutions, which will be prepared to exchange escudos for euro free of charge from 1 January 2002, will continue to do so until 30 June 2002. Afterwards, coins denominated in escudos may only be exchanged at the Banco de Portugal, until the end of 2002, and banknotes for a period of twenty years.
From 1 January 2002 credit institutions will supply the public with euro via their counters, and via their cash dispensers as far as technically possible. It is expected that most cash dispensers in the euro-area, indeed around three-quarters of them, will be able to supply euro before the end of the first week of January. In Portugal, the switch of cash dispensers to euro banknotes will be even quicker: as of 4 January 2002, all Portuguese cash dispensers will supply euro banknotes only.
The introduction of euro banknotes and coins is a complex and ambitious operation which will require - in addition to understanding and collaboration on the part of the public - organisational, logistical, technical and economic efforts on the part of those sectors directly involved in the use of banknotes and coins, such as businesses, vending machine manufacturers, cash-in-transit companies and, of course, the banking sector in particular.
In reality, the banking sector has made, and will continue to make, a considerable effort in substituting, so to speak, the "raw material" of its activities - currency - and I should like to highlight and express my gratitude for this effort. The sector's contribution is, without doubt, decisive.
I should also like to refer in particular to the retail sector and ask for its co-operation. Retailers are much more accustomed to carrying out transactions and handling banknotes and coins than their customers. They also enjoy the confidence of the public. Applying well the rules for rounding when converting amounts expressed in escudos to amounts expressed in euro, facilitating dual labelling in the two units of account, not exploiting the introduction of the euro cash to round amounts up, helping customers to understand the details of transactions and, in general, adopting a co-operative rather than obstructive attitude are all key aspects in ensuring the success of the introduction of the euro banknotes and coins. If retailers are receptive to the euro banknotes and coins, they will convey confidence and security to their customers, which will be of benefit to the cash changeover.
To help the above-mentioned professional groups with the exchange from escudos to euro, specific initiatives have been elaborated, which are too numerous for me to expound here in detail. By way of an example, we can mention the centralised tests which were organised in Neu Isenburg (Germany) in the spring and autumn of 2000 to facilitate the adaptation of sensors in euro banknote-accepting machines. In this vein, the Eurosystem has approved the frontloading of banknotes - that is to say, their distribution before 1 January 2002 to professional groups (not to the general public) - on dates which vary according to country and sector, but not, in any case, before 1 September 2001. The frontloading of coins has also been approved, including, in this case, to the general public.
In Portugal - it does no harm to repeat - the approximate dates from which frontloading is expected to begin are as follows:
as of 1 September, frontloading of coins to credit institutions;
as of 1 October, frontloading of banknotes to credit institutions;
as of 1 December, frontloading of banknotes and coins to retailers;
as of 17 December, limited frontloading of coins but not banknotes to the public via banks and other credit institutions.
Looking at these dates, it is apparent that the public will, in general, be able to obtain combinations of euro coins, up to a total value of EUR 10 (PTE 2,005) at the cash desks of their bank, from 17 December 2001. Right from the outset, this will make it easier, when conducting euro transactions, and in particular those involving small amounts, to give the exact change or a rounded amount for which the vendor will give you change.
The Governing Council of the ECB, after considering the advantages and disadvantages, decided in January 1999 not to authorise the distribution of euro banknotes to the public in any euro area country prior to 1 January 2002. As an alternative measure, cash dispensers - which, on average, distribute around 70% of banknotes in the euro area - will provide low-denomination euro banknotes from 1 January 2002, as well as low-denomination escudo banknotes at the end of 2001. This means that it will be possible to make payments without shopkeepers having to accumulate a store of cash in order to be able to give change.
By contrast, those retailers which so wish may have euro banknotes from the beginning of December this year, if this makes their work easier. In order to obtain these, they must address themselves to their bank and must fulfil certain minimum requirements; these involve pledging collateral against the euro they receive (for example, providing escudos in exchange or having their bank account debited) and committing themselves to not distributing these to the public until 1 January 2002.
The exchange of escudos and euro will imply costs for all groups involved, including, logically, the Eurosystem itself. In this respect, the Eurosystem made it clear from the beginning that, as a general rule, it will not shoulder the operating costs of the other parties, following exactly the same approach as that applied at the time of the changeover to the euro in January 1999. As parties involved in the introduction of the euro, each and every one of us must shoulder, therefore, our respective operating costs.
I should like to stress the recognition and gratitude of the Governing Council of the ECB towards the sectors involved in the introduction of the euro cash for the logistical and economic efforts which they are about to realise. The public will also be grateful, and I am sure that it will reward, with its commercial loyalty, those banks and retailers which carry out the exchange operation in a simple and transparent manner. Businesses are being faced with both a challenge and an opportunity to offer a good service to their customers and, thereby, improve their turnovers. We are aware that, on your part, there are grounds for concern which, of course, have been taken into account and to which we have sought to respond as far as possible. The Eurosystem will continue to be open to working together with you to clarify all further details, to study more alternative measures or resolve any new questions which may arise. If it has not always been possible to accommodate your requests, as in the case of the frontloading of banknotes to the public, this is because, although these may seem logical from a specific viewpoint, when a global perspective taking into account all the various aspects is adopted, another conclusion is reached.
The banknotes and coins will be the face of the euro. The euro, our currency, is the most tangible expression not only of the common monetary policy, but also of the whole project of European integration, which is bringing so many benefits to the Portuguese. This project now requires the active collaboration of each and every one of us. Currency symbolises value and is a medium of exchange. The single currency, in this case, means a common value system and fluid exchange. The fact that, in a few months, cash payments will be made with the same currency by all 304 million people in the euro area and that all prices - from Portugal to Finland, from Ireland to Greece - will be expressed in the same currency goes above and beyond the strictly economic. It is a socio-historic event in which we Europeans will play the leading role and whose success depends on each and every one of us.