Practical aspects of the introduction of the euro
Prof. Eugenio Domingo Solans, Member of the Governing Council and of the Executive Board of the European Central Bank (ECB), Speech delivered at the European Parliamentary Financial Services Forum, Brussels, 9 October 2001.
In order to give all professional parties directly concerned with the euro cash changeover enough time to make the necessary preparations, within the scope of their own competencies the ECOFIN Council, the European Commission and the Governing Council of the ECB decided well in advance the general guidelines concerning the logistical, informative and legal aspects of the changeover, after considering the different views of the groups involved. Allow me to elaborate on these points.
First let me stress the idea of co-ordination of actions among the public authorities with responsibilities in the euro cash changeover, at European and national level. At European level this co-ordination has taken place at the ECOFIN, Eurogroup, EFC and Governing Council of the ECB meetings and in many other informal bilateral meetings. As the Executive Board Member of the ECB more directly involved in euro cash changeover issues, I have had several exchanges of views with Mr. Prodi and Mr. Solbes, here in Brussels or in Frankfurt, on many aspects related to the introduction of euro banknotes and coins.
I said that the authorities of the European Union approved the "general guidelines" on the logistical, informative and legal aspects of the changeover to remind you that, according to the principles of subsidiarity and decentralisation, the detailed changeover framework was decided and developed by the national authorities, the Ministries of Finance and the National Central Banks.
I also mentioned that the general framework of the euro cash changeover was decided well in advance to allow enough time for the professional groups involved to develop their own preparations. In this respect, I could recall that the decision not to frontload euro banknotes to the general public was already adopted in 1999, or that the centralised tests organised by the ECB to facilitate the adaptation of sensors in machines accepting euro banknotes took place in Neu Isenburg (Germany) in the spring and autumn of 2000.
I should also like to recall and underline that many contacts at different levels have taken place between the ECB and representatives of the various professional groups involved in the euro cash changeover: among others the Mint Directors' Working Group, the European Banking Federation, the European Savings Bank Group, the European Association of Co-Operative Banks, the European Federation of Foreign Exchange Operators, EuroCommerce, der Hauptverband des deutschen Einzelhandels (HDE), the European Security Transport Association, Euromat, the European Vending Association, ECCA, the European Modern Restaurant Association (EMRA), der Europäische Tabakwaren Grosshandels-Verband and last but not least the Consumer Organisations Euro Working Group. I am aware of how relevant the regular meetings with the so-called "Third Parties" are for the ECB.
Regarding the contents of the logistical aspects of the changeover that you already know, let me underline a few points. First, let me say that in preparation of the frontloading exercise, the Eurosystem has stressed the importance of frontloading specifically low denomination banknotes so as to ensure a smooth changeover, for example by minimising the need for retailers to hold large amounts of change. We have obviously been very successful in these attempts, because the frontloading orders by financial institutions have exceeded expectations, especially with regard to the 5 and 10 euro denominations. This has led us to fine-tune our initial production plans by shifting production from higher denomination banknotes to lower ones and increasing production of the lower denomination banknotes. Therefore, the overall production target is now 14.9 billion instead of 14.3 billion, plus a central reserve stock of around 10% of the overall production to cover any unforeseen event. At the end of September 12.3 billion banknotes were produced, more than are necessary to replace the national banknotes in circulation. Our production capacity, which is able to produce around 1 billion banknotes per month, is now devoted to produce logistic and contingency stocks. In this respect, the representatives of the banking community should know that we are flexible and prepared to meet their demands for each denomination.
While the bulk of the frontloaded banknotes is being ordered by banks which are based in the euro area, it appeared to be important to offer the possibility of frontloading outside the euro area. Accordingly, the Governing Council of the ECB agreed that, as of 1 December 2001, national central banks of participating Member States may frontload other central banks and non-euro area credit institutions specialising in the wholesale distribution of banknotes, upon request and subject to certain terms and conditions. As of the same date, these frontloaded central banks and credit institutions may sub-frontload euro banknotes to other credit institutions outside the euro area. However, any further sub-frontloading is not allowed, obviously including any frontloading to the general public.
This brings me to an issue which has already been discussed at length: the frontloading of banknotes to the general public. President Duisenberg discussed this issue extensively in his Testimony to the European Parliament on 28 May 2001, and I have nothing to add to his arguments. I should like to refer only briefly to some recent developments which reinforce our conviction that the disadvantages of frontloading to the general public exceed their advantages. First of all, as already mentioned earlier, the large number of banknotes that will be available as of 1 January 2002 via the frontloading and subfrontloading will help to smooth the changeover. In addition, I am sure that all of you have heard about the case in which some new euro banknotes have already "slipped into circulation"; if the subfrontloading of banknotes to the general public had been agreed for any time before 1 January 2002, we would obviously have to expect an uncontrolled use of these banknotes, resulting in considerable confusion.
Allow me now to refer to the risk of counterfeiting, a real threat which will, however, be countered by a number of effective measures. First of all, through a secure banknote which is difficult to counterfeit and with an authenticity which can be easily checked. To achieve this aim the euro banknotes are protected by a number of state of the art security features. However, given the capabilities of modern reproduction technologies, it is obviously necessary to pay attention to avoid the acceptance of counterfeit.
Second, appropriate legislation must ensure that the euro banknotes are well protected throughout the euro-area countries. In this context, I should like to mention the Council Framework Decision of 29 May 2000 on increasing protection by criminal penalties and other sanctions against counterfeiting in connection with the introduction of the euro, and the Council Regulation of 28 June 2001 laying down measures necessary for the protection of the euro against counterfeiting. It is crucial that the national legislation is adapted accordingly before the end of this year in all Member States.
The Council Regulation mentioned above establishes a framework for collaboration between all authorities which are active in the fight against counterfeiting. In this context, I should like to stress the importance of the close co-operation of the ECB with Europol and the Commission in the Counterfeit Steering Group and in the High-Level Counterfeit Group.
Third, the collection of information on euro counterfeiting and the use of this information by all those involved in the fight against counterfeiting. The ECB is drawing up a Counterfeit Analysis Centre where the euro counterfeit will be technically analysed and classified. The relevant technical and statistical information will be stored in a database that is also being established at the ECB. The counterfeit coins will be analysed and classified at the European Technical and Scientific Centre for coins, which is being established by the Commission at the French mint in Pessac; the relevant data on counterfeit coins will also be stored in the ECB's counterfeit database. The information stored in the ECB's database will be made available to all authorities involved in the fight against counterfeiting, in accordance with their respective competencies.
Another aspect which I should like to mention is the information of specific target groups and the general public on the changeover and, specifically, on the designs and security features of the euro banknotes and coins. Adequate information is of paramount importance to ensure that everyone is aware of these features at the very start of 2002 and to familiarise the European citizens as much as possible with the euro banknotes and coins so that they are confident and supportive. With this aim, since the beginning of this year a specific website was created in the eleven official European Community languages, providing detailed information on the euro banknotes and coins and the changeover. On 30 August 2001 the ECB revealed the designs and security features of the euro banknotes and announced a mass media campaign under the slogan "the EURO. OUR money" consisting of three main activities: a series of eight print advertisements and five TV spots, the distribution of more than 200 million copies of an information leaflet on the euro banknotes and coins and their security features and a children's competition which will involve the distribution of 7 million posters containing information on the euro banknotes and coins to children aged between eight and twelve. The 24 winners of the Euro Superstar competition will be invited to the ECB in Frankfurt to celebrate the arrival of the new money. By the way, I remember that during a dinner in Frankfurt on 3 November 2000, Mrs. Randzio-Plath convinced me of how important it would be to involve school children in the euro changeover preparations.
At my official hearing on 5 June 2000 before the Committee on Economic and Monetary Affairs of the European Parliament, I already had the opportunity and the honour to inform on the Eurosystem's Information Campaign.
Allow me also to inform you that the Eurosystem has set up a Cash Changeover Co-ordination Committee (CASHCO) in which a representative of the Commission participates as an observer. CASHCO is closely monitoring the final preparations for the changeover and will do so during the period itself. We will thus be in a position to react to any incident rapidly and appropriately.
Bearing in mind the Eurosystem's extensive preparations for the introduction of the euro banknotes and coins, I am quite confident that the cash changeover will run smoothly without major difficulties.
The exchange of national currencies 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 have and 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, fair and transparent manner. Applying well the rules for rounding when converting amounts expressed in national currencies 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.
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 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 and 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 the requests may seem logical from a specific point of view, when a global perspective is adopted taking into account all the various aspects, another conclusion is reached.
I am fully convinced that with our exchange of views, with our decisions, with our agreements and even with our disagreements we have all done our best to prepare the euro cash changeover properly. Now we know and the public should also know that everything is well prepared for this important operation to be a success.
The time has come to settle any remaining differences if they persist and to form a united front so that we transmit confidence to the public. The European citizens, present here through their representatives at the European Parliament, are the main actors of the euro cash changeover. Our obligation as professionals from now on is to make them aware of the benefits deriving from the introduction of the euro banknotes and coins, to convince them of adopting a receptive and fully co-operative attitude and to make it clear to them that the success of the euro cash changeover will be their own success.
The euro banknotes and coins are the face of the euro. Behind this face there is a wealth of values. The euro cash changeover goes far beyond being the introduction of new banknotes and coins: it also represents the complete and simultaneous adoption by more than 300 million Europeans of the euro as a common unit of account in substitution of the eleven national units of account still used in the euro area. Across Europe from Greece to Ireland, from Finland to Spain, all prices and values will be expressed only in euro. While accepting the new euro banknotes and coins, the European citizens will complete our monetary integration, which until now is the most decisive step taken to reach our goal of a united Europe.