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Green Paper on the practical arrangements for the introduction of the single currency

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Green Paper on the practical arrangements for the introduction of the single currency

This Green Paper aims to dispel as far as possible the uncertainties that still surround the transition to the single currency (by spelling out the essential details of the transition scenario and the legal framework), to demonstrate its technical feasibility and to determine possible approaches for encouraging public acceptance of the changeover.


Commission Green Paper of 31 May 1995 on the practical arrangements for the introduction of the single currency [COM (1995) 333 final - Not published in the Official Journal].


The Green Paper begins with a reminder of the benefits of economic and monetary union: a strict macroeconomic framework, a contribution to international monetary stability, the elimination of exchange rate distortions within the single market, transparency of prices, etc.


The choice of scenario for the transition to the single currency must be determined by three criteria: technical feasibility, compliance with the Treaty and simplicity, flexibility and low costs. The Commission has opted for a three-phase scenario in preference to other possible scenarios (such as a "delayed big bang"). The following restrictions must be placed on the scenario:

  • the changeover must be as short as possible so as to mitigate the risks of confusion which would weaken the credibility of the process and the determination of operators to carry it through;
  • it must proceed in a number of well-defined phases, with substantial progress being made during each successive phase;
  • it must minimise the costs by making definitive changes;
  • it must inspire public confidence and allow individuals to become familiar with the single currency.

A three-phase reference scenario is presented which corresponds to the letter, spirit and logic of the Treaty:

  • launch of economic and monetary union (Phase A);
  • effective start of EMU and emergence of a critical mass of activities in ecus (now euros) (Phase B);
  • final changeover to the single currency (Phase C).

A smooth transition would be facilitated if the measures envisaged for each phase were, whenever possible, taken ahead of schedule. Public authorities concerned (Council, Commission, European Monetary Institute/ European Central Bank (ECB) and the Member States) must send clear signals as quickly as possible to different currency users so as to convince them of the imminence of EMU and to set in motion the preparations vital for its success.

Phase A: The launch of economic and monetary union (EMU)

The start of Phase A is characterised by the decision of the Council to move to monetary union in accordance with the procedure laid down in the Treaty (Article 121 and 123). The aim of this phase is to take the decisions and measures required for moving to EMU, at Phase B. The most significant step is the establishment of the European System of Central Banks (ESCB). In conjunction with banks and financial institutions, the ESCB/ECB would begin to introduce the operational instruments required for conducting monetary and exchange rate policy in ecus from the start of the ensuing phase. On the basis of available estimates, these preparations should be completed within a maximum of twelve months.

In order to generate irreversible momentum, the Council, as part of the decision to move to monetary union, should announce the final date for the full introduction of the single currency (at the latest four years after the start of Phase A). The Green Paper also recommends that at the beginning of Phase A inter alia the following package of measures should be adopted :

  • adoption of a legal framework allowing the single currency to be introduced at the start of Phase B. Inter alia, this would include conditions for using the new currency in the different sectors and relations with national currencies, continuity of contracts and legal obligations; legislation enabling financial and tax authorities to collect some payments in ecus at the start of Phase B;
  • fixing of the characteristics and technical specifications for bank notes and coins in ecus, such that cash handling machines and information systems can be adapted. The decision to begin producing ecu notes and coins would be taken by the competent authorities (the EMI, the national mints);
  • establishment of a national steering structure for supervising the move to the single currency, involving all the currency users concerned (government, central bank, private sector, consumers). It would draw up an action plan for adapting public administration at national and local levels. Some form of coordination would be put in place at Community level;
  • definition of a changeover plan in each country by the banking and financial community which would specify the speed and scope of the technical adaptation of its members. Such a plan would establish a number of technical arrangements necessary for a smooth changeover (capital markets and their infrastructures - quotation, settlement, delivery, registration, wholesale payments systems).

This package should be prepared in advance, and some of the measures should preferably have been adopted well before the start of Phase A. Throughout this phase, private operators would continue, on a voluntary basis, their own preparations for the move to the single currency. This would help to ensure a smooth transition.

Phase B: Effective start of monetary union and the emergence of a critical mass of activities in ecus

Under the Treaty, the start of Phase B is marked by the Council irrevocably fixing the conversion rates of participating currencies and by the ESCB assuming responsibility for the single monetary policy. The ecu ceases to be defined as a basket of currencies and becomes a currency in its own right, for which the national currencies are perfect substitutes, under a different name. The fixing of conversion rates will not in itself affect the external value of the ecu. The conversion rate of the basket ecu in relation to the single-currency ecu is 1:1. Official foreign exchange markets for the participating national currencies will disappear completely.

This phase would last a maximum of three years. In order to reinforce the perceived credibility and irreversibility of EMU, the Commission believes it important to generate a rapid momentum for the introduction of the single currency by the immediate creation of a critical mass of activities in ecus. The emergence of this critical mass would require an initial changeover in the banking and financial sector, which would then have a maximum of three years to complete the changeover of remaining operations and systems.

The definition of this critical mass of ecu activities will have to be clarified in consultation with the banking sector and the EMI, which is the institution responsible for preparing the monetary policy framework. However, the Commission would like the definition to be as broad as possible, so as to include monetary and exchange rate policy, inter-bank, monetary, capital and exchange markets, new government debt and wholesale payment systems.

  • monetary and exchange rate policy in ecus should be defined and implemented in terms of the single currency from the start of this phase. The ESCB would conduct ecu transactions with all operators involved in monetary policy (national central banks, banks) and in the whole range of instruments associated with monetary policy: refinancing, open-market operations and, more generally, short-term transactions. In addition, in foreign exchange transactions, the ESCB would deal exclusively in ecus vis-à-vis third currencies (dollar, yen). Settlement of monetary policy transactions would be made through the wholesale TARGET system that the EMI has undertaken to render operational by the end of 1996;
  • new issues of public debt would be denominated in ecus as from the start of Phase B to the extent that it is technically possible. This would affect issues addressed to institutional investors and those maturing after the start of Phase C. Private issuers could decide to follow a similar path;
  • inter-bank, monetary and capital markets: globalisation implies that markets affected by the conduct of the single monetary policy would have to be able to work in ecus simultaneously from the start of Phase B. This changeover concerns primarily Treasury bills, bonds and their derivatives. All operators on these markets (banks, investment funds, insurance companies, institutional investors, intermediaries) would operate in ecus, as would the associated market systems (quotation, settlement, delivery, registration);
  • the wholesale settlement systems (TARGET and the private clearing system of the ecu Banking Association) would have to be available to process large-value payments in ecus.

The emergence of a critical mass in ecu activities would have various implications for the major categories of currency users. National currencies would continue to be used between banks and most of their customers (businesses, consumers) until Phase C. Thus:

  • the changeover for banks and financial institutions to the single currency will begin through a single monetary and exchange-rate policy, market transactions and the associated settlement systems. The critical mass will basically concern homogeneous market activities which can be readily identified and processed according to independent procedures. The other information and management systems would change over during Phase B in accordance with the changeover plan, applying a decentralised approach that will be coordinated by the competent authorities. The nature of the transactions performed in retail banking, involving high volume but small value, means that the changeover in this area would take place only after the national payments systems have been adapted;
  • public administrations would have a leadership role to play during Phase B, in accordance with the action plan adopted by the national steering structure in the course of the preceding phase. It would be possible to pay some taxes in ecus. More generally, major items of public expenditures could be denominated, and wherever possible, paid in ecus as soon as possible, as could the presentation of national budgets. Moreover, public administrations would also have to mount an information campaign;
  • private businesses other than banks could conduct some of their operations in ecus circumstances permitting. Firms most heavily involved in international business might opt straight away to change over all or part of their operations to the ecu in Phase B. Other enterprises would probably be less inclined to switch to the single currency at an early stage;
  • consumers would essentially continue to use their national currency during Phase B, owing to the relatively limited availability of ecu-denominated means of payment. However, competition and public demand may lead a number of private operators to move rapidly to introduce a range of services in ecus. This, however, is dependent on the changeover of corresponding payment systems to the ecu. More generally, public awareness would be systematically promoted through both public and private initiatives, for example the dual display of prices.

Phase C: Final changeover to the single currency

This phase would be announced when EMU is launched (at the start of Phase A). However, this phase could begin before the pre-announced date if the Council meeting in the composition of Heads of State or Government so decided, owing to favourable circumstances. It would last as long as necessary to complete the physical replacement of national notes and coins, i.e. several weeks. It would mark the completion of the introduction of the single currency and involve the following developments:

  • notes and coins are exchanged;
  • only the ecu is legal tender;
  • the changeover of the banks and the financial system is completed: all means of payment (transfers, cheques, cards) are converted into ecus, in conjunction with the domestic settlement systems;
  • the private non-bank sector conducts all transactions exclusively in ecus.

The replacement operation needs to be meticulously prepared. In a number of cases (cash registers, ticket machines and vending machines), preparations will start long in advance, as soon as the information is available on the technical specifications of the coins and notes so that software and hardware can be adapted. The actual changeover could be completed in a few weeks in order to avoid complications caused by a prolonged period of dual circulation. The old national currencies may be exchanged free of charge at the national central banks during the statutory period laid down in each country.

Given the magnitude of what will be an unprecedented event, the Commission considers that a maximum period of four years between the decision to move to EMU (Phase A) and the final changeover to the single currency (Phase C) is not a priori excessive. This period is likely to be shortened. The duration of this process is largely dictated by the need to prepare the general public and by technical requirements (the time the banking industry needs in order to make necessary preparations, and the time needed to produce ecu notes and coins).

It is difficult, at this stage, to predict exactly how long it will take to familiarise the general public with the ecu and to implement all the technical preparations required. But to the extent that authorities are willing to take preparatory measures before the start of Phase A, and that the critical mass is sufficiently large, then Phase B may be shortened. Hence the Commission proposes that the periods given in the reference scenario be viewed as maximum periods and that the dates fixed by the Council should be deadlines.


The Green Paper outlines a sectoral analysis of the consequences of the reference scenario for each of the major categories of users of the single currency. This initial attempt at an overall evaluation is accompanied by a call for dialogue with the interested parties with a view to verifying or improving the feasibility of the proposed reference scenario.

The strategy for the transition to the single currency advocated by the Green Paper is intended to minimise the disturbance caused for the various user categories by such a major transformation, which is neither uniform nor simultaneous in its impact. The different operators are affected to varying degrees and sometimes at different times, in each of the phases. The objective is to mobilise the key sectors in sufficient time by implementing the changes that are strictly necessary to ensure both a smooth initial transition to the single currency for these operators and a smooth final changeover in Phase C. The complete implementation of the reference scenario would not take longer than four years and will affect all currency users.

The banking and financial sector will be one of the very first affected, by dint of the single monetary and exchange-rate policy in ecus, which will involve market transactions and the associated systems at the beginning of Phase B. The Green Paper examines the technical implications of this changeover on the banking system, which will be involved in all its technical manifestations (from capital markets, via payment systems and general accounting, to its customers) throughout this Phase. The Green Paper advocates a coordinated approach, for example in the form of specific plans for each market, developed under the aegis of the national authorities and the professional associations, to ensure that the preparations are consistent and synchronised. The single currency will not be introduced for private customers until Phase C, when notes and coins in ecus are brought into circulation. The Commission will organise discussions with banks, financial institutions and the users of payment systems in order to clarify the critical mass concept for Phase B, the scope of the market-specific plans, the impact on the markets, the interoperability of payment systems and, more generally, to be apprised of the reactions and suggestions on the part of these groups regarding the Green Paper.

Public administrations will also have a vital role in the initial introduction of the single currency, both at national and at Community level. This will involve many areas: legislative changes, new debt issues in ecus at the outset of Phase B, the capacity to receive certain payments in ecus (in particular tax payments) during Phase B, introducing the single currency as the unit of account for budgetary operations, keeping the public systematically informed, mainly by displaying all rates in both ecus and national currency, etc. As a concrete step to promote this leadership role, which is vital for engendering the confidence of the economic operators and the general public, the Commission proposes that the Community institutions systematically establish working groups to examine the implications of the introduction of the ecu for the Community institutions. As regards the national administrations, the Commission suggests that they inform it of the measures they intend to implement to smooth the transition to the single currency, so that both parties can discuss them.

Most enterprises will not really be affected by the ecu until Phase C. However, it is important that they start thinking about this change as soon as possible and adopt strategies for changing over to the single currency that, when the time comes, facilitate a smooth transition for their core activities (cash handling, sales and marketing, accounting, treasury transactions, tax reporting, personnel management, etc.). In certain cases (e.g. for enterprises involved in intra-European trade) it would even be in their interests to start preparing for the introduction of the ecu as early as Phase B, especially those with large-scale treasury operations. They may also find that this gives them a significant commercial advantage. The Commission suggests that each representative organisation appoints a "single currency officer" as soon as possible, whose task would be to keep the member companies informed on this issue, and that each Member State establishes structures for carrying out dialogue on these matters with the private sector, with a view to pooling the information and expertise necessary for a successful transition.

Consumers will, to a large extent, determine the degree of success of the introduction of the single currency, even though it will not be a physical reality for them until Phase C, when the ecu notes and coins are released into circulation and the national currencies withdrawn from circulation definitively. It is essential that rigorous efforts be undertaken to prepare the general public for the change by means of suitable communication campaigns (such as by encouraging dual price displays during Phase B) on the part of both the public authorities and private operators, and by guaranteeing adequate legal protection during Phase C (for example, regarding exactly what information should be provided for consumers, and the rules on rounding concerning conversion rates from national currencies to ecus). The Commission intends to step up its dialogue with consumer representative organisations with a view to reaching a consensus with the other categories of currency users regarding the need for Community legislation on dual price displays.


Inter alia, legal certainty for currency users is a sine qua non for the success of the final introduction of the ecu. The Green Paper examines the five major uncertainties which still surround the implementation of the single currency:

  • the legal arrangements governing the ecu during Phase B;
  • the legal arrangements governing national currencies as denominations of the ecu during Phase B;
  • the single currency as legal tender during Phase C;
  • the necessity to continue contracts in force at the time of the changeover in Phase B and then Phase C;
  • legal questions relating to bank notes in ecus (counterfeiting, etc.)

The continuity of legal obligations will be the guiding principle of the changeover to the single currency. With a view to guaranteeing the stability of legal and contractual arrangements, the Commission invites the Member States to report to it on the legal measures that need to be taken to ensure that the single currency can be used on the same basis as national currency from the outset of Phase B. It is intended that the Commission will thus be able to propose the legislation necessary to guarantee legal certainty for users of the future single currency.


Communication is a major challenge for the successful introduction of the single currency, on which subject widespread doubts and ignorance remain. In order to foster public support for the single currency commitment in the Treaty on European Union, it is crucial to devise an overall communication strategy, adapted to each phase of EMU and aimed at each major category of users. This campaign is intended to stimulate the private sector and the public sector to make the necessary technical preparations. Another objective is to promote acceptance for the new European currency among the general public. This communication programme will take various forms (information campaigns in schools, as part of vocational training courses, newspaper articles, radio and television programmes, etc.), targeted at each different category of operator.

Last updated: 02.10.2002