92001E3525

WRITTEN QUESTION P-3525/01

by Christopher Huhne (ELDR) to the Commission

(20 December 2001)

Subject: Seignorage revenue

Will the Commission estimate for each Member State the likely financial gain from the introduction of the euro in seignorage revenue?

Will it further express this as a percentage of GDP in each case?

Has this revenue been taken into account in the Commission's existing projections for public finances?

How should it be treated in public finances?

Answer given by Mr Solbes Mira on behalf of the Commission

(25 January 2002)

The Commission does not have any comparable estimates for Member States of the likely financial gain from the introduction of the euro on seignorage revenues. The introduction of the euro essentially involves the substitution of non-interest-bearing claims denominated in euro for the non-interest-bearing claims denominated in the original national currencies and as such has no direct effect on aggregate seignorage revenue in the euro area. The allocation of seignorage income among the euro area National Central Banks (NCBs) will be based on the European Central Bank's (ECB's) capital key (Article 32.5 of the European System Central Bank's Statute). On 6 December 2001, the ECB Governing Council agreed on a transitional regime of five years in order to mitigate the impact of the introduction of euro banknotes on the NCBs' current relative income positions. Future shifts in the patterns of cash holdings and possible non-surrender of notes and coins in the original national currencies will also have an impact on the balance sheets of central banks (notes) and governments (coins). At present the scale of such impacts and the timing of their recognition in balance sheets are not clear.

In the light of the above it is not possible to further express this as a percentage of gross national product in each case.

The Commission has not taken into account any gains of the kind referred to in its projections for the public finances.

Seignorage revenue is an analytical concept which is not identified in the European System of national accounting framework used for the public finances but it makes its presence felt through property income flows. Essentially, the transactions and balance sheet adjustments involved are below the line and should have no impact on the general government surplus/deficit. Any transfers to government from central banks of exceptional gains from the transition should be treated as financial transactions not affecting the government surplus/deficit but potentially affecting government debt.