COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN CENTRAL BANK - Practical aspects of the euro: state of play and tasks ahead

Introduction

At the end of the first half of the transitional period, this communication provides an overview of the preparations undertaken so far and those required for the final changeover to the euro at the beginning of 2002. Two events are associated with the end of the transitional period: as from 1 January 2002, the euro will no longer be divided into national currency units, and in the weeks following this date the national banknotes and coins will be replaced by euro-denominated notes and coins. While purely technical or practical in nature, these two events do have implications which are without precedent in monetary history.

The reference scenario for the changeover to the single currency was agreed by the Madrid European Council in December 1995, following input from the Commission and the European Monetary Institute. The essential elements were included in the Council Regulations of June 1997 and May 1998 which provide the legal framework for the euro. Subsequently, all euro-zone Member States adapted various parts of their own legislation to the arrival of the euro. Many national measures taken at this early stage of practical preparations served to facilitate the changeover to the euro on financial markets, and to allow companies to use the euro unit in their reporting, in the denomination of their capital or in tax returns. In fact, financial markets were ready to switch to the euro on a large scale immediately after its introduction; this presented the first challenge at the practical level (leaving aside the implementation of the single monetary policy), a challenge which was successfully met. Initiatives at European level at this early stage of practical preparations included three Commission recommendations in April 1998 concerning banking charges for conversion to the euro, dual display of prices and other monetary amounts and dialogue, monitoring and information to facilitate the transition to the euro. The Commission subsequently organised several Round Tables on practical aspects and formulated an information strategy in preparation for the final changeover; it updated its priorities in a communication dated February 2000. With respect to the cash changeover, the European Central Bank has organised close and regular contacts with representatives of the principal cash users. The ECB is also preparing a wide-ranging information campaign on the new banknotes and coins.

The overview provided in this communication is structured to reflect the two challenges at the end of next year, i.e. changing every currency amount from national sub-divisions to the euro, and withdrawing the old banknotes and coins while introducing the new ones.

I. Changing over from national currency units to the euro

A. Preparations by the private sector

This section concerns both preparations by firms and measures to enable consumers to familiarise themselves with the new currency. The Commission has set up an advisory group on the practical aspects of the introduction of the euro, consisting of the representatives of twenty or so European professional federations (of which three are consumer associations) to discuss these matters. The deliberations of this group will serve as input for a recommendation on methods of familiarising the public with the euro, which will be presented by the Commission in autumn 2000.

1. Preparations by firms

In general, firms are making little use of the euro and the rate at which they are preparing themselves is slow.

a. Firms making little use of the euro

For firms, like individuals, the use of the euro involves a learning process. Making and receiving payments in euros and sending out invoices in euros are all tests of whether the firm's IT, accounting and financial structures are compatible with the euro, and are all practical experiences in learning how to handle the new currency. It is therefore in everyone's interests for use of the euro to develop before 2002. Most observers were expecting a sort of snowball effect: large firms would ask their subcontractors to switch to the euro, and they in turn would ask their suppliers to do so. For a variety of reasons, this effect did not occur. The use of the euro by firms, and in particular by SMEs, remains at a generally modest level.

The Commission regularly publishes a document reviewing the use of the euro in Europe. [1] Use of the euro for payments effected by firms has risen significantly in recent months and in value terms stood at a little over 25% in April 2000, as against slightly under 2% in the last quarter of 1999. But this high figure is slightly deceptive: in volume terms, payments in euros represent only 2.4% of transactions. This major discrepancy between payments in volume and in value terms is due mainly to two factors:

[1] Quarterly review of the use of the euro, No 2, 12 April 2000. http://europa.eu.int/comm/economy_finance/document/misc/eurouse2_en.pdf

- Europe is experiencing an unprecedented wave of mergers and acquisitions which has involved cross-purchases of shares between merging companies, and these are denominated in euros;

- large firms are starting to change over to the euro. In all the participating Member States, studies show that the gap between large firms and SMEs as regards use of the euro is widening significantly.

These figures are confirmed by the results of a Eurobarometer Flash survey carried out for the Commission [2] according to which only 10% of the SMEs surveyed already invoice in euros, and a clear majority of them intend to await the end of the transitional period before doing so.

[2] EOS Gallup survey carried out in May-June 2000 amongst a sample 2 819 SMEs in the euro zone and Greece.

b. Firms are preparing slowly

According to a report published at the beginning of the year, [3] 20% of large firms in the euro zone have switched over entirely to the euro and 40% are hoping to do so this year. Preparations by SMEs, by comparison, are slower. Amongst SMEs included in the Eurobarometer Flash survey, only 15% said they were already able to carry out all their operations in euros, 25% expect to be able to do so by the end of 2001, and the rest, i.e. over 50% of SMEs, estimate that this will not be possible until the year 2002. It is difficult to say just how many firms have switched over to euro accounting. Firms may set prices and issue invoices in euros while continuing to keep their accounts in national currency. The authorities presume that firms making VAT returns in euros have switched over to euro accounting. On this basis, between 0.5% and almost 9% of firms have switched over to euro accounting, depending on the country. Commission statistics indicate that in the euro zone the proportion of firms' bank accounts kept in euros has increased substantially (from 0.6% in volume terms in the last quarter of 1999 to 3.4% in the first quarter of 2000) and that the rate of changeover has clearly accelerated: almost one new account in ten is in euros. The overall trend is undeniably in the right direction. But it is still slow.

[3] "Europe's response to EMU", KPMG. www.kpmg.co.uk

While it is natural, in the absence of notes and coins, for the payment statistics to reflect the low level of use of the euro, the small number of firms to switch over to the European currency is generally worrying. It may imply:

- either, on a positive assumption, a progressive changeover strategy, using the whole of the transition period;

- or a delay in preparation;

- or a changeover strategy centred on 1 January 2002;

- or a mistaken strategy, based on the idea that the transitional period will end on 30 June 2002.

The results of the abovementioned Eurobarometer Flash survey suggest that these last two assumptions are the ones most frequently made by SMEs. 30% of them estimate that it is not yet time to prepare, and, of the 48% who say they have an action plan, only half have started to actually implement the measures drawn up. However, opting for 1 January 2002 as the changeover date is a decision which requires careful consideration and is an option which can only suit certain types of firm. [4] There is a significant risk that at the end of 2001 there will be bottlenecks in terms of the availability of IT and accounting resources, and firms which choose this option are running the risk of not being ready in time or of paying more for the same goods or services. It is legally impossible to choose a date after 1 January 2002: the national monetary units cease to exist at midnight on 31 December 2001. The communication campaigns organised between 1995 and 1998 on the timetable for switching to the euro mentioned the date of 30 June 2002 as the final date in the dual circulation phase. The message on the date was taken on board, but its content was misinterpreted and has often been perceived - in particular by small firms - as equivalent to the end of the transitional period.

[4] There are of course certain cases where changing over on 31 December 2001 is the least bad option, for example in the case of retailers or SMEs equipped with single-currency software programmes. However, even in this hypothesis, there is a risk and the operation must be carefully prepared.

A communication drive is therefore necessary in order to inform businesses of the exact stage the timetable for the actual introduction of the euro has reached and to impress on them the existence of a 31 December 2001 deadline and the need to speed up their preparations.

2. Enabling the public to learn about the euro

Consumers will quickly be operating in a euro environment as from the beginning of 2002. They will at the same time have to work out ways of understanding prices and monetary amounts in euros, recognising the new means of payment, taking on board its value and reassuring themselves that the switchover to the euro will have a neutral impact on prices. Prior practical experience of the euro and the dual display of prices and monetary amounts are amongst the essential methods of helping to prepare for the euro.

a. Use of the euro

Private individuals can hold accounts and make book money payments in euros. Use of the euro by the public remains low overall but tripled between the last quarter of 1999 and the first quarter of 2000, increasing from 0.8% to 2.4% of payments in volume terms within the euro zone. In value terms, payments in euros by individuals - including purchases of financial securities and payments at French motorway tolls - are now approaching the 10% mark (8.9%). The euro is used in 13% of cross-border payments in volume terms and in over 24% of such payments in value terms. There are still very few euro accounts held by individuals (less than 1% of the total number in most of the participating Member States).

On average, 45% of payment terminals in the euro zone [5] were able to accept payments in euros in April 2000. This is an important indicator: in the absence of notes and coins, the adaptation of terminals is an essential prerequisite for the development of euro payments (with the exception of France, cheques are little used in the euro zone). In some countries, a terminal may, however, be "eurocompatible" without actually accepting a euro payment: traders may choose to deactivate the function, especially after errors have been made (e.g. amounts invoiced in euros instead of the national currency or vice versa). Payment terminals have still not been adapted to the euro in three Member States (Austria, Ireland and the Netherlands), preventing consumers from gaining any practical experience of the euro.

[5] See quarterly review of the use of the euro referred to above.

The Commission would also point out that the actual level of bank charges applicable to cross-border payments must fall significantly if the beneficial effects of economic and monetary union are to be fully realised. In line with its communication of 31 January 2000 on retail payments in the internal market, the Commission called for cross-border payments to be more rapid, cheap and in the long run capable of being treated in the same way as domestic payments.

French and Belgian banks are preparing to switch their customers' accounts into the euro (unless explicitly asked not to do so) from July 2001.

The switching of accounts also generally implies that book money payments will also switch to the euro. Consumers, who will have to be clearly informed of the arrangements involved in the operation, will thus be able to start actively familiarising themselves with the new currency in the second half of 2001. It is desirable for these examples to spread, since it is in the banks' interests to avoid a "big bang" type of changeover which could overload their systems and hold back consumers from familiarising themselves with the euro.

Use of the euro by citizens before 31 December 2001 is an important means of contributing to the successful introduction of euro notes and coins. It would be useful if the owners of terminals could be encouraged to speed up the conversion to the euro of payment terminals which are technically capable of operating in a variety of currencies [6] and if they could stimulate the use of the euro by traders and consumers. Thought will have to be given to the ways of prompting citizens to make more active use of the euro means of payments at their disposal, particularly in the second half of 2001.

[6] Payment by cards has three aspects: the dual amount on the terminal, the dual amount on the ticket and the payment itself. Many terminals do not allow customers to know whether the payment is actually performed in euros; the banks involved convert automatically if necessary.

b. The dual display of prices and other monetary amounts

In 1998 the Commission adopted for a recommendation rather than a set of rules, relying on the market's interest in ensuring that the consumer was properly informed. This approach has been vindicated by the facts: dual pricing is widespread throughout the participating Member States. According to a study carried out for the Commission, [7] 60% of Belgian traders, 40% of Spanish traders, 47% of German traders, 41% of French traders, 81% of Luxembourg traders, 70% of Finnish foodshops, 42% of Austrian supermarkets and 31% of Portuguese traders apply dual pricing to all or some of their products. In Ireland, the EMU Business Awareness Campaign, [8] estimates that 30% of Irish firms practise dual pricing.

[7] Deloitte & Touche, May 2000. Study conducted for the Directorate-General for Health and Consumer Protection.

[8] cf. www.emuaware.forfas.ie

The only country to have adopted general legislation on this matter is Austria, where dual pricing will be compulsory from 1 October 2001, with fines being imposed for non-compliance. [9] However, the law allows numerous exemptions, in particular for shops with fewer than 10 employees and for service stations. In the Netherlands, a national agreement provides for all traders to bring in dual pricing in July 2001. In all the participating Member States, the large stores apply dual pricing.

[9] ATS 200 000, EUR14 535.57 (maximum).

Questions are, however, beginning to be asked as to the real effectiveness of dual pricing: it seems that consumers pay little attention to prices in euros. [10] This is prompting thoughts about how labelling can be used more effectively to familiarise consumers with the euro. Some Member States, such as France, are thinking of reversing the order of dual pricing (main price in euros, equivalent value in national currency), in the second half of 2001. The Commission will deal with this question in the recommendation which it is to present in the autumn of this year.

[10] According to Eurobarometer No 52, most consumers do not look at the euro price.

c. Persons at risk of being excluded from information flows

The Commission works closely with the associations representing persons at risk of being excluded from information flows (the elderly, the economically and socially disadvantaged, the blind and partially sighted, the deaf and hard of hearing, the physically and mentally handicapped, and migrants) as part of the "Euro Made Easy" programme.

The European Blind Union in particular has been involved from the beginning in the work of the Commission and the European Central Bank in defining the technical specifications of euro notes and coins. Ad hoc financial support from the Community has enabled it to carry out a number of measures, such as braille and large-type information brochures, many other audio and computer information resources and games and information packs for the blind and partially sighted. Training programmes for instructors are also being organised in each Member State, with the help of the Commission. The mints are also in contact with the various national associations for the blind and visually handicapped. Some, such as the Royal Mint of Belgium or the Paris Mint, have conducted campaigns or produced information tools on the euro.

For all such people, training and information packs have been produced under the Community "Euro Made Easy" programme. These packs, which have been tested in pilot regions (and in particular in the most remote regions), are now available to the Member States. Some Member States (France, Italy and Belgium) have already, in collaboration with the Commission, established large-scale information programmes for the people concerned. The European Central Bank has announced that it will make use of these networks to provide information on notes and coins. With a view to this, it will in October 2000 print training kits (consisting of single-sided bank notes marked "of no value" for those called upon to train persons with sensory or mental handicaps. Similar actions would be desirable for coins, so that the necessary tools for the organisation of practical campaigns are available from the start of 2001.

Measures for persons at risk of being excluded from information flows should be stepped up in 2001 so as to meet the specific requirements of this section of the population.

B. Preparations by public administrations

1. National level

Public administrations in general made their choices with respect to the changeover before the euro was introduced. The majority of Member States have authorised optional use of the euro since January 1999 for practically all financial flows and for reporting to public authorities.

All the initial euro-zone Member States have since 1999 authorised companies to use the euro to constitute their capital, keep their accounts, make tax returns and payments, pay their social security contributions and accomplish their legal publication requirements.

The majority of Member States, apart from Spain and the Netherlands, have accepted companies' social security statements in euros since 1999.

Citizens have been able to pay their taxes in euros in all Member States since 1999. They have also been able to make tax returns in euros since 1999 in Belgium, Luxembourg, Austria, the Netherlands and, in some circumstances, in Italy, Finland and Portugal.

Public administrations have overwhelmingly chosen not to switch their own accounts into euros until the end of the transitional period. However, Luxembourg and Greece are drawing up their 2001 government budgets in euros. Greece will introduce the euro banknotes and coins at the same time as the other euro-zone Member States; it thus has a shorter time in which to complete its preparations.

The public authorities have to take a large number of decisions concerning, inter alia, adjustment of the equipment used by the public in their day-to-day contacts with the authorities and the adaptation of converted amounts, which are usually rounded in national currency units. These amounts must be adapted in such a way that appropriate rounding makes it easy for the public to handle them. In most cases, these decisions require further legislation, which must be adopted as soon as possible so that the measures can be implemented in good time.

Public administrations in Member States are also gradually making more use of the euro in their operations and in their relations with companies and the public. In France, for example, all government procurement extending beyond 2001 will be denominated in euro from 1 July 2000; local government has been recommended to follow the same procedure from January 2001.

The public sector's role is important with respect to the information provided, particularly to SMEs, which clearly need to speed up preparations for the cash changeover. It appears that the level of awareness of SMEs needs to be raised, inter alia by factual information on the cash changeover - what the end of the transitional period means and what the legal and practical implications are. It should also be stressed that preparations may take longer and be more complicated than is generally assumed, so that SMEs should start to prepare as early as possible in order to avoid costly bottlenecks at the end of 2001. Early preparation should reinforce the competitive position of SMEs, while changeover can be an opportunity to make broader improvements, e.g. E-business. As a rule of thumb, SMEs should have a strategic plan before the end of 2000.

The public authorities should place particular emphasis on companies' accounts in their communication efforts. The Commission has informed the accounting profession of the implications of the changeover to the euro, as related to monetary law. For their part, Member States should intensify communication with the accounting profession.

While the changeover is the responsibility of the individual Member States, mutual information and exchange of experience is helpful in dealing with issues that are essentially common to all Member States. This is the purpose of the network of public administrations which the Commission has been organising for several years and which provides a forum for the national officials responsible for the changeover of public administrations to the euro. In this connection, the Commission has developed an extranet tool, Communication and Information Resource Centre Administrator (CIRCA), which is a protected library and consultation system and enables working and official documents and information to be informally communicated between members of the public administrations network.

Public administrations may wish to examine, on an ongoing basis, whether their choices with respect to their own changeover and preparations are still adequate. They should step up their communication efforts in order to speed up preparation by SMEs for the euro and provide them with certainty regarding their legal obligations at the end of the transitional period.

They should continue to benefit from exchanging information and experiences with one another.

2. Preparations by local authorities

Because of their nearness to and daily contact with the general public, the local authorities are key players in determining the success of the changeover to the European currency. In order to clarify the situation concerning the progress they have made in preparing for the introduction of the euro, the Commission acting in cooperation with the Committee of the Regions, has conducted a survey of local authorities. [11] The task of the local authorities is twofold: they must themselves prepare for the euro and they must help the public to prepare properly, by organising training and communication campaigns.

[11] The survey was based on a questionnaire sent out between 15 March and 15 April 2000 to the local authorities represented by the 222 members of the Committee of the Regions. The sample studied covers over 80 million euro-zone inhabitants (or more than one in four of the population) and represents a total budget of some EUR 173 billion.

a. Preparing for the euro

The local authorities have in particular to train their staff, adapt their computer systems and their accounts and be prepared to accept payments and tax returns in euros.

Training staff to familiarise themselves with the use of the euro. 64% of the local authorities in the sample have already organised training courses for their staff. Most of the local authorities which have not yet organised internal training (54%) are planning to do so in the second half of 2001, chiefly in the form of specialised courses for those particularly concerned (54%).

The adaptation of IT systems to the euro. Over half the authorities in the sample say that they have "euro-compatible" software; this is a high figure which leads one to wonder whether it reflects a genuine effort to adapt IT tools or a lack of awareness of the problem. Almost one in five intends to adapt their systems by the end of the first half of 2001. More than one in four is waiting until the last moment (the second half of 2001) to do so. The larger the authority, the greater the degree of IT preparation tends to be. Local authorities which have not yet begun to adapt their tools are running a serious risk: according to the computer companies, it takes between one month and one year just to update files, not counting the time needed to update the software programmes and to train staff to use the new tools. Those which have chosen to adapt tools in the second half of 2001 (i.e. slightly over one in four) are liable to run into practical difficulties.

Switching over to use of the euro in the accounts. The date chosen is generally the same as that on which the national administration switches over. Nine out of ten local authorities are planning to switch to use of the euro in their accounts on the last possible date (1 January 2002), with size or type of authority making no appreciable difference. Some local authorities are publishing their budgets in two currencies (national currency/euro), while continuing to keep accounts in national currency.

Acceptance of payments and tax returns in euros. Most local authorities in the sample accept both operations in euros. The larger the authority, the higher the proportion of acceptance. 58% of local authorities have accepted payments in euros [12] since the launch of the third stage of economic and monetary union (over 76% as a weighted average). Those which do not yet handle euro transactions are generally waiting until 1 January 2002 to do so, a choice made by almost one in three authorities. [13]

[12] It results from the Regulation on the introduction of the euro that a local authority may refuse to accept a cheque made out in euros during the transitional period. By contrast, an individual is always able to make a euro transfer in favour of a local authority from his account.

[13] The refusal to accept euro-denominated payments does not seem to be dictated by technical considerations: the proportion of local authorities which have adapted their software programmes to the euro is roughly the same in the case of those which accept the euro and those which do not. On the whole, local authorities lag behind national authorities in accepting euro-denominated payments, since all the participating Member States have accepted euro payments since 1 January 1999.

b. Preparing the public for the euro

Over half the local authorities have organised public communication and information campaigns and more than one in three have also mounted campaigns aimed at particular target groups.

Public information campaigns. Size is a decisive factor here: while 55% of authorities have already organised public information campaigns on the euro, this proportion rises to almost 90% as a population-weighted average. Campaigns have taken three main forms: distribution of explanatory brochures (37% of local authorities), poster campaigns (14%) and organisation of public conferences (29%).

Information campaigns aimed at particular target groups. The added value of local authority communication campaigns is particularly evident here: local authorities are often the only ones to have direct and regular contact with vulnerable sections of the population (homeless persons, elderly persons, etc.) and they know exactly the type of information required by certain categories of the public (traders, etc.). Over one third of local authorities have organised such campaigns (84% as a weighted average). The main targets of these specific measures are schools (26%), followed by elderly persons (21%) and traders (18%). Most of the authorities which have not yet organised measures aimed at particular target groups are planning to do so in the second half of 2001 (17%, compared with 12% in the first half of 2001 and 7% in the second half of 2000).

Member States could usefully support the information efforts of local authorities, which perform a very important relay role in preparing the public for the euro.

II. Preparing for the introduction of euro banknotes and coins

A. Euro coins and combating counterfeiting of notes and coins

1. Preparation of euro coins

a. Production of euro coins and notes

The euro coin production target for the twelve euro-zone Member States is 50.3 billion coins by the end of 2001. Each Member State is minting its own coins, except Luxembourg whose euro coins are being produced by the Dutch mint. Mass production started in 1999. By the end of May 2000, about 39% of the target volume due by the end of 2001 had been minted. Member States are following different production timetables; as a result, some countries are at present ahead of others. All initial participating Member States consider that production is in line with the targets set. Greece is starting to produce notes and coins following adoption by the Council on 19 June 2000 of the decision on the adoption by Greece of the single currency on 1 January 2001.

According to the European Central Bank, the production of euro banknotes started in July 1999. About 14.5 billion banknotes will be printed by the end of 2001 in twelve printing works in the euro zone, including Greece.

b. Quality of euro coins

Great efforts have been made to provide the euro coins with the most secure characteristics both in manual transactions and for use in vending machines, and a close dialogue has been established with the vending industry, the blind and consumers. In particular, consultations with end-users made it possible to adjust the technical characteristics, to facilitate recognition of coins and to suppress the use of nickel so as to avoid any allergic illness. With respect to machine use, it is safe to say that the coins are more secure than any of the respective national coins in circulation. This is because of the combination of a safer material composition and specifications which are more detailed and generally tighter than those of circulating national coins.

In addition to the euro coin specifications laid down in Council Regulation No 975/98 as amended by Regulation No 423/99, [14] the participating Member States have agreed on a number of common detailed specifications designed to ensure the smooth use of coins in vending machines throughout the euro area, irrespective of the mint where they were produced. These detailed specifications include values and tight tolerances for all parameters that enable the coins to be recognised by vending machines.

[14] OJ L 139, 11.5.1998, pp. 6-8, and OJ L 52, 27.2.1999, pp. 2 and 3.

In order to implement these specifications, Member States together with the ECB have agreed on a quality management system ensuring consistently high quality in the production of the euro coinage. The ECB has taken an active role in implementing the system.

Under the system, common procedures are applied for checking both coins and blanks; each mint has established quality control arrangements governing its production. The ECB monitors the quality of the euro coins produced, carries out inspection visits of the quality management system at the mints, analyses the respective data, prepares regular reports on the quality of the coins produced and will alert the national authorities and the euro-zone Ministers if a serious quality problem persists.

The quality management system was prepared in the first half of 1999 and implemented immediately afterwards; the reports confirm that the euro coins produced so far meet the required quality standards.

c. Adaptation of vending machines

Vending machines must be adjusted so that they can operate with euro coins from the beginning of 2002. Member States have agreed to help the industry by a variety of measures. First, six test centres, located in Finland, France, Germany (Mainz and Hamburg), the Netherlands and Spain were created in order to centralise measurements and controls for accredited members of the coin operating industry and to make it possible for validator manufacturers and operators to test coins produced in all euro-zone mints in the same location. The test centres started operating in the summer of 1999.

Second, Member States have agreed that they may lend samples of euro coins and/or euro tokens to companies that manufacture coin validating and other coin handling equipment, for testing and adaptation of their equipment on their premises in the Community. The relevant agreements include financial guarantees and stringent security conditions for the protection of the samples and the confidential information.

d. Collector coins and commemorative coins

The Council has confirmed that the tradition of issuing collector coins should be allowed to continue, not least because it gives expression to cultural and local values and traditions. In order to ensure that the tradition of issuing such coins can continue and flourish, Member States have agreed on a number of common rules. Collector coins will be legal tender in the issuing country alone; however, the competent authorities are required to set up temporary arrangements whereby owners of euro collector coins issued in other euro-zone Member States can receive the face value of those coins. To ensure that they are readily distinguishable from euro coins intended for circulation, collector coins must differ in the face value, the design and some of the physical properties. The identity of the issuing Member State has to be clearly and easily recognisable.

With a view to avoiding confusion for the public, the Council in March 1999 welcomed the Commission's recommendation that Member States should not issue euro-denominated collector coins or coins with a dual euro/national currency denomination before the end of 2001. [15] National measures should also ensure that confusion is avoided in the commercial field. In particular, collector coins, medals and tokens which bear the words "euro" or "euro cent" or show a design similar to that which appears on the euro coin are banned for commercial purposes.

[15] OJ L 20, 27.1.1999, pp. 61 and 62.

Member States have agreed on a moratorium on the issue of commemorative coins intended for circulation during the early years of euro note and coin circulation.

e. Involvement of the Commission with regard to the euro coins

The Commission has been collaborating closely with the European mints with a view to helping in the implementation of Community legislation and facilitating the smooth introduction of euro coins. While the Member States are responsible for issuing euro coins, in June 2000 they requested the Commission to assume the role of physically coordinating the common actions of the mints. This mandate confirms the Commission's technical support in the preparation of euro coins.

Continuous monitoring of the speed of production of euro coins is required to ensure that the necessary stocks are available in time for the launch of the coins.

Member States will continue to ensure high quality standards for the euro coins, particularly with regard to use in vending machines.

2. Combating counterfeiting of notes and coins

Obviously, the best safeguard against counterfeiting is the quality of banknotes and coins. The euro banknotes and coins incorporate the most advanced authentication features. However, since the euro is one of the world's major currencies, the banknotes and coins will in all likelihood be a preferred target for counterfeiting. In view of this risk, the European institutions and the Member States have taken a number of initiatives in order to reinforce protection of the euro against counterfeiting.

- As far back as early 1998 the Commission (OLAF) convened a group of experts composed of representatives from national police forces, the ECB, Europol and Interpol, in order to examine the risk of counterfeiting and measures to be taken against it. The work of this group has facilitated subsequent progress in devising anti-counterfeiting measures.

- In April 1999 the Council (Justice and Home Affairs) extended Europol's role to include combating forgery of money and means of payment. [16]

[16] OJ C 149, 28.5.1999, pp. 16 and 17.

- In May 2000 the Council (Justice and Home Affairs) adopted a framework Decision on increasing protection by penal and other sanctions against counterfeiting in connection with the introduction of the euro. [17] This framework Decision includes an update of offences which Member States shall make punishable, including offences related to euro banknotes and coins before they are put into circulation at the beginning of 2002. The Decision also calls for effective, proportionate and dissuasive penalties; counterfeiting in the form of fraudulent making or altering of currency shall be punishable by a term of imprisonment, the maximum being not less than eight years.

[17] OJ L 140, 14.6.2000, p. 1.

- In May 1998 the Commission presented a comprehensive communication on measures to combat counterfeiting. [18] Following subsequent work, the Commission will shortly present a proposal for a Council Regulation on combating counterfeiting of euro banknotes and coins. The purpose of this proposal is to organise the flow of information on counterfeits and counterfeiters within the Community in a manner which is comparable to that within a country.

[18] COM (1998)) 474 final.

- As regards the technical side of combating counterfeiting, Member States and the Commission, in conjunction with the ECB, have prepared a technical scheme for handling counterfeit euro coins. Under the scheme, each Member State will establish a National Coin Analysis Centre, which will make the first analysis of the suspect counterfeit coin. The centrepiece of the scheme is the European Technical and Scientific Centre (ETSC), which will analyse and classify new counterfeit coins. The ETSC will be provisionally established in France, using the expertise of the Paris mint. The Community budget will make an appropriate contribution to the costs involved in operating the ETSC. At each of the national central banks, a National Counterfeit Centre will provide the link with the ECB, which is preparing a database on both banknote and coin counterfeits.

- The ECB with the NCBs has established a technical scheme to combat euro banknote counterfeiting.

Efforts in relation to the technical scheme for handling counterfeit euro coins are necessary in order to render it operational well before the launch of euro notes and coins.

The necessary legislative framework on combating counterfeiting which the Commission is about to propose should be in place well ahead of 2002.

B. National cash changeover plans

Following the Commission's information memo on the introduction of euro notes and coins to the Turku informal Ecofin Council in September 1999, the Member States issued a common statement last November on the guidelines for the introduction of euro banknotes and coins. In particular, Member States agreed to do their best to ensure that most cash transactions can be effected in euro after the first fortnight of 2002; to limit the dual circulation period to between one and two months; and to provide for frontloading with banknotes and coins. In order to implement these agreements, Member States have started to publish specific decisions and measures, sometimes referred to as the national cash changeover plans. All twelve euro-zone Member States have published varying amounts of information on their cash-changeover preparations.

The measures can be divided into three broad categories: those which cover the period up to the end of 2001, those which determine the period of dual circulation of old and new notes and coins, and those which concern the period after dual circulation.

1. Period up to 2002

The first period includes in particular decisions on frontloading: whether, when, to whom and how.

Normally the central banks are responsible for preparing to put banknotes and - to a lesser extent - coins into circulation. When making the changeover to the euro, it is obvious that central banks and other public authorities must work hand in hand. The euro-zone central banks are for their part preparing the logistics of the changeover and in particular frontloading, in close contact with interested parties, and are likely to present details in the near future.

All Member States plan to start frontloading professional target groups (i.e. banks, retailers, cash-in-transit companies and the cash-operated industry) with euro banknotes and coins in the last four months of 2001. Plans for frontloading retailers and cash transport companies vary from country to country, while coins will generally be frontloaded earlier than banknotes. Six Member States have so far determined the exact packaging and content for frontloading retailers.

Seven Member States have also so far planned specific arrangements for frontloading coins to the general public. Ireland, Italy and Greece do not plan to provide frontloading for the public. Most Member States are considering measures to encourage the public to use up any stocks they may have of small national coins in good time.

There is a need for coordination action between Member States to prepare frontloading of the enterprises concerned.

2. Dual circulation period

With respect to the period of dual circulation, the focus is on the first fortnight of 2002, at the end of which the bulk of the changeover should be completed.

In all Member States banks will stop releasing national notes and coins generally from the start of 2001; in Germany DM coins may still be provided out of available stocks until the end of February 2002.

In accordance with the Commission recommendation of April 1998, banks should exchange, without charge to their customers, "household amounts" of the national banknotes and coin for euro banknotes and coin during the final period. In 1998 the Commission requested banks to quantify "household amounts" by volume and frequency. Most Member States have started preparations for such agreements. However, the details have yet to be determined in most cases. The treatment of people who do not hold bank accounts or are on very low incomes also requires further consideration. The specific situation of retailers will also have to be examined carefully, in particular regarding the amount of cash that they will be changing over the counter and the value date which will apply to them in the case of frontloading. In addition, special care should be taken with respect to the display of prices so as to preserve transparency for consumers.

One important feature of the arrangements for the first fortnight is that retailers are supposed to give change in euro only. In order to achieve this, agreements between the respective organisations have been reached in a number of countries; in others, public authorities are planning to recommend such action.

In all countries, the plan is for all automatic teller machines (ATMs) to be converted to the euro in the initial two weeks. Since it is essential that banknotes in smaller denominations are available to the public in the first few days, ATMs will in most Member States exceptionally distribute EUR10 notes and in some even EUR5 notes. However, here a balance needs to be struck between the need for small denominations and the high frequency of reloading ATMs, which is the consequence of small denominations. In some countries most financial institutions will provide small banknote denominations in their branches at the beginning of 2002.

The following picture emerges concerning the date on which the national notes and coins cease to be legal tender: nine Member States have chosen late February 2002. In Ireland, the date is 9 February 2002 and in the Netherlands 28 January. In Germany, DM notes and coins will cease to be legal tender on 31 December 2001 but in practice they will be accepted as means of payment until the end of February 2002.

On the basis of present plans, the target of changing the bulk of notes and coins in the first two weeks seems to be possible everywhere. Estimates suggest that in some countries only a very small proportion of cash transactions will still take place in the national unit after this period.

3. Period following dual circulation

After the end of the dual circulation period, citizens in at least some countries will still be able to exchange old notes and coins for new ones at their bank for a time. The financial conditions of such late exchange are a matter of some interest.

Finally, periods for redeeming national banknotes and coins at the central bank or other specific institutions are in most cases long although they differ for banknotes and for coins and from country to country.

A question which has attracted some interest recently is how people can exchange stocks of old foreign coins brought home after travelling in other euro-zone countries.

While all Member States have made public their intentions concerning the main issues of the cash changeover, a number of areas require further elaboration. This is necessary so that economic operators can organise for the cash changeover, creating the conditions for the smooth introduction of notes and coins.

Firstly, five Member States (Germany, France, Belgium, the Netherlands and Ireland) have so far published comprehensive cash-changeover plans. Other Member States have published the relevant information in a piecemeal manner. Secondly, a significant number of decisions have still to be taken and arrangements made in most countries. The specific issues that have yet to be elaborated in greater detail include:

- the amounts which banks will exchange without charge to their customers and the frequency with which they will do so;

- arrangements for people who do not have a bank account;

- provision of small denominations in those countries where ATMs will not distribute such denominations or will not do so in sufficient quantity;

- using up stocks of small coins in good time;

- arrangements with retailers regarding the conditions under which frontloading will take place;

- the specific arrangements for withdrawing and transporting the national coins.

Attached is a list of web sites where information on the national cash-changeover plans can be found. Also attached is a table showing the main elements of those plans. This table is provisional to the extent that the elements represent current government planning, which, in most cases, is being further elaborated.

The smooth introduction of the euro noters and coins requires that operators be able to plan their changeover with a high degree of certainty. For this reason it is necessary that all participating Member States publish their cash changeover plans and that the remaining issues are clarified in time.

III. SUMMARY OF CONCLUSIONS

All those involved need to be kept informed about the exact timetable for the physical introduction of the euro and to be made aware of the cut-off date of 31 December 2001 and of the need to speed up their preparations.

Use of the euro by the public before 31 December 2001 will contribute significantly to the success of its introduction. Financial institutions should be encouraged to speed up the process of making payment terminals with a multi-currency capability euro-compatible and should encourage traders and consumers to use the euro. Consideration should be given to how the public can be encouraged to make greater use of the euro-denominated means of payment available to them, particularly during the second half of 2001.

Dual pricing is widepsread in all participating Member States although some doubts are emerging about its real effectiveness: it would seem that consumers do not pay much attention to euro pricing. [19] This is prompting thoughts about how labelling can be used more effectively to teach consumers about the euro. Some Member States, including France, are considering reversing dual pricing in the second half of 2001, i.e. showing the price first in euros and then in national currency. The Commission will address this question in the recommendation it will be presenting in the autumn.

[19] According to Eurobarometer No 52, most consumers take no notice of the prices in euros.

The measures in favour of those at risk of being excluded from the information disseminated should be stepped up in 2001 in order to ensure that the specific needs of this section of the population are met.

Public administrations may wish to check at all times that their choices with respect to their own changeover and their preparations are still adequate. They should intensify communication efforts so as to accelerate preparation of SMEs for the euro and provide them with certainty regarding their legal obligations at the end of the transitional period. They should continue to benefit from the mutual exchange of information and experiences.

Member States could usefully support the information efforts of local authorities, which play a very important relay role in preparing the general public.

Continuous monitoring of the speed of production of euro coins is required to ensure that the necessary stocks are available in time for the launch of the coins. Member States will continue to attach importance to achieving high quality standards for euro coins, particularly with regard to their use in vending machines.

Steps must be taken to ensure that the technical arrangements for dealing with counterfeit euro coins are operational well in advance of the launch of euro notes and coins. The necessary legislative framework on combating counterfeiting of euro banknotes and coins, which the Commission is about to propose, should be in place well ahead of 2002.

The smooth introduction of euro notes and coins requires that operators be able to plan their changeover with a high degree of certainty. For this reason, it is necessary that all participating Member States publish their cash-changeover plans and that the outstanding issues are clarified in time.

Useful web sites

Belgium // Www.euro.fgov.be

Germany // Www.bundesbank.de

Greece // www.euro-hellas.gr

Spain // www.euro.meh.es

France // www.finances.gouv.fr

Ireland // www.irlgov.ie/ecbi-euro

Italy // www.tesoro.it/Euro

Luxembourg // www.etat.lu/FI

Netherlands // www.euro.nl

Austria // www.euro.gv.at

Portugal // www.min-economia.pt

Finland // www.euro.fi

Government plans; state as of 4 July 2000

ELEMENTS OF THE NATIONAL CASH CHANGEOVER PLANS

>TABLE POSITION>

Figures in brackets signify government intentions. *For clients. ** At central banks.