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A PROJECT REPORT ON
EVOLUTION & IMPLEMENTATION OF EURO CURRENCY
UNDER THE GUIDANCE OF
PROF. ANIL MAHAJAN
SUBMITTED BY
MAULESH BUCH
MMS FINANCE
ROLL NO: 05
K. J. Somaiya Institute of Management Studies & Research
Vidya Nagar, VidyaVihar (E), Mumbai 400077
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DECLARATION
The project report in the Area of Specialization Finance is submitted in March
2005 to K. J. Somaiya Institute of Management Studies & Research, Mumbai in
partial fulfillment of the requirement for the award of the degree of Master of
Management Studies (M.M.S) affiliated to the University of Mumbai.
Submitted to:
Prof. Anil Mahajan
Submitted By:
Name: Maulesh Buch
Roll No: 05
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CERTIFICATE
This is to certify that project entitled EVOLUTION & IMPLEMENTATION
OF EURO CURRENCY is submitted in March 2005 to K. J. Somaiya Institute
of Management Studies & Research by Maulesh Buch in partial fulfillment on the
requirements of the awards of the degree of Master of Management Studies
(M.M.S) affiliated to the University of Mumbai for the batch of 2003 05.
Prof. Anil Mahajan Prof. P. V. Narasimham
(Project Guide) (Director General)
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ACKNOWLEDGEMENT
This is to express my earnest gratitude and extreme joy at being bestowed with an
opportunity to get an opportunity to get an interesting and informative project. It is
impossible to thank all the people who have helped me in completion of project,
but I would avail this opportunity to express my profound gratitude and indebtness
to the following people for all the help they have given me.
I am extremely grateful to my project guide and co-coordinator Prof. Anil Mahajan
who has given an opportunity to work on such an interesting project. He proved to
be a constant source of inspiration to me and provided constructive comments on
how to make this project better. Credit also goes to my friends whose constant
encouragement let me in good stead. Lastly, I would thank Prof. P. V. Narasimham
and all my faculties for providing all explicit and implicit support to me during the
course of my project.
Name: Maulesh Buch
Roll no: 05.
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EXECUTIVE SUMMARY
On January 1, 2002, currency of Austria, Belgium, Finland, France,
Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain
replaced by a single currency Euro The introduction of Euro four decades after
the inception of the European Union is a significant step towards European
Political Unity.
Since 1950s, European Region was gradually moving towards economic
cooperation & integration. In1989, Delors report was presented, providing
direction by three-stage transition plan to be executed over more than a decade.
Plan outlined abolishment of capital movement restriction, establishing various
authorized institutions and the changeover.
Countries with diverse economic conditions had their own viewpoint and
Denmark, Sweden and United Kingdom opted out from joining Euro.
Maastricht Treaty laid down economic conditions to be satisfied for
participation. These convergence criteria is regarding budget deficit, rate of
inflation, interest rate and exchange rate stability.
In 1998, European System of Central Banks was formed to implement the
changeover. European Central Bank was established and irrevocable fixed
exchange rate was set for each national currency.
Euro coins and notes in different denomination came into circulation. It
was designed with an idea to represent unity along with respect for independent
nation. Security and convenience measure was also taken care of. Proper
information systems and logistics were put in place to bring awareness about euro
and implement the transition.
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During January 1999 to December 2001 euro was came into existence for
all non-cash transactions on no compulsion, no prohibition basis. Thereafter it
became the legal tender and old coins & notes were gradually withdrawn. The
currency changed, but because of the established conversion rate, the value
remained the same.
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TABLE OF CONTENTS
Chapter 1. Introduction 1
Chapter 2. The Evolution of Euro Currency 5
Chapter 3. European Countries & Euro 12
Chapter 4. Maastricht Treaty 19
Chapter 5. Setting the Value of the Euro 23
Chapter 6. Euro Coins & Notes 29
Chapter 7. Implementing the Changeover 36
APPENDIX I i
APPENDIX II ii
APPENDIX III iii
APPENDIX IV v
APPENDIX V viii
Bibliography & References ix
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Introduction
Chapter 1. Introduction
"The introduction of the euro is probably the most important integrating step since
the beginning of the unification process. It is certain that the times of individual
national efforts regarding employment policies, social and tax policies are
definitely over. This will require to finally bury some erroneous ideas of national
sovereignty... I am convinced our standing in the world regarding foreign trade
and international finance policies will sooner or later force a Common Foreign
and Security Policy worthy of its name... National sovereignty in foreign and
security policy will soon prove itself to be a product of the imagination."
German Chancellor Gerhard Schrder on 'New Foundations for European
Integration', The Hague, January 19, 1999.
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Introduction
In any economy, money performs four important functions as a medium
of exchange, measure of value of goods and services expressed as price, standard
of measure or unit of account and store of value. Money largely consists of
currency with public and demand deposits in bank. Hence, currency and its value
play very critical role in any countries economy and any change therein, especially
in the era of globalization, affects nations economic scenario significantly.
National currencies are vitally important to the way modern economies
operate. They allow us to consistently express the value of an item across borders
of countries, oceans, and cultures. Wealth can be easily stored or transported as
currency.
On January 1, 2002, world economy and history of currencies have seen
beginning of new era as twelve of the countries in the European Union replaced
their respective currency. Austrian shilling, Belgian franc, Dutch guilder, Finnish
Markkaa, French franc, German mark, Greek drachma, Irish pound, Italian lira,
Luxembourg franc, Portuguese escudo and Spanish peseta was replaced by a single
currency Euro and issued their new euro banknotes and coins. This was
mammoth transition as the economic and monetary policies were different in
different countries. The implementation of the euro was a remarkable success of
Europe's biggest project, the economic and monetary union.
The original seed was planted in 1946 when Winston Churchill suggested
the creation of the "United States of Europe." The primary goal was to create
political harmony in the region through economic cooperation.
Then, in 1952, Churchill's suggestion took shape and the European Coal
and Steel Community (ECSC) was created. The goal, just as Churchill had
intended, was to help prevent military conflict between France and Germany. In
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Introduction
1957, the Treaty of Rome was signed, declaring the goal of creating a common
European market.
Thereafter European region was constantly moving in the direction of
economic cooperation and integration by forming various institutions. After many
false starts, the process of creating the Euro got its real start in 1989, when Jacques
Delors, president of the European Commission, published the Delors Report. This
important report outlined a transition plan that would create a single European
currency.
European Union (EU), which began as the ECSC with just six countries
Germany, France, Italy, Netherlands, Belgium and Luxemburg, has now
membership of 25 countries and has population 455 million with around 28% share
of the world GDP and 20% share of global trade.
Though the US dollar is still favored as a reserve currency, within three
years of the launching of Euro, around 17% of the reserves of world banks were in
euro. The share of euro in commercial paper outstanding is steadily increasing and
the euro has also been used as international bonds and notes market.
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Introduction
Participating Countries
There are currently 12 member states of the European Union utilizing the euro:
Belgium
Germany
Greece
Spain
France
Ireland
Italy
Luxembourg
The Netherlands
Austria
Portugal
Finland
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The Evolution of Euro Currency
Chapter 2. The Evolution of Euro Currency
"One basic formula for understanding the Community is this: 'Take five broken
empires, add the sixth one later, and make one big neo-colonial empire out of it
all.'"
Professor Johan Galtung, Norwegian sociologist, "The European Community, a
Superpower in the Making", 1973
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The Evolution of Euro Currency
A Brief History
As mentioned in the previous chapter Winston Churchill envisioned the
creation of the "United States of Europe". His goals were primarily political, in that
he hoped a unified government would bring about peace for a continent that had
been torn apart by two world wars.
Then six west-European countries took Churchill's suggestion and created
the European Coal and Steel Community (ECSC). These resources were quite
strategic to the power of each country, so a requirement of the ECSC was that eachcountry allows their resources to be controlled by an independent authority.
Thereafter, the Treaty of Rome was signed, declaring the goal of creating a
common European market. France, Germany, Italy, Belgium, the Netherlands, and
Luxembourg signed it. Refer Appendix I for details about a country joining
European Union.
The Treaty of Rome was ratified in 1958, establishing the European
Economic Community (EEC). The goal of the EEC was to reduce trade barriers,
streamline economic policies, coordinate transportation and agriculture policies,
remove measures restricting free competition, and promote the mobility of labor
and capital among member nations. It was very successful, but just as with the
ECSC, it served more of a peacemaking role between the European nations than an
economic role.
At this time, the monetary exchange rate between countries was controlled
by the Bretton Woods system, which connected currencies to the U.S. dollar,
allowing for only a one percent fluctuation around designated values. This was
referred to as the "pegged rate" and was based partly on the gold backing of the
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The Evolution of Euro Currency
dollar. This system worked well for 20 years, helping to stabilize exchange rates
and restore economic growth in the postwar period. During 1960s, the system
began to fail as US balance of payment deficits started mounting, and exchange-
rate agreements became the prevalent topic among European political and
economic leaders.
By December 1969, Luxembourg's Prime Minister, Pierre Werner, was
asked to write an EC (European Community) report covering the need for a
complete monetary union among the European economies. The Werner Report
came out in 1970 and specifically brought up the idea of a single European
currency as part of a cooperative monetary effort. The report was the first to use
the term Economic and Monetary Union.
Although this plan seemed promising, it lost momentum when President
Nixon's 1971 policy of "benign neglect" ended U.S. backing (by its gold reserves)
of the predefined exchange rates against the dollar, collapsing the Bretton Woods
system. The dollar-gold link was abandoned in August 1971. After an abortive
attempt to salvage the system by means of series of parity realignment, dollar
devaluations and widening the bands of permissible variation around the central
parities, the system was finally laid to rest, officially in 1978. Other foreign central
banks were not willing to support the dollar. The era of floating exchange rates had
begun.
In 1979, European Monetary System (EMS) was set up. EMS was an
arrangement by which most nations of the European Union (EU) linked their
currencies to prevent large fluctuations relative to one another. It was organized to
stabilize foreign exchange and counter inflation among members. Periodic
adjustments raised the values of strong currencies and lowered those of weaker
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The Evolution of Euro Currency
ones, but after 1986, changes in national interest rates were used to keep the
currencies within a narrow range. In the early 1990s, the European Monetary
System was strained by the differing economic policies and conditions of its
members, especially the newly reunified Germany, and Britain permanently
withdrew from the system. The main components of the EMS were the European
Currency Unit (ECU), the exchange rate and intervention mechanism (ERM) and
various credit mechanisms.
The next move toward a unified European economy came with the 1987
Single European Act. This act called for the systematic removal of barriers and
restrictions that hampered trade between European countries. As a result, border
checks, tariffs, customs, labor restrictions and other barriers to free trade were
dismantled. Refer Path to Euro in Appendix III.
Transition Plan
In 1989, Jacques Delors, president of the European Commission, published
the Delors Report, outlining the three-stage transition plan.
Stage one began on July 1, 1990, and immediately abolished (at least in
principle) all restrictions on the movement of capital between the member states. It
also began the identification of issues that needed to be dealt with and the
development of a working program to implement the upcoming changes.
Stage two began on January 1, 1994, and marked the establishment of the
European Monetary Institute (EMI). The EMI was responsible for coordinating the
monetary policy and strengthening the cooperation of the central banks, as well as
preparing for the establishment of the European System of Central Banks, which
included the single monetary policy and single currency. European Monetary
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The Evolution of Euro Currency
Institute went into liquidation following the establishment of the ECB on 1 June
1998.
In December 1995, the European Heads of State or Government at the
European Council meeting in Madrid voted on the name "euro" for the single
currency of the European Monetary Union.
The European Monetary Institute was created as transitional step in
establishing the European Central Bank (ECB) and a common currency. The ECB,
which was established in 1998, is responsible for setting a single monetary policy
and interest rate for the adopting nations, in conjunction with their national central
banks. Accordingly, in 1998, Austria, Belgium, Finland, France, Germany, Ireland,
Italy, Luxembourg, the Netherlands, Portugal, and Spain cut their interest rates to a
nearly uniformly low level in an effort to promote growth and to prepare the way
for a unified currency.
Stage three began on January 1, 1999, with the establishment of
"irrevocably fixed exchange rates" of the currencies of the current 11 member
states. The euro was legally a scriptural currency in the 11 Member States of the
euro area during the period from its launch on 1 January 1999 until the
introduction of notes and coins on 1 January 2002.During this period, the eurowas the official currency of those countries, but could only be used in non-cash
transactions such as electronic transfers, credit, etc. At the beginning of 1999, the
above mentioned 11 EU members adopted a single currency, the euro, for foreign
exchange and electronic payments. (Greece, which did not meet the economic
conditions required until 2000, subsequently also adopted the euro.) The
introduction of the euro four decades after the beginnings of the European Union
was widely regarded as a major step toward European political unity. By creating a
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The Evolution of Euro Currency
common economic policy, the nations acted to put a damper on excessive public
spending, reduce debt, and make a strong attempt at taming inflation.
The Euro
While the euro was introduced on 1 January 1999, its name was decided at
the European Council in Madrid in December 1995. Banknotes and coins in euro
were launched on 1 January 2002. Since 28 February 2002, euro notes and coins
have been the only legal tender in the euro area. One euro is divided into one
hundred cent. The currency code EUR has been registered with the InternationalOrganisation for Standardisation (ISO 4217) and is used for business, financial and
commercial purposes.
The graphic symbol ()
The European Commission (EC) was given the task of creating the euro
symbol as part of its communications work. The design of symbol had to
accomplish three things:
It had to be easily recognized.
It had to be easily written by hand.
It had to be pleasing to look at.
The EC had more than 30 designs drawn up. They selected 10 from those and let
the public vote, which narrowed those 10 down to two. From there they made their
final selection. The design that was selected is based on the Greek letter epsilon,
and it resembles the "E" as the first letter of the word "Europe." The two parallel
lines through the center of the "C" represent stability. It is registered with the
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The Evolution of Euro Currency
International Organisation for Standardisation (ISO 10036) for business, financial
and commercial purposes.
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European Countries & Euro
Chapter 3. European Countries & Euro
"We already have a federation. The 11, soon to be 12, member States adopting the
euro have already given up part of their sovereignty, monetary sovereignty, and
formed a monetary union, and that is the first step towards a federation."
German Foreign Minister Joschka Fischer, Financial Times, July 7, 2000.
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European Countries & Euro
Participating Countries (Eurozone)
The Eurozone or euroarea encompasses those member states of the
European Union in which the euro has been adopted as the single currency in
accordance with the Treaty and in which a single monetary policy is conducted
under the responsibility of the decision-making bodies of the ECB (European
Central Bank). The euro area currently comprises Austria, Belgium, Finland,
France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal
and Spain. Refer Appendix II for the countries participated in European MonetaryUnion. Following are the details of those countries and their citizens viewpoint
about Euro.
Austria: Austria is a small European country in terms of gross domestic product,
area, and population. Yet, since the end of World War II, it has achieved a
remarkable record of growth by concentrating on manufacturing the products of
the second industrial revolution--such as high-quality machine tools, chemicals,
and other producer goods--and exporting them largely to the countries of Western
Europe. AlthoughAustria has achieved considerable autonomy in many importanteconomic areas, it remains fully engaged in the European and global economic
environment.Austria joined European Union in 1994. Austria had voted by a two-
thirds majority to join the European Union. However, populist support for both the
EU and the single currency, has fluctuated. After initial resistance to euro many of
Austrians (66%) supported joining the euro and replaced its currency Austrian
Schilling (ATS) at 1EUR= 13.7603 ATS.
Belgium: Belgium became a founding member of the European Economic
Community in 1957, and Brussels is home to many key European institutions,
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European Countries & Euro
including the European Commission and the European Parliament. As one of the
EU's founding members and the self-styled "capital of Europe", there is great
support for EMU in Belgium. Belgians are used to the idea of monetary union,
having shared a currency with Luxembourg since 1920. The euro's popularity is
undisputed, with 70 per cent in favour of EMU, according to a survey in 1999.
Belgium Franc (BEF) was replaced at 1 EUR = 40.3399 BEF.
Finland: One of the euro's most ardent supporters, Finland shrugged aside the
reluctance of its Nordic neighbours Denmark and Sweden and signed up for the
euro in 1998, three years after it joined the EU. Finland's economy has performed
well since the country joined the EU. It has received financial help for its poorer,
sparsely-populated regions in the north and east of the country. Finland Markka
(FIM) was replaced at 1 EUR = 5.94573 FIM.
France: In the years following the Second World War, France was at the heart of
the intellectual push for a unified Europe, thanks to people such as Jean Monnetand Robert Schumann, who are considered the architects of the European project.
In the 1980s, under President Francois Mitterrand, France further strengthened its
place at the forefront of the European Union. However, France's contribution to the
creation of the euro has not been without hiccups. The French only joined
European Monetary Union after a hard-fought referendum campaign in 1992, in
which just 51 per cent voted in favour of the single currency project. In the end
franc was replaced at 1 EUR = 6.55957 FRF.
Germany: The German government backs a profound shift in political power
within the EU, with general support for some form of European federation. It also
backs eastward enlargement. However, there is much wariness about the loss of the
solid, strong Deutsche Mark in favour of the euro. For most Germans, the fear of
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European Countries & Euro
inflation - and the corresponding love for the stable D-mark they have enjoyed for
years - remains deep-seated. The country has gone through several currency
reforms and a period of hyperinflation within living memory, and many would
rather stick with the reliable D-mark, which for them symbolises the country's
post-war success. Deutsche Mark was replaced at 1 EUR = 1.95583 DEM.
Greece: The poorest member of the EU, Greece sees EMU as an essential step
towards achieving its strategic and economic ambitions. In spite of the euro's
weakness when Greece entered the euro-zone on January 1 2001, opinion polls
showed that some 70 per cent of Greeks were in favour of membership. There is
little attachment to the drachma. Europe's second-oldest currency is linked in
Greek minds with economic and political backwardness. Greece is leveraging the
euro to encourage foreign direct investment with a view to the country becoming a
business and transport hub, linking south-east Europe with EU markets. Greece
Drachma (GRD) was replaced at 1 EUR = 340.750 GRD.Ireland: During the 1990s, a rapid increase in foreign direct investment and
generous amounts of EU regional aid helped transform Ireland into the EU's fastest
growing economy. The Irish have traditionally been one of the most pro-European
nations, unsurprising considering the large amounts of financial assistance they
have received from Brussels. Exchange rate for euro was 1 EUR = 0.787564
Ireland Pound (IEP).
Italy: Italy has attracted a great deal of criticism from its European partners over
its public spending and its large debt. On entering the eurozone the Italian
economy was the most stretched of all countries by the EU's convergence criteria
for membership. By pushing through several reforms, most notably overhauling
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European Countries & Euro
public finances, the then centre-left government was able to join the euro. Italian
Lira was replaced at 1936.27 per euro.
Luxembourg: The smallest member of the EU was one of the EEC's six
founding nations in 1957. Luxembourg has provided two of the European
Commission's nine presidents, Gaston Thorn and Jacques Santer. The Grand
Duchy is also known for its pro-European loyalty and a former Luxembourg prime
minister, Pierre Werner, was one of the intellectual fathers of European monetary
union. The country's government has been a major player in ensuring the swift
introduction of the euro. Interestingly, in order to join the euro, Luxembourg had to
set up its own central bank. The euro is a project well suited to Luxembourg's
traditions as it has been part of a monetary union with Belgium since the 1920s.
Luxembourg Franc was replaced at 40.3399 per Euro.
Netherlands: The Netherlands is one of the EU's smaller members, with a
population of 15m, but also one of its most enthusiastic. From the outset it hasembraced the euro, and planed a quicker changeover to the currency than any other
country, withdrawing the guilder four weeks into 2002. The country which hosted
the negotiations for the Maastricht and Amsterdam treaties, has benefited from a
weak euro. Netherland Guilder was replaced at 2.20371 per euro.
Portugal: Entry to the euro in brought about a brief upturn for Portugal in 1998
as falling interest rates and currency stability triggered economic regeneration in
one of Western Europe's poorest countries. However, initial euphoria gave way to
growing gloom as Portugal's economic growth slowed and inflationary pressure
persisted, triggering stern warnings from Brussels over excessive public spending.
Portuguese Escudo was replaced at 200.482 per euro.
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European Countries & Euro
Spain: Spain has moved mountains economically to ensure membership of the
euro. Between 1997 and 2000 annual real output growth averaged more than 4 per
cent creating 2m new jobs that have brought the unemployment rate down from
21.5 per cent to 13.6 per cent. Once considered an economic backwater, Spain has
seen an unprecedented rise in its phone and internet sectors. Exchange rate was 1
EUR = 166.386 Peseta.
Non-participating EU countries
Denmark, Sweden, and United Kingdom met the criteria of Maastricht
Treaty but opted out to participate in Euro. The National Central Banks (NCBs) of
Denmark, Sweden and the United Kingdom, have a special status that allows them
to conduct their own national monetary policies, but not to take part in deciding
and implementing monetary policy for the euro area.
Denmark: Denmark obtained an opt-out of joining the euro after voters initially
rejected the Maastricht Treaty in a referendum in June 1992. A referendum held in
September 2000 to determine whether to join the single currency was rejected by
53 to 47 percent. The Danish government announced in January 2002 that a second
referendum on the issue will be held, although no date has yet been set. Denmark is
a member of the Exchange Rate Mechanism II (ERM II), which means that the
Danish krone is linked to the euro, although the exchange rate is not fixed and is
pegged within a 2.25% band against the euro.
Sweden: Sweden joined the EU in 1995 with an opt-out on adopting the euro. In
Sptember 2003 a referendum was held in Sweden on whether to adopt the Euro as
theie currency and 56% rejected the proposal to join the euro currency.
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European Countries & Euro
United Kingdom: UK negotiated an opt-out of joining the euro in the
Maastricht Treaty. The current Labour government is committed to holding a
referendum when it determines that the economic conditions for joining are right.
In June 2003, Government has stated that it remains committed to promoting
eventual membership of the euro to the British people.
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Maastricht Treaty
Chapter 4. Maastricht Treaty
"The euro was not just a bankers' decision or a technical decision. It was a
decision which completely changed the nature of the nation states. The pillars of
the nation state are the sword and the currency, and we changed that. The euro
decision changed the concept of the nation state and we have to go beyond that."
EU Commission President Romano Prodi, Financial Times interview, April 9,
1999.
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Maastricht Treaty
Maastricht Treaty on European Union signed on 7 February 1992
(following political agreement at the Maastricht European Council in December
1991) and came into force in November 1993. It established the conditions and the
timetable for the introduction of the single European currency. To participate,
countries must meet the requirements that were set up in the Maastricht Treaty,
drafted in 1991.
Economic Requirements for Participation
In addition to the membership requirements of the EU, countries who wished to
participate in the euro and be a part of "Euroland" had to pass some economic tests
referred to as convergence criteria:
Public Finances: The country's annual government budget deficit
cannot exceed 3 percent of gross domestic product (GDP). This addresses
the concern of excessive budget deficit. In addition, the total outstanding
government debt (the cumulative total of each year's budget deficit) cannot
exceed 60 percent of GDP.
Price Stability: In order to encourage more stable prices and to push
down inflation rates, the country's rate of inflation must be within 1.5
percent of the three best performing EU countries. That is, inflation rate
should not exceed by more than 1.5 percentage points that of three best
performing countries.
Long Term Interest Rates: The average nominal long-term interest
rate must be within 2 percent of the average rate in the three countries with
the lowest inflation rates. (Interest rates are measured based on long-term
government bonds and/or comparable securities.) That is, long-term interest
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Maastricht Treaty
rate should not exceed by more than 2 percentage points that of the three
best performing countries in terms of price stability.
Exchange Rate Stability: The country's exchange rates must stay
within "normal" fluctuation margins of the European Exchange Rate
Mechanism (ERM) without severe tensions or devaluation for at least two
years.
The Treaty moreover requires an examination of the compatibility of the
countrys national legislation, including the statutes of its national central bank,
with the relevant provisions of the Treaty.
After much debate over how strictly these requirements must be upheld, it was
finally determined that participating countries must show that they are at least "on
course" to meet the requirements.
Meeting the initial requirements, however, is not a one-time thing. The
Stability and Growth Pact, which was drafted in 1996, established an agreementstating that fines would be charged to countries that have excessive deficits.
Member states cannot run a budget deficit that is greater than 3.0 percent of the
GDP. If they do, they will be charged 0.2 percent of their GDP, plus 0.1 percent of
the GDP for every percentage point of deficit above 3.0 percent. The Pact does not
automatically impose these fines, however. Countries that are in recession, which
is defined as a fall by at least 2.0 percent for four fiscal quarters, may automatically
be exempt. A fall by any amount from 0.75 to 2.0 percent requires a vote by the
EU to impose the fine.
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Maastricht Treaty
Stability and Growth Pact
It consists of secondary EU legislation combined with a political commitment in
the form of a European Council Resolution adopted at the Amsterdam summit on
17 June 1997. The Pact is intended as a means of safeguarding sound government
finances in order to strengthen the conditions for price stability and for strong
sustainable growth conducive to employment creation. More specifically,
budgetary positions close to balance or in surplus are required as the medium-term
objective for Member States, which would allow them to deal with normal cyclical
fluctuations while keeping their government deficit below 3% of GDP.
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Chapter 5. Setting the Value of the Euro
"The euro is far more than a medium of exchange... It is part of the identity of a
people. It reflects what they have in common now and in the future."
European Central Bank Governor Wim Duisenberg, December 31, 1998.
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European Currency Unit (ECU)
The ECU was the official accounting unit of the European Union until the
end of 1998, and was notably used for the establishment of the EU budget, as the
numeraire of the ERM and as a reserve asset for central banks. It was a basket
currency made up of the sum of fixed amounts of the 12 national currencies of the
Member States of the European Union at the time of the signature of the
Maastricht Treaty in February 1992. With the introduction of the euro on 1 January
1999, the ECU ceased to exist, while the initial value of the euro (for exampleagainst other currencies, such as the dollar) was defined as being equal to the value
of the ECU on 31 December 1998. The final composition of the ECU was frozen
on 8 November 1993 following the entry into force of the Treaty of Maastricht,
and consisted of the following monetary amounts fixed on 20 September 1989,
based on weightings established by the Ecofin Council on 19 June 1989:
Currency ISO Code Weighting in % Fixed amount
Belgian franc BEF 7.6 3.301
Danish kroner DKK 2.45 0.1976
German mark DEM 30.1 0.6242
Greek drachma GRD 0.8 1.440
Spanish peseta ESP 5.3 6.885
French franc FRF 19.0 1.332
Irish pound IEP 1.1 0.008552
Italian lira ITL 10.15 151.8
Luxembourg franc LUF 0.3 0.130
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Dutch guilder NLG 9.4 0.2198
Portuguese escudo PTE 0.8 1.393
British pound GBP 13.0 0.08784
Exchange Rate Mechanism (ERM)
Exchange rate and intervention mechanism of the European Monetary
System defined the exchange rates of the currencies participating in terms of
central rates against the European Currency Unit. These central rates were used to
establish a table of bilateral central rates between participating currencies.
Exchange rates were allowed to fluctuate within a band around the bilateral central
rates; with the normal fluctuation margins corresponding to +/- 2.25% (however,
margins were temporarily widened). The central rates could be adjusted, subject to
mutual agreement between all countries participating in the ERM. ERM ceased to
exist on 1 January 1999, when the euro was introduced, and was replaced by
ERM-II.
Exchange Rate Mechanism II (ERM II)
Successor to the Exchange Rate Mechanism of the European Monetary System,
ERM II came into existence on 1 January 1999. The principles of the system were
agreed at the Amsterdam European Council in June 1997. And notably provide for
bilateral links between the euro and each participating currency. The standard
fluctuation band amounts to 15% around the central rate, while narrower bands
may be agreed on a case-by-case basis. Membership of the mechanism is
voluntary, although Member States with derogation are expected to join it.
Denmark and Greece participated from 1 January 1999, with the kroner subject to
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a narrow band of 2.25%. Since Greece joined the euro, Denmark has been the
only member until 28 June 2004, when Estonia, Lithuania and Slovenia joined
ERM II with a fluctuation band of 15%.
Eurosystem
The Eurosystem comprises the European Central Bank (ECB) and the
national central banks of the Member States, which have adopted the euro in
accordance with the Treaty. There are currently 12 national central banks in the
Eurosystem. The Eurosystem is governed by the Governing Council and the
Executive Board of the ECB and has assumed the task of conducting the single
monetary policy for the euro area since 1 January 1999. Its primary objective is to
maintain price stability.
It meets its objectives through:
Deciding and implementing monetary policy;
Conducting foreign exchange operations; and
Operating payment systems.
European System of Central Banks (ESCB)
The European System of Central Banks (ESCB) comprises the ECB and
the national central banks of all 15 Member States of the European Union. It
includes, in addition to the members of the Eurosystem, the national central banks
of the Member States, which have not adopted the euro. The National Central
Banks of Member States not participating in the euro area, i.e. Denmark, Sweden
and the United Kingdom, have a special status that allows them to conduct their
own national monetary policies, but not to take part in deciding and implementing
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monetary policy for the euro area. The Governing Council, the Executive Board
and the General Council of the ECB govern the ESCB.
European Central Bank (ECB)
The European Central Bank was established on 1 June 1998 and lies at the
centre of the Eurosystem and the European System of Central Banks (ESCB). It
ensures that the tasks conferred upon the Eurosystem and the ESCB are
implemented either by its own activities pursuant to the Statute of the ESCB or
through the national central banks. The ECB is situated in Frankfurt, Germany.Decision-making bodies of the ECB comprises of Governing Council, the
Executive Board and the General Council. The Governing Council comprises all
the members of the Executive Board and the governors of the national central
banks of the Member States, which have adopted the euro. The Executive Board
comprises the President and the Vice-President of the ECB and four other
members appointed by the Heads of State or Government of the Member States,
which have adopted the euro. The General Council comprises the President and the
Vice-President of the ECB and the governors of all the national central banks of
the Member States of the European Union. The ECB implements the monetary
policy for the Eurozone by setting interest rates, conducting foreign exchange
operations, holding reserve and authorising the issue of euro bank notes.
The job of European Central Bank (ECB) was to make sure that the European
System of Central Banks (ESCB) implemented the changeover required by the
euro statutes and generally carries out its duties. The General Council of the ECB
was responsible for setting the conversion rate for the euro for each participating
country. Those rates were established in January 1999, and are "irrevocably fixed."
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The conversion was based on the existing currency so that the euro is simply an
expression of the previous national currency. These rates were determined on 31
December 1998 for 11 national currencies (31 December 2000 for the Greek
drachma) by dividing the market value of the euro by the market values of the
individual participating currencies.
The ECB used guidelines established in a Joint Communiqu that was issued
on May 2, 1998, by the ministers of the member states who were adopting the
euro. In order not to modify the external value of the European Currency Unit
(ECU), they used the bilateral rates of the Exchange Rate Mechanism (ERM) to
establish the fixed conversion rate for each national currency. The calculation of
the exchange rates followed the regular daily concertation procedure, which used
the representative exchange rate for each nation's currency against the U.S. dollar
as of December 31, 1998. Refer Appendix V for irrevocable exchange rate of
various countries.
The National Central Banks of the participating Member States played a key
role in the smooth transition to the euro. Their responsibilities have included:
Introducing the euro in their respective countries;
Managing the changeover from national currencies to the euro;
Creating the necessary systems to effectively circulate the euro banknotes
and coins;
Withdrawing national currencies; and
Providing advice about and promoting the use of the euro.
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Chapter 6. Euro Coins & Notes
"We must now face the difficult task of moving towards a single economy, a single
political entity .. For the first time since the fall of the Roman Empire we have the
opportunity to unite Europe."
EU Commission President Romano Prodi, European Parliament, October 13, 1999.
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Euro circulation coins (normal and commemorative)
There are currently eight denominations of euro coins in circulation: the 1,
2, 5, 10, 20 and 50 cents and the 1 and 2. One euro is equal to 100 cents. The
denominations and technical specifications of the coins are harmonised and they
have legal tender status throughout the euro area since 1 January 2002. However,
each Member State issues coins with its own national design on one side of each
denomination, whilst the other side features a common European motif. In addition
to the euroarea member states, Monaco, San Marino and the Vatican City are also
entitled to issue limited quantities of euro circulation coins through agreements
with the Community. A quality management system has been put in place to
ensure that the euro coins remains interchangeable throughout the euro area. They
conform to the common standards necessary for use in all vending machines.
All eight different denomination coins vary in size and thickness according
to their values to promote easier identification and even to facilitate recognition by
the blind and the partially sighted. There was a Europe-wide competition for the
coin design and Luc Luycx of the Royal Belgium Mint had the winning designs for
the side of the coins that is common to all 12 member states.
The design features one of three maps of Europe surrounded by the 12 stars
representing the Euro member states. The opposite side of the coins has designs
specific to each country, also surrounded by the 12 stars. Although each country
has its own coin design, each coin is accepted in any member state.
The 1 and 2 coins are bicolour/bimetallic coins. The bicolour or
bimetallic coins are the one with a core inserted in a ring, the core and the ring
being of different colours and different metals or alloys. This is for security reason
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as it becomes harder to counterfeit such bimetallic and bicolor coin than regular
coins.
Euro collector coins
Euro collector coins are not intended for circulation. Therefore, it differs
from regular euro coins. According to the conclusions of the Ecofin Council
meeting in January 2000, to ensure that Euro collector coins will be readily
distinguishable from Euro coins intended for circulation, the coins must bide to the
following rules:
The face value of collector coins should be different from that of the coins
intended for circulation (i.e. Euro coins cannot have a face value equal to
the 8 denominations: 1, 2, 5, 10, 20, 50 Euro cent and 1 and 2 Euro)
Collector coins should not use images, which are similar to the common
sides of the euro coins intended for circulation. Furthermore, as far as
possible, the designs used should also be at least slightly different from
those of the national sides of circulation coins
Out of colour, diameter and thickness, euro collector coins should differ
significantly from the coins intended for circulation in two respects
Collector coins should not have a shaped edge with fine scallops, or
"Spanish flower"
The identity of the issuing Member State should be clearly and easily
recognizable.
Euro collector coins may be sold at or above face value and the approval for
the volume of collector coins issue should be sought on an aggregate basis rather
than for each individual issue. With respect to collector coins' denominations that
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may coincide with the low denominations of euro banknotes there does not seem to
exist any significant risk of substitution. However, Member States are expected to
stand ready to consider any demands by the ECB on this matter. While Euro
collector coins will have legal tender status in the issuing Member State, the
competent authorities (NCBs, Mints or other institutions) should set up temporary
arrangements through which owners of euro collector coins issued in other euro
area Member States can receive the face value of those coins while bearing the
costs related to this transaction. That is, the legal tender status of these coins is
limited to the country of issue.
Euro commemorative coins
These are commemorative variations of euro circulation coins, in the sense
that they have a different national side from the standard one, and commemorate a
specific event or personality. They comply with the denominations and with the
technical specifications of euro circulation coins and has legal tender status
throughout the euro area. As these coins must bear one of the common sides, the
commemorative feature must appear on the national side so that the common side
remains unaffected. The volume of coins and/or the production period of this coin
variation are limited. It has been agreed between Member States and the
commission that all commemorative coin issues would be limited to a single coin
denomination (2).
Euro Bank Notes
There are seven euro bank notes in denomination (5, 10, 20, 50, 100,
200 and 500). Banknotes denominated in euro, circulating in the euro area since
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1 January 2002. The seven designs are common to all euro area members, where
they are the only notes with legal tender.
As with the euro coin, notes design was also the result of a contest.
Designers were nominated by the national central banks, and the competitors
turned out designs for the seven bank notes based on either the theme of "Ages and
Styles of Europe" or an abstract modern theme. Robert Kalina of the
Oesterreichische Nationalbank won the competition. His designs were selected at
the Dublin European Council in December of 1996. He based his designs on the
theme of seven important architectural periods in Europe's cultural history. The
resulting banknotes are attractive, have a number of security features and are
representative of all the Member States involved.
On the front of the banknotes, windows and gateways symbolise the spirit
of openness and co-operation in Europe. The 12 stars of the European Union
appear on each banknote. On the reverse, a bridge from the same architectural
period is featured, symbolising the close co-operation and communication within
Europe, and between Europe and the world.
The seven bank notes are printed in different sizes and shapes for easier
identification. The size of the banknotes varies, increasing with the value. The 5
banknote is the smallest and the 500 the largest. Similar to euro coin, different
sizes and the bold, contrasting colours with "touch and feel" characteristics will
help the blind and the partially sighted to identify the banknotes. These are just two
of the four features incorporated into the banknotes after consultation with the
European Blind Union. The other two features are: the printing of the values in
large, bold figures, and the use of the intaglio printing process for some elements
of the banknotes. Intaglio printing leaves the print raised in relief. Such tactile
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marks are also printed along the edges of the higher-value 200 and 500
banknotes.
The other main features of every euro banknote are:
The name of the currency written in both the Latin (EURO) and the Greek
(EYP) alphabets
The initials of the European Central Bank in the five linguistic variants -
BCE, ECB, EZB, EKT, EKP - covering the 11 official languages of the
European Community
The symbol indicating copyright protection
The signature of President of the European Central Bank
The flag of the European Union
Around 14.89 billion euro banknotes and 51.629 billion euro coins was
produced throughout the euro area prior to 1 January 2002. Around ten billion
banknotes were put into circulation immediately, replacing national banknotes,while the rest were held in reserve to replenish stocks.
What happened to Old Currency Coins?
Coins recycled
The old currency coins were send to the countries like China where tey are
worth their nickel. China requires that kind of material as raw materials to feed its
rapidly growing economy, and it is snapping up the obsolete coins and melting
them down for their metal content. The Asian giant, with booming construction
and automobile sectors, is scouring the globe for every piece of scrap metal it can
lay its hands on - and France is one country that has a ready supply of much-
sought-after nickel-containing coins. China's stainless steel demand was increasing
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and nickel is a key component of the medal as an anti-corrosive additive. It is also
very versatile and also finds its way into cars, appliances and kitchenware.
Coins devoured
Reuters China had been a major buyer of French coins since they were
replaced by euros as the country's legal tender almost two years ago. Coins were
not auctioned directly. Instead, it was sold to dealers, and some of whom in turn is
selling it to smelters and scrap metal traders. The old 50-centime coin, almost 100
percent nickel, is proving particularly popular in China, where it is bought as scrap
to supplement tight supplies of the main raw material, refined nickel. The
shipments are usually packed 500 to 1,000 tonnes per lot and the stainless steel
producers can just put the coins into their furnaces as nickel feed.
Even collectors' items have found their way into Chinese furnaces. As per one
estimation around 260,000 tonnes of old European coins would be recycled by the
end of 2005. 260,000 tonnes of old coins would yield around 150,000 tonnes of
copper, 54,000 tonnes of steel and 43,000 tonnes of nickel. Germany, the region's
largest coin user, had almost 79,000 tonnes of old marks and pfennig coins. But
like most other EU countries, it sold most within 18 months of the euro's launch.
France had around 43,000 tonnes of old coins and still retains a large portion of
this total.
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Implementing the Changeover
Chapter 7. Implementing the Changeover
"Our future begins on January 1 1999. The euro is Europe's key to the 21st
century. The era of solo national fiscal and economic policy is over."
German Chancellor Gerhard Schrder, December 31, 1998.
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Transitional period
As agreed by the Madrid European Council, three year period between
launch of the euro currency on 1 January 1999 and introduction of notes and coins
on 1 January 2002, laid down in the changeover scenario. During this transitional
period the principle of no compulsion, no prohibition applied, meaning people
and businesses were free to carry out (non-cash) transactions in euro, but were not
obliged to do so.
On January 1, 1999, eleven of the countries in the European Economic andMonetary Union decided to give up their own currencies and adopt the Euro
currency: Austria, Belgium, Finland, France, Germany, Ireland, Italy,
Luxembourg, the Netherlands, Portugal, and Spain. Greece followed suit on
January 1, 2001. The conversion rates were "irrevocably fixed," and the euro
officially "existed". At that point, the euro could be used for non-cash transactions,
such as making electronic payments, writing checks, or credit transactions. Even to
the extent that in most cases the balances were shown both in the national currency
as well as in the converted euro amounts. The currency changed, but because of the
established conversion rate, the value remained the same. Refer Implementing
Euro in Appendix IV.
The speed of the changeover from existing national currencies to the euro
varies from country to country depending on their respective national changeover
plans. Although, euro currency was introduced on January 1, 2002, some countries
had slightly different schedules for the end of circulation of their existing national
currency. The schedule for the euro introduction and endings for national
currencies:
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December 31, 2001 was the last day for electronic payments in the old
currencies.
December 31, 2001 was the last day that the German mark could be legal
tender; however, cash was accepted until February 28, 2002.
January 28, 2002 was the last day for the Dutch guilder.
February 9, 2002 was the last day for the Irish punt.
February 17, 2002 was the last day for the French franc.
February 28, 2002 was the last day for all other national currencies,
including the Belgian franc, Luxembourg franc, Italian lira, Greek drachma,
Finnish markka, Spanish peseta, Portuguese escudo, and Austrian schilling.
Euro bank notes and coins began circulating in the above countries on
January 1, 2002. At that time, all transactions in those countries were valued in
Euro, and the "old" notes and coins of these countries were gradually withdrawn
from circulation. When items were purchased with national currency, the change
was given in euros. Exchange of cash was also done in banks. Automated teller
machines (ATMs) began distributing only euros on January 1, 2002. During the
"dual circulation period," until the final deadlines were reached for changeover,
both national currencies and the euro were accepted, but after that point only theeuro was acceptable legal tender.
Continuity of contracts
Any contract, signed prior to the date when euro became legal tender, and
where monetary value is expressed in old currency is legal and valid. The
introduction of the euro did not have the effect of changing or modifying contracts
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and does not provide a legal excuse for trying to do so. Any financial amounts
expressed in national currency units in mortgage, insurance or any other contracts
was changed into euros at the fixed conversion rate.
Euro introduction (e-day)
The introduction of the euro was a key test of the success of Europe's
biggest project, the economic and monetary union. It was the single biggest issue
confronting European finance ministers for months, as the new european currency
would have to be introduced into circulation simultaneously for all participatingcountries, on January 1, 2002. How smoothly the changeover would go, and how
the currency would fare on the exchange markets, would be critically important for
the future of the currency as it would help the rest of the EU countries, who
decided not to join the monetary union, to reconsider. Problems of security and
logistics were some of the biggest ones. The sheer quantity of notes and coins that
would have to be introduced is staggering, providing obvious opportunities for
robbers. The confusion of the changeover was also seen as a window of
opportunity for counterfeiters and money launderers. European officials were
cautiously confident that banks and large companies would be prepared for E-day,
but doubts remained about the readiness of small and medium-sized enterprises,
and the risk of inflationary price rises in shops.
The EU's attempts to gauge the public mood suggested a gradual warming
towards the single currency. From spring to autumn 2000 the Eurobarometer poll
detected a drop in support for the euro from 58% to 55%, however spring 2001
saw a rebound to 59%. Among the 12 states that would soon be switching
currencies, support had risen to 66%. Of these countries, Finland was the only one
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where less than half of the population (49%) supported the euro in spring that year,
while Germany, Austria and Portugal came in at less than 60%. The most positive
were Italy and Luxembourg (above 80%) followed by Belgium, Greece and Ireland
(above 70%).
Information campaign
The time required for the transition to the new currency varied from
country to country, depending on how efficient the publicity and teaching
campaign had been. The first European planning in 1995, dictated that the new andthe old currencies would both circulate at the same time for the first 6 months.
However, in 1999 the decision was reduced to just 4 weeks. This change suggested
that the majority of financial transactions would be made in Euros by January 15,
2002, a mere 2 weeks after the initial introduction of the currency. To cope with
this, the Central European Bank and the national banks in the Euro-zone launched
a Europe-wide campaign to inform the public of the new changes. In November
1999, Publicis was chosen to help organize the campaign, with a predicted cost of
80 million euros for 2 years. The objective was to ensure that the general public
and professional cash handlers, in both the Eurozone and other countries, were
informed about the denominations of euro banknotes and coins, the visual
appearance of euro banknotes and coins, the security features and the changeover
modalities.
These messages were delivered via four main information channels.
Press and public relations activities designed to raise awareness of the
changeover and to make the public more receptive to the new cash. They
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mainly consisted of press conferences and euro events, as well as providing
material for the media (press kits, videos, etc.).
A Partnership Program, which involved more than 3,000 organisations
using Eurosystem information materials on euro banknotes and coins in
their communications to employees, customers and suppliers, and which
extended the reach and multiplied the impact of this information
A mass media campaign on TV and in the press was carried out from
autumn 2001 to early 2002. A public information leaflet (200 million
copies) and children's poster (7 million copies) in the 11 official languages
of the European Union were also distributed during that period in the euro
area countries. In addition, the leaflet was translated into 23 other
languages.
A dedicated website supported other areas of the program, and it allowed
the official partners to download materials that they could adapt and
reproduce
The smoothness and rapidity of the cash changeover in the euro area in 2001-02
reflects the success of the Euro 2002 Information Campaign (which complemented
national campaigns) and the logistics of the changeover.
ATMs
The Automatic Teller Machines in the 12 country-member states played an
important role to the successful transition to the new currency. ATMs would be the
first places to supply the European public with Euros, and because of the different
time zones across Europe Greece was the first country to receive the new currency.
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Following table shows number of ATMs installed in different countries during
transition period:
Country Number of ATMs Installed
Germany 60,000Spain 44,000France 35,000Italy 31,700
Portugal 8,500Netherlands 7,000
Belgium 6,600Austria 5,800Greece 3,897Finland 2,200
Ireland 1,235Luxembourg 350
The wide difference between the countries is attributed not only to the
difference in population figures and the number of banks, but also to the fact that
in some states ATMs were installed in super markets, metro stations, highways etc.
Although the task of adjusting all these machines to the new currency on time was
difficult and time consuming, it is estimated that 85%-90% of all ATMs were able
to supply the new currency by the end of the first week of January.
In this way, this mammoth transition was implemented by proper execution
of information campaign and logistical support backed by well-planned strategy.
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APPENDIX I
The European Union Expansion
Year Countries Joining
1951Germany, France, Italy, The Netherlands, Belgium and Luxemburg
1973 Britain, Denmark, Ireland1981 Greece1986 Portugal, Spain
1995 Austria, Finland, Sweden2004 Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania,
Malta, Poland, Slovakia, Slovenia.
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APPENDIX II
European Monetary Union
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APPENDIX III
Path to Euro
Year A Step Forward
1948The Organisation for European Economic Cooperation (OEEC) is set
up in Paris. The Congress of Europe (a meeting of delegates from 16
European countries) agree to form the Council of Europe with the aim
of establishing closer economic and social ties1951
The European Coal and Steel Community (ECSC) is established toremove all import duties and quota restrictions on the trade of coal,
iron ore, and steel between the member states1952
The European Defense Community (EDC) Treaty is signed to form a
parallel European Political Community (EPC), which was rejected
later.1955
ECSC foreign ministers agree to develop the community by
encouraging free trade between member states through the removal of
tariffs and quotas.1958
The treaty of Rome establishes the European Economic Community
(EEC). That stipulates the eventual removal of customs duties on
trade between member countries. The EEC Treaty sets out allow the
free movement of workers, capital and services across borders and to
harmonise policies on agriculture and transport.1960Austria, Britain, Denmark, Norway, Portugal, Sweden and
Switzerland form the European Free Trade Association (EFTA) to
promote free trade but without the formal structures of the EEC.1972
Following the recommendations of the Werner Report, the EEC
launches its first attempt at harmonising exchange rates.1978
European Monetary System (EMS) is created. At the center of theEMS is the European Currency Unit (ECU).
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1987Single European Act establishes the goal of a single market by 1992.
1992Treaty on European Union (TEU), (Maastricht Treaty), is signed.
1994
Establishment of the European Monetary Institute (EMI).1995
European Council settles on "euro" as name for the single currency.1998
European Central Bank (ECB) is established in Frankfurt, Germany
and European System of Central Banks (ESCB) is formed.
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APPENDIX IV
Implementing Euro
Year A Step Forward
January 1 1999The euro becomes the currency for 11 member states.
January 1, 1999 -
December 31, 2001Transition period: changeover to the euro by the whole economy.
January 1, 2001Greece adopts the single currency.
August 30 2001European Central Bank releases final details of euro banknote.
September1, 2001
Euro banknotes and coins available to banks in Finland, Germany,
Luxembourg and Spain. Belgium, France, Greece, Ireland, Italy
and Portugal receives coins only. Sub-frontloading to retailers of
banknotes and coins begins in Germany, Luxembourg and large
retailers in Spain. Irish and Finnish retailers receive euro coins.September3, 2001
Austrian banks receive banknotes and coins.September 10, 2001
Sub-frontloading of banknotes to Austrian retailers.October 1, 2001Greek and Portuguese banks receive banknotes. Large Italian
retailers receive euro coins.November1, 2001
Belgium, Ireland and Italy receive banknotes in banks. Sub-
frontloading to Greek retailers of coins and Irish retailers receive
banknotes only.December1, 2001
France and the Netherlands (and coins) receive banknotes. Sub-
frontloading to retailers of banknotes and coins begins in Belgium,
France, Greece (banknotes only), Italy (large retailers only),
Netherlands (large retailers only) and Portugal.December 14, 2001
France, Ireland and the Netherlands make euro coins available to
the public through starter kits.December15, 2001
Austria, Belgium, Finland, Italy, Luxembourg and Spain release
starter kits.
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December17, 2001Germany, Greece and Portugal release euro starter kits.
January 1, 2002Euro notes and coins enter in circulation in 12 participating states
of the EU. All non-cash transactions will hereafter take place ineuros. Dual circulation period begins, in which consumers can still
use national currencies but will be given change only in euros.January 28, 2002
Dutch national currency ending as legal tender.February 9, 2002
Irish national currency ending as legal tender.February 17, 2002
French national currency ending as legal tender.February 28, 2002
Belgian, Greek, Spanish, Italian, Luxembourg, Austrian,Portuguese and Finnish national currencies ending as legal tender.
German commercial banks exchanging national banknotes and
coins for euros until at least this date. Commercial banks in
Austria, Finland, Greece and Ireland to decide individual deadlines
for currency exchanges.June 30, 2002
Last date commercial banks in France, Luxembourg, Portugal and
Spain will exchange national currencies for euros.December31, 2002
Last date commercial banks in Belgium and the Netherlands will
exchange national currencies for euros. Last date Portugal's central
bank will exchange national coins for euros.2003 and beyond The 12 Eurozone Central Banks have set various deadlines for
exchanging old national currencies:
Germany, Ireland, Spain and Austria, have said they willexchange old notes and coins indefinitely
Belgium and Luxembourg, say they will exchange old notes
indefinitely but set a deadline of the end of 2004 for coins.
Italy and Finland have each set a deadline of 10 years for notes
and coins.
Greece and France have each set a deadline of 10 years for
notes; Greece will exchange coins for two years, France for
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three years.
The Netherlands has set deadlines of January 1, 2007 for coins
and January 1, 2032 for notes.
Portugal will exchange notes for 20 years (the deadline for
coins is December 31, 2002).
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APPENDIX V
Irrevocable Fixed Exchange Rates in the Euro
1 =
Belgian Franc
40.3399
DeutscheMark1.95583
GreekDrachma340.750
SpanishPeseta166.386
FrenchFranc6.55957
IrishPound0.787564
ItalianLira1936.27
LuxembourgFranc40.3399
DutchGuilder2.20371
AustrianSchilling13.7603
PortugueseEscudo200.482
FinnishMarkkaa5.94573
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Bibliography & References
European Central Bank - http://www.euro.ecb.int/en.html
http://europa.eu.int/comm/economy_finance/euro
http://www.xe.com/euro.htm
http://www.fleur-de-coin.com/articles/euro.asp
http://www.encyclopedia.com/html/e/europnm1s1.asp
http://money.howstuffworks.com/euro.htm
http://www.polsci.ucsb.edu/faculty/cohen/inpress/bretton.html
http://www.ecuactivities.be/documents/publications/publication/1996_3/dinand.htm
http://specials.ft.com/euro
European Union & Euro Article by Dr. B. Bhatia, Synergy January 2005 Issue,
SIMSR Magazine.
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