Opinion of the Economic and Social Committee on the "Assessment of the state of preparedness for the introduction of the euro to highlight the main gaps and the necessary remedial action"

(2001/C 311/11)

On 31 May 2001 the Economic and Social Committee, acting under the second paragraph of Rule 23 of its Rules of Procedure, decided to draw up an Opinion on the "Assessment of the state of preparedness for the introduction of the euro to highlight the main gaps and the necessary remedial action".

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 24 July 2001. The rapporteur was Mr Burani.

At its 384th plenary session of 12 and 13 September 2001 (meeting of 12 September), the Economic and Social Committee adopted the following opinion by 74 votes in favour with two abstentions.

1. Introduction

1.1. In its opinion of 29 March 2001(1), the Economic and Social Committee made comments and suggestions concerning the 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 on the Practical aspects of the euro: state of play and tasks ahead(2). The introduction of the euro is rapidly approaching, but the many initiatives in progress or planned by a wide range of public and private bodies give the impression that not all the problems have been fully thought through. In any case, the need for systematic coordination of such initiatives is becoming increasingly evident: not an easy task, despite the good will displayed by all those concerned.

1.2. With these points in mind, the Committee held a hearing with the relevant social actors on 14 May 2001, attended by representatives of the Commission and the European Central Bank, who provided valuable comments and information. The views expressed by the participants provided an overall picture of the situation: the brief notes below are intended to contribute further to discussion on possible further action. The Committee points out that the comments and proposals made in its earlier opinion, referred to in point 1.1 above, remain fully valid.

1.3. The Committee has no intention of encroaching upon the authorities in charge of these initiatives, but simply of highlighting a number of aspects which, although apparently minor, might give rise to practical or psychological obstacles to the shift from eleven different currencies to the single currency. There is no historical precedent for such an operation: some lessons may be learned from past experiences, but otherwise the starting point must be data on the current situation, combined with a substantial dose of imagination and common sense.

2. Communication

2.1. Representatives of the general public (consumers, families, "weak" sectors of society, people living in remote rural and upland areas) have confirmed the point made by the Committee in its earlier opinion(3): in autumn 2000, only a small proportion of people in the Eurozone were fully acquainted with how the transition will be effected. Matters had improved by January 2001 - according to the Eurobarometer survey quoted in the Commission's communication(4) - but were still, in the Committee's view, far from satisfactory. In view of the human and financial resources committed by the European and national authorities, sectoral associations and private businesses, the only possible conclusion is that the effects of the information campaign, which was launched in 1996 and ran until the end of 2000, have fallen far short of expectations. The "cost per contact" (the cost for each person effectively remembering the message, not all recipients) is extremely high, and far in excess of the Commission's estimate of 2 euros per citizen. This cost is borne by the public authorities and private organisations.

2.2. As the date on which the euro will come into circulation draws closer, the situation is looking brighter, for reasons which are obvious, and which "neutral" experts in mass psychology should have been able to predict from the outset: a message given out so early concerning an event which is not pressing and without practical implications is never seen as being useful. The recipients therefore tend to give little attention to it and then to forget it. It must be recognised that this is what has happened. It was forgotten that written messages are hardly ever read, especially when unsolicited, and only those who consider them "useful" or "urgent" consult them.

2.3. Without seeking to place blame retrospectively, past experiences and mistakes must now be turned to advantage: campaigns should only be launched in the immediate run-up to the event (and stepped up in the last quarter of the year), using what is now the most widespread and, overall, the least expensive medium - television. Messages should be straightforward, should cover every possible practical circumstance and should propose solutions and methods within everyone's reach. Only once a solid foundation of readily-acquired knowledge has been built up can the general public be persuaded to take the next step and read written information (folders, brochures): these must be designed as a helpful reminder, not as a means of learning.

2.4. The issue of the most vulnerable sectors of society (the economically disadvantaged, the blind, the illiterate etc.) remains. All proper measures must be taken in this regard, but excessive optimism as to the results should be curbed. Communication can only have a minimal impact on the practical difficulties inherent in the position of the socially excluded or people with certain types of disability: at best it can help to make them feel less isolated. Entirely different measures, unconnected with euro information campaigns, are called for.

3. Availability of notes and coins

3.1. The issue of greatest apparent concern to the retail sector is the availability, from day one, of enough euro cash to give change to customers, whether they pay in national currency or euros. This can be resolved by advance distribution of cash, but there are bound to be shortfalls and calculation problems, which use of calculators and cash registers can only offset in part. The greatest difficulties will be faced by small and medium-sized retailers, as they clearly have less capacity to deal with problems; for major distribution networks the situation is different, and seemingly giving less cause for concern, especially in those countries where a high proportion of payments are made with credit, debit or pre-paid cards.

3.2. The European Central Bank (ECB) has come out against early distribution of banknotes for legal and security reasons. The commercial sector was not pleased by this stance. The Committee believes that this matter should be resolved at national level, where each central bank, having heard the views of the retail and banking sectors, is best placed to assess the situation and consumers' payment habits. It must be possible to strike a balance between the opposing requirements of the ECB to avert the danger of massive circulation of forged currency from the beginning, and of the retail sector to familiarise their staff with handling and recognising banknotes before they come into circulation.

3.3. However, the question of "change" needs to be looked at flexibly, given that national currency will remain legal tender during the transitional phase. In cases of a shortage of euros (which should however be an exception to the general rule), traders will be able to give change in national currency, and customers will - normally - be obliged to accept it. This expedient is not favoured by the retail sector (on account of the obvious book-keeping difficulties it entails) or the Commission (which fears it would slow down the process of full conversion to the euro); however, it is hard to see how else the problem of shortages of euros to be given in change - which should only occur in isolated cases - can be resolved. Once again, the Committee would argue that payment cards should represent the best solution in most cases.

3.4. Availability of euros to the general public is a further aspect: a general rush to the banks to change national currency, or to cash distributors to get hold of the new notes, must be forestalled. An atmosphere of anxiety and urgency only leads to queues and puts nerves on edge - and needlessly, since national currency will remain usable for a relatively lengthy period (45-60 days). A "big bang"-type change might be desirable, but it must be recognised that this is not realistic and would, in any case, create insurmountable problems. Here again, communication with the public must stress that there is no urgent need to change money: in other words, there is no need to panic if euros cannot be obtained until a few days after the first day of 2002.

4. Rounding-off of prices

4.1. As long ago as 1995, in its Opinion on the Green Paper on the practical arrangements for the introduction of the single currency(5), the Committee warned against the danger involved in rounding-off of prices: when a national currency, very often not divided into sub-units of a hundred ("cents"), is converted into another currency with a higher unit value - and therefore necessarily divided into hundredths - the temptation to round up to the nearest five or zero (e.g. from 32 to 35, or from 77 to 80) may be strong. This is particularly true of relatively low-price goods. Consumer organisations will need to be extremely vigilant in order to ensure that public opinion is on the alert, encouraging healthy competition between commercial operators. National and local authorities must do the same, while bearing in mind that under free pricing arrangements, coercive action is to be ruled out.

4.2. Rounding-off of trade prices is an eventuality which must be avoided, but at present is purely hypothetical, partly due to the conclusion of sectoral and/or national agreements: warning signs are however emerging from the public transport sector in certain countries, where some operators cite cash-management problems to justify rounding-off (upwards) of prices in euros. The same applies to telecommunications and - in some cases - gas, electricity and water. Given that in nearly all the countries the prices of urban transport tickets and of the utilities are among the items making up the "basket" used for calculating inflation, the consequences of rounding-up in these sectors are entirely predictable.

4.3. Conversion calculations are quite a different matter: the occasional error is acceptable, but cases of fraud at consumers' expense are certainly not, especially if they affect the weakest or least-informed sectors of society - the latter including foreign tourists. In the above-mentioned opinion on the green paper, the Committee suggested that the Member States consider legislation to introduce criminal sanctions for deliberate and systematic errors in conversion (fraud); the proposal is repeated here.

4.4. It might be useful for all citizens to have a simple electronic calculator to check conversions and ensure peace of mind. Many businesses are already distributing cheap, easy-to-use instruments free: this should become general practice. There should also be backing for messages advocating mental calculations to give a rough idea of how much a given amount in national currency is worth in euros, rather than a precise calculation. "Handy hints" of this kind may be acceptable mainly to give a rough advance idea of the cost of major purchases (e.g. a dress or suit): in any case, combining this with checking the price with a calculator would be fair at the time of actual purchase.

5. The financial system

5.1. The financial sector, and the banks in particular, do not appear to be experiencing severe difficulties in switching accounts, deposits and other relations in national currency over to the euro. Indeed, in some countries conversion will take place automatically and in advance during the summer or autumn of 2001, except where interested parties explicitly state otherwise. Neither do there seem to be technical problems in converting national or international retail payment systems; the cost of the operation, however, does represent an obstacle, which is to be addressed in an opinion which the Committee is currently preparing.

5.2. More complex and costly problems arise in connection with distribution of the new currency and withdrawal of the national ones, as well as conversion and supply of cash distributors, adjustment of card terminals to dual currency operation and the transport and storage of funds. Although preparations seem to have been carried out with diligence and determination, some minor difficulties and delays affecting both consumers and the banking system itself cannot be ruled out: yet another reason for relying on the banks for an early resolution of these problems.

5.3. Concerning cards - which, as the Committee has repeatedly maintained, represent the only system guaranteeing problem-free conversion to the euro and as such, meriting maximum encouragement - a difference has arisen between issuers and the commercial sector, which might have implications for consumers. The Committee does not wish to judge the merits of the case, which is currently before the competition authorities, but notes its particularly inauspicious, albeit purely coincidental, timing. It injects uncertainty into a system which at this precise moment needs to be strengthened and put forward once again as the best possible solution.

6. Businesses

6.1. As pointed out in its earlier opinion(6), some SMEs - particularly very small, individual ones - may not be able to convert their own administrative and accounting procedures to the euro by the deadline of 31 December 2001. The question is not whether these businesses will become "outlaws": those who do not comply clearly will. Rather, the question is how the national authorities, particularly the tax authorities, will react to a situation in which a substantial proportion of operators are in an irregular position. The temptation to take punitive action may be strong, but it is to be hoped that all the governments have planned assistance and support arrangements for those in real difficulties on account of insufficient resources or operational capacity.

6.2. Governments too will have to show good will in ensuring that legislative or regulatory provisions simplify procedures for the switch to the euro. In Italy, for example, converting sums in accounts to another currency (euros) requires a decision by an assembly of the members. Since the conversion here is simply a matter of complying with law, such a decision is hardly necessary.

7. Logistical problems and fraud

7.1. Although invited, representatives of the cash-transit industry did not attend the hearing held by the Committee. The sector is nevertheless a key element in understanding the complex logistical problems involved in movements of funds from central banks to the commercial banks, from the banks to their branches and then to customers, and back in the other direction. Those concerned are aware of the scale of these movements, but it has certainly not escaped the attention of criminal organisations and other criminals.

7.2. The Committee is not qualified or informed to formulate opinions on logistics, but it views the security issues with some concern, from the point of view of the social and material danger of robberies and of the safety of personnel protecting money in storage or transit.

7.3. Today, under "normal" conditions, armed and often bloody attacks take place. It is reasonable to assume that an exceptional event on a vast scale, in terms of both the frequency and size of cash movements, will intensify and aggravate such incidents. Police forces and private cash-in-transit operators will not easily be able to deal with all the possibilities. Involvement of the armed forces may be advisable and perhaps necessary, although not necessarily in all countries. The Committee wishes to express its serious concern in this regard and trusts that such concern is shared by the Member State authorities, who should nevertheless be reminded of their responsibility for the effects of underestimating the danger.

7.4. The risk of fraud and forgery is a further aspect which should not be underestimated. The survival of a currency depends entirely upon confidence in it: it is to be hoped that the repeated assurances offered by the ECB and the national banks reflect a euro which really is highly "forgery-proof". The ESC trusts that every possible measure has been put in place to prevent the circulation of forged euros, not only within the European Union but also beyond its boundaries.

7.5. In addition to the factors described in the earlier opinion(7), which remain valid, the Committee would draw attention to the fact that from the physical point of view, euro coins do not form "a single currency": not only does the presence of eleven different national versions (reverse side) do nothing to boost recognition in the various countries, but it could encourage the circulation of forged coins in countries other than that in which they are produced, where there would be little or no familiarity with them.

7.6. Given that euro currency from each country will immediately begin circulating in the others as tourists travel, there are grounds to fear that news of large-scale forgery in one country might cause widespread suspicion towards money from that country, rather like the attitude towards Luxembourg francs in Belgium or Scottish pounds in the other parts of the United Kingdom (although in these two cases the problems are unconnected with forgery).

7.7. The Committee offers these comments to the appropriate authorities - the Commission, the European Central Bank, the Eurozone governments - not because it expects a disaster to occur, but because any strategic plan worthy of the name should include a "worst-case scenario" and the appropriate preventive measures. While pessimism only smothers initiative, a realistic and clear-headed assessment of all the eventualities is to be expected of high-quality public administration.

Brussels, 12 September 2001.

The President

of the Economic and Social Committee

Göke Frerichs

(1) OJ C 155 of 29.5.2001, p. 57.

(2) COM(2000) 443 final.

(3) OJ C 155 of 29.5.2001, p. 57.

(4) COM(2001) 190 final of 3 April 2001.

(5) OJ C 18, 22.1.1996, p. 112.

(6) OJ C 155, 29.5.2001, p. 57.

(7) OJ C 155, 29.5.2001, p. 57.