*v* COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 31.05.1995 
COM(95) 333 final 
GREEN PAPER 
ON THE PRACTICAL ARRANGEMENTS FOR THE 
INTRODUCTION OF THE SINGLE CURRENCY 
(presented by the Commission) 

FOREWORD 
Europe will have a Single Currency 
By the end of the century, Europe will have a single currency. It will be strong and 
stable. This is the wish of its leaders and peoples in signing and then ratifying the Treaty 
on European Union. 
Making the change is a complex and politically delicate operation, requiring the utmost 
care and preparation. Stage Two of Economic and Monetary Union began on January 1 
1994 and is the period designed by the Treaty for preparations leading up to the final and 
irrevocable fixing of currency parities no later than January 1 1999. 
However, the Treaty does not enter into the detail of the methodology to be pursued. It 
says only that there must be a "rapid" introduction of the ECU1 as the single currency 
after the irrevocable fixing of parities. The aim of this Green Paper is to contribute to the 
debate on the best way to achieve this goal. 
Convergence criteria are of primary importance 
The need to raise awareness of the technical issues involved does not in any way weaken 
the primary importance of economic convergence. This is at the heart of the Treaty and 
the indispensable condition for a strong and stable single currency, at least as strong as 
the strongest national currency. The Treaty has provided four criteria for measuring this 
convergence and one of them, covering public finances, focuses both on budget deficits 
and outstanding public debt. 
These four criteria are both key indicators of sound économie management and the 
objective basis for a political decision. They must be strictly and fully respected, both 
before and after the changeover to the single currency. 
The Treaty lays down procedures for ensuring respect for the criteria and sanctions when 
they are not respected. This is the only way to build Monetary Union on solid 
foundations and to guarantee its permanence. It is also the only way to provide Europe 
with that stable macroeconomic environment it needs for faster growth and more job 
creation. 
Steady progress towards satisfying the criteria has been made in the last two years, 
notably in narrowing differences of inflation and interest rate levels between Member 
States. But overall progress towards convergence is still unsatisfactory, particularly as 
regards public finances : Member States have to step up their efforts on this front. 
^e word "ECU" is used in this document as it is written in the Treaty. In the context of the public 
acceptance of the single currency, it is important that the issue of its denomination should not become an 
obstacle to the technical preparations. If necessary, this requires a discussion at the political level. 
Relations between the Monetary Union and non-participating Member States 
Not all of them make enough progress on convergence within the time available. This 
possibility is clearly envisaged by the Treaty which allows Member States to proceed to 
Monetary Union at different speeds. As participants in the Council of Economic and 
Finance Ministers and the General Council of the European Central Bank, those not in 
the first group will be constantly encouraged to continue their efforts to meet the 
necessary conditions. 
Furthermore, two Member States have an "opt-out" clause which allows them to decide 
separately on their willingness to take part in the Monetary Union. 
A highly delicate matter which should be clarified as soon as possible is the future 
relationship between participating and non-participating Member States. Means of 
safeguarding the single market during the transition phase must be examined. Stability 
will need to be assured in relations between the currencies of the two groups and more 
thought is needed on precisely what mechanism will be necessary after the beginning of 
Stage Three. 
How to proceed to the single currency 
It is not the purpose of the Green Paper to answer the questions "who" and "when" about 
Monetary Union. They can be settled only by the European Council, and they will be in 
the course of time. But when the moment comes for the Heads of state and government 
to decide on the passage to the single currency, they will need to be sure that the question 
"how" can be fully answered. 
Identifying the correct responses has been, and is, a continuing process which began 
several years ago and has gathered pace with the very broad consultations of recent 
months. These will continue for some time with all those directly concerned with the 
issues which have yet to be resolved. The Green Paper is a very important stage in a 
process, but it is only one stage. 
In its preparation, the Commission has sought to avoid the pitfalls of either exaggerating 
or underestimating the difficulties ahead. The former might have given the impression of 
helplessness, or of internal divisions, while the latter could have resulted in a cut and 
dried approach, seeking to impose options right down to the last detail, including on 
those matters clearly requiring more thought. Many details have still to be worked out, in 
due course. They should be balanced and in particular prevent any distortion between 
banks, financial centers and countries. 
Three ambitions for the Green Paper 
The Green Paper seeks to encourage progress towards : 
reducing uncertainties, first and foremost about the overall costs of the changeover. 
Different scenarios can be envisaged, each with its advantages and disadvantages. 
They need to be judged according to sometimes contradictory criteria : public 
acceptability, efficiency, flexibility, pragmatism, respect for the Treaty and the 
credibility of the process. Without giving an ideal and definitive answer, the Green 
J^ 
Paper presents a reference scenario together with the necessary details of the legal 
framework required ; 
raising awareness of the key actors of the work to be done. The Green paper lists the 
technical questions to be resolved ; 
winning, at each stage of the process, public acceptance and support without which 
the operation cannot succeed. The Green Paper sketches a preliminary approach to 
defining communications strategies and emphasises that a great deal more planning 
needs to be done. A common impulse is needed whose decentralised execution 
should reflect very different national circumstances. 
A reference scenario in Three Phases 
Despite the breadth of the Green Paper's contents, the reference scenario is bound to 
receive most attention. Without entering into details, it divides the changeover into three 
phases characterised by : 
the decision of the Council, meeting at the level of heads of state and government, to 
launch the single currency ; 
followed no more than a year later by the effective beginning of Economic and 
Monetary Union with the irrevocable fixing of parities. During this phase, the 
scenario envisages a "critical mass" of financial activities in the single currency built 
around a single monetary policy and the emission of new public debt ; these are the 
two signals which the markets are waiting for ; 
completion of the transition no more than three years later with the introduction of 
notes and coins and the changeover of other payment systems. 
The Commission believes that the "critical mass" scenario offers'at this stage the most 
balanced means of satisfying the various requirements for a successful transition 
mentioned above. 
A process involving all of the institutions 
The Commission's Green Paper contributes to the implementation of the Treaty, but it is 
not the end of the process which concerns the future lives of all Europeans. All 
institutions will have to play their role according to their respective competencies. 
Cooperation is needed, and has to be constructive. 
A major role is given to the European Monetary Institute. In particular, it has the 
exclusive responsibility concerning the design of the European banknotes and the future 
monetary policy instruments as well as concerning the preparation for future 
responsibilities falling to the European System of Central Banks. 
For its part, the Council has a key leadership role. It has to take the final decision on the 
package of measures necessary for the rapid introduction of the single currency. 
JJM 
As the Union's only elected institution, the European Parliament should be fully involved 
in the process. It has a particularly important role to play in bringing the single currency 
closer to the citizens. 
Member States have vital tasks to accomplish in numerous areas, notably 
communication, the adaptation of legislation and ensuring that their administrations, 
particularly those responsible for fiscal matters, -make the necessary technical 
preparations. This work will be time consuming and should begin as soon as possible. 
Conclusion 
In the eyes of public opinion, the credibility of the EMU objective has clearly been hurt 
by the recession and the currency turmoil of the past three years. Polls still indicate a 
narrow overall majority support for a single currency but the situation differs widely 
between the countries. 
However, the need for a strong and stable single currency is greater than ever. The 
Commission is absolutely convinced of this and recent events have served only to 
strengthen this conviction. 
The time has come to take concrete actions to implement the objectives set out in the 
Treaty. By publishing the Green Paper, the Commission is playing its part and launching 
a call to action to all those most concerned, institutions, governments, as well as the 
private sector. The sooner Member States' economies converge, the more quickly will 
doubts dissolve. The sooner banks and enterprises start to prepare, the greater the 
benefits to them; the lesson here is just as it was with the single market. 
At the same time, there is a need to explain to Europe's citizens the real value of their 
new money, and to convince them that it is an element of stability, growth and the future 
well-being of our continent. This will need a determined communications effort which is 
simple, continual and transparent. 
I v 
TABLE OF CONTENTS 
Introduction 
Part 1 The transition scenario 
Chapter I - Criteria which shape the scenario 
1. Feasibility 
2. Compliance with the Treaty and the credibility of the process 
3. Simplicity, flexibility and low cost 
4. Other scenarios 
Chapter H - A reference scenario for the move to the single currency 
1. PHASE A : The launch of economic and monetary union (EMU) 
2. PHASE B : Effective start of monetary union and the emergence of a critical 
mass of activities in ECU 
3. PHASE C : Final -changeover to the single currency 
Part 2 Role of the different operators 
Chapter I - The banking and financial sector 
1. The banking sector 
2. The payment systems 
3. The financial markets 
Chapter II - Public administrations 
1. Public administrations as leaders and catalysts 
2. Community institutions 
3. National administrations 
Chapter HI - Enterprises 
1. Defining a changeover strategy : a key decision for enterprises 
2. Implications of the ECU for enterprises 
Chapter IV - Consumers 
1. Preparing consumers to make the change 
2. The practical impact of the changeover on consumers 
3. Consumer protection 
:3Zi 
Part 3 The legal framework for the ECU 
1. The ECU and national denominations in PHASE B 
2. Legal tender 
3. Continuity of contracts 
4. Rounding 
5. Legal issues relating to bank-notes 
Part 4 Communications 
Chapter I - Two primary objectives : winning popular support and stimulating 
technical preparations 
Chapter II - The communications challenge 
1. Doubts and lack of information 
2. Uneven support 
Chapter III - Tasks for a communications strategy 
1. From the Green Paper until the start of PHASE A 
2. From PHASE A onwards 
3. Organisation 
Chapter IV -Follow-up to the Green Paper 
Review of the operatinal conclusions 
INTRODUCTION 
1. By the end of the century, the European Union will have a strong and stable single 
currency. This is the wish of its peoples and its leaders, in signing and then ratifying the 
Treaty on European Union. 
Economic and monetary union is a central commitment of this Treaty which aims at 
consolidating peace and prosperity which, from the outset, have been the prime objectives 
of the construction of Europe. 
Today, when trade between Member States accounts for 60% of their total trade, the 
attainment of the common market and the liberalisation of capital movements call for a 
logical and essential complement: the single currency. 
In the last few years, the unacceptable rise of unemployment, the difficulties caused by 
recession and the excessive or unwarranted fluctuations on foreign-exchange and capital 
markets have impaired progress towards economic and monetary union in Europe. 
Certain sectors of public opinion have been seized by doubt. In economic and financial 
circles, the desirability, credibility and feasibility of the single currency have been 
questioned. 
The Union would have withstood these difficulties better had the single currency existed. 
This conviction is gaining ground and is further strengthening Member States' 
commitment to the Treaty on European Union; now it has to win over public opinion in 
Europe. 
The single currency cannot be brought about by decree. Europe is profoundly attached to 
the principles of democracy: a historic step of this magnitude must reflect the wishes of its 
citizens. The European institutions must guarantee the openness and the transparency 
required by a development which will affect the everyday lives of each of us. 
This is the purpose of the present Commission's Green Paper : to help foster among 
Europeans a pride in their currency and to encourage them to play a full part in making it 
a reality. 
It gives rise to three groups of questions : 
• Why the single currency? What benefit will it bring for Europeans? What about the 
fears? 
What is the Treaty's design for economic and monetary union? 
Why is a Green Paper needed today? How can it be really useful? What will be the 
questions - and answers - forthcoming from the citizens of the Union, business, banks 
and government, i.e. all the players involved in the transition to the single currency? 
Section 1 
The single currency, a factor of stability and prosperity 
2. The increasingly closer integration of the European economies calls for greater 
monetary coordination, against a background marked by the disappearance of fixed 
exchange rate regimes and the globalisation of the world economy. 
The establishment of the European Monetary System represented the first step in this 
direction. But the currency turbulence of recent years has demonstrated the need to go 
further. 
Only the single currency and its environment of stability will provide the citizens of 
Europe with the many practical advantages listed below : 
• a more efficient single market, once the single currency is in place; 
• the stimulation of growth and employment; 
• elimination of the additional costs connected with the existence of several European 
currencies; 
• an increase in international stability; 
• enhanced joint monetary sovereignty for the Member States. 
An essential complement to the single market 
3. For the single market to work smoothly, exchange-rate adjustments must not be 
allowed to disrupt trade or .investment through their unpredictable impacts on profitability. 
An exchange-rate adjustment, even a moderate one, may substantially alter the balance of 
a contract between two European firms and at the same time affect the relative wealth of 
citizens and the purchasing power of consumers. Only a single currency covering the 
largest possible number of Member States can shelter firms and individuals from these 
disruptions. 
For the first time it will also permit a genuine comparison of the prices of goods and 
services across frontiers. This will be of benefit to consumers and business alike, 
sharpening competition and boosting trade within the single market. 
A stimulus to growth and employment 
4. The single currency will promote investment and employment in two ways : 
• because it is based on a solid economic framework in which public deficits are under 
control and price stability secured. This will foster trade, improve the allocation of 
resources, encourage increased savings, enhance growth and in the end create more 
employment and higher living standards; 
• because the European Central Bank will have the means to fulfil its primary 
objective, that is to ensure price and monetary stability throughout Europe. The 
clearly defined nature of this task, the independent status of the ECB and its strong 
constitution will foster market confidence, which, in turn should be conducive to 
low interest rates, in particular long term rates. This is especially welcome for 
SMEs. 
A factor in lowering costs 
5. Transaction costs (the costs of foreign-exchange transactions or the costs of 
exchange-rate cover) will disappear altogether within the monetary union. These 
transaction costs are far from negligible: they are estimated to be 0.3-0.4% of the Union's 
gross domestic product, i.e. ECU 20-25 billion. 
Everyone has to pay them. For example, an individual leaves his country with 
1 000 marks, francs or pounds in his pocket and visits each of the countries of the Union 
in turn. At each border crossing, he changes his money into the currency of the country 
he is entering. On his return home, he will be left with less than 500 marks, francs or 
pounds or any other European currency, without having made a single purchase. 
A contribution to international stability 
6. The European Union is the world's leading trading power. Its currency will 
naturally become one of the main exchange and reserve currencies, on an equal footing 
with the dollar or the yen. 
Europeans should increasingly be able to pay for their imports from third countries in their 
own currency. European firms should increasingly be able to export their products and 
invoice them in their own currency. They will be able to calculate the profitability of their 
investment programmes on a sound basis, and thus safeguard employment. 
Equipped with an internationally recognised currency, Europe will also be better able, 
together with its US and Japanese partners, to strive for greater stability in the 
international monetary system. 
Enhanced joint monetary sovereignty 
7. For some, the transition to the single currency means the loss of national monetary 
sovereignty. But how much autonomy do monetary policies really have today in Europe? 
With capital moving freely between interdependent economies, an autonomous monetary 
policy is no longer a credible policy option. Member States will only lose a prerogative, 
which in practice they cannot use. By collectively managing EMLFs monetary policy, the 
participating central banks will exercise a new kind of joint monetary sovereignty - a 
shared but effective responsibility over one of the strongest currencies in the world. 
What about the fears 
8. A single currency means irrevocably fixed exchange rates. Some people fear that 
when their country is experiencing particular difficulties, the exchange rate instrument 
cannot be used to deal with them. However, this instrument provides - mostly 
temporary - relief only in special circumstances. In most cases, such difficulties are better 
addressed or cushioned through other channels for which the responsibility remains largely 
within the Member States, such as budgetary policy or the functioning of the labour 
market. For this reason, the Treaty spells out the need for a high degree of convergence 
and the principle of an open market economy with free competition. In the case of 
difficulties caused by exceptional occurrences beyond the control of a Member State, the 
Treaty foresees however the possibility of granting, under certain conditions, Community 
t financial assistance to be decided by the Council. 
Section 2 
The Treaty on European Union provides a sound and clearly defined 
foundation for economic and monetary union 
9. The Treaty : 
• is designed to establish the single currency as one of the most stable currencies in the 
world; 
• establishes economic and monetary decision making centres which are strong and 
balanced; 
• sets a single currency goal to match those with the best track records; 
• lays down a precise and realistic timetable for achieving this goal. 
The ECU will be one of the strongest currencies in the world 
10. For monetary union to be credible and strong, it must encompass only countries 
which are well managed economically. To this end, the Member States have undertaken 
to improve the performances of their economies to match those with the best track record. 
This is the concept of convergence. 
In order to assess whether the degree of convergence is sufficient, the Treaty sets out the 
rules of good management which must be followed. These are the convergence criteria, 
which in fact embody sound economic principles in so far as inflation, interest rates, 
exchange-rate stability, and government deficits and debt are concerned. 
For the single currency to be sound, these criteria must be scrupulously observed not only 
for entering the third stage but also for participating on a lasting basis in monetary union. 
The Treaty lays down procedures, which could lead to financial sanctions, and allows 
market forces (no bail out) to encourage those Member States which are failing to do so. 
The institutions of an economic and a monetary union 
11. The sound management of EMU must be permanent : compliance with the criteria is 
not simply a test of qualification for membership but a lasting commitment by the Member 
States to adhere to an economic policy conducive to sustainable growth, employment and 
the maintenance of purchasing power. 
EMU is built on two foundations : a strong focal point for the coordination of economic 
policies (the Council of Economics and Finance Ministers) and an independent monetary 
institution (ESCB). 
The Council of Economics and Finance Ministers is responsible for defining the broad 
guidelines of economic policy; it has means at its disposal to apply pressure on 
participating countries to meet their budgetary commitments. In addition, there is no 
possibility of bail out. 
The European System of Central Banks (ESCB), which brings together the central banks 
of the Member States and the European Central Bank (ECB), is independent: they cannot 
receive any instructions from either Member States or the European institutions. The 
ECB freely determines the Union's monetary policy and its task is to guarantee price 
stability. 
A single currency is a common goal 
12. The single currency should ultimately cover the entire single market. New members 
of the Union must also comply with the relevant provisions of the Treaty on European 
Union as has been the case for Austria, Finland and Sweden. 
Not all Member States will have achieved a sufficient degree of economic convergence by 
the time EMU starts. However, the Treaty allows for different rates of integration. 
Those countries which do not meet the criteria from the outset will fully participate in all 
the procedures (multilateral surveillances, excessive deficit) designed to- facilitate their 
future participation. The Governors of their central banks will be members of the ECB 
General Council. The Member States with a derogation will treat their economic and 
monetary policy as a matter of common interest within the competent bodies of the Union. 
However, they will not take part in decision-making as far as the actual management of 
the single currency is concerned. 
When the Treaty was.signed, the United Kingdom and Denmark wished to reserve the 
right not to participate in monetary union and Denmark has since then notified that it will 
not participate. This "opt-out" was agreed by the other signatories. This meant that those 
two Member States were able to ratify the Treaty, thereby subscribing to all of its 
provisions, including Protocol No 10, by which Member States undertake notlb oppose 
the transition to the single currency. 
The Treaty sets out a precise and realistic timetable 
13. The second stage of economic and monetary union began on 1 January 1994. Since 
that date, the Ecofin Council has had new instruments at its disposal to promote 
convergence : 
• each year in the spring, it endorses the broad guidelines of economic policy, which 
lay down the common objectives in terms of inflation, public finance, exchange rate 
stability and employment; 
• it discusses Member States' economic policies on the basis of national convergence 
programmes (in which each country adopts a multiannual strategy for meeting the 
criteria at the earliest possible moment) and the Commission's report on 
convergence; 
• it decides which countries have an excessive deficit; and recommends to each of the 
countries the measures needed to remedy the situation. If these recommendations 
are not followed, it may decide to publish them, a step that could have a significant 
political and market effect. 
The year 1994 also saw the creation of the European Monetary Institute. As the 
forerunner to the European Central Bank, the EMI has to strengthen central bank 
cooperation and the coordination "of national monetary policies. It has to make the 
preparations required for the establishment of the ESCB, for the conduct of a single 
monetary policy and the creation of a single currency in the third stage of EMU, including 
the preparation of banknotes. In all these areas, significant progress has already been 
achieved. 
At the meeting to be held at the end of 1996, the Council, composed of the Heads of State 
or Government, will decide whether a majority of Member States meet the conditions for 
embarking on monetary union. This decision will be taken by qualified majority. If the 
decision is in the affirmative, and if it deems it appropriate, the. Council will set the date 
for the beginning of the third stage. 
The third stage will in any case start no later than 1 January 1999. The transition to a 
single currency will be automatic on that date for those countries which meet the criteria, 
however many of them there are. 
At that date, the monetary union will be a reality: exchange rates between national 
currencies and against the ECU will be fixed irrevocably. The European Central Bank will 
be operational and will conduct the single monetary policy; the ECU will be a currency in 
its own right; the foreign-exchange markets will fix its value against third currencies, for 
example the dollar and the yen. Such is the undertaking entered into by the Member 
States and democratically ratified. Such is the design of the Treaty on European Union. 
In these circumstances, why the need for a Green Paper? 
Section 3 
The Green Paper will reduce uncertainties 
14. In less than four years, EMU will be a reality. The time has come to launch the final 
stage of the preparatory work and to determine together with all players involved how to 
prepare for the introduction of the single currency. It is not a matter of "who" will take 
part and "when", but "how" this will happen. 
For this, encouragement, not prescription, is what is needed. 
The Green Paper adopts an open and interactive approach 
15. The choice of green is the first symbol of this approach. The aim of the Green 
Paper is to establish a list of questions posed by the introduction of the single currency. It 
does not necessarily try to respond to all of them in a detailed definitive manner. Instead, 
the Commission would like this document to be used for reference and discussion by all 
those concerned by the introduction of the single currency (Member States, the European 
Parliament, the EMI, central banks, banks, firms, consumers, and others). 
In recent weeks, intensive consultations have allowed the Commission to identify more 
clearly expectations and constraints. This interactive process must continue and intensify. 
To assess the constraints with which the process must contend, the Commission set up an 
independent group of experts chaired by Mr. Cees Maas which held a large number of 
hearings with professionals concerned. The conclusions reached at this stage by this 
group are published at the same time as the Green Paper. They allowed a greater 
appreciation of the technical feasibility of the changeover to the single currency. 
Thus, the Green Paper combines a detailed review of the questions raised by the 
introduction of a single currency, with a presentation of the views of the Commission on 
some of these questions and an indication of those areas where further consultations are 
still necessary. Where the Commission puts forward its own view, it does so in the 
interest of the smooth working of the whole process. While the Commission keeps entire 
responsibility for these expressed preferences, it is still open to further discussion and 
consultation in order to identify the best solution. 
The Green Paper pursues a threefold objective 
16. First, it sets out to remove as far as possible the uncertainties still surrounding the 
changeover to the single currency. Uncertainty is the primary factor affecting cost and 
risk : its several aspects must be rapidly removed so that the banking sector, government 
and firms can prepare to make the necessary investments. 
At the political level, consideration of the Green Paper's conclusions by the Cannes 
European Council should be an opportunity for the Member States to reaffirm their 
commitment to the timetable set out in the Treaty and contribute to the necessary 
preparations to meet the timetable. 
Currency users require a reference scenario and legal certainty in order to undertake the 
preparations that are necessary. This is addressed in the first and third parts of the Green 
Paper respectively in order to identify the most suitable approach in collaboration with all 
interested parties. 
17. Second, it sets out to demonstrate the technical feasibility of the transition to the 
single currency. The aim of the Green Paper is to establish the key issues proposed by the 
introduction of the single currency, so that they might be openly discussed and better 
understood. In this respect, it represents a response to the frequently expressed concern 
of those in the private sector who have urged the Commission to make its best endeavours 
to clarify the practical arrangements for introducing the single currency. 
18. Third, the Green Paper defines possible approaches for encouraging public 
acceptance of the changeover to the single currency. The fourth part is devoted to the 
communication campaign which is needed to bring home to European citizens the 
advantages of the single currency and to prepare everyone foF the practical measures 
required for the introduction of the ECU. The timely adoption of the suggested technical 
measures should ensure an orderly and smooth changeover. An appropriate preparation 
will help to alleviate doubts, in particular in those countries where the present strength of 
the national currency makes it more difficult to accept the changeover. The support of all 
citizens is crucial to the success of monetary union. 
These objectives determine the structure of the Green Paper : 
Part 1 : the transition scenario 
Part 2: the role of the different groups of currency users 
Part 3 : the legal framework of the single currency 
Part 4: communication. 
10 
Part 1 - The transition scenario 
11 
Chapter I 
Criteria which shape the scenario 
19. The Treaty provides for the "rapid" introduction of the ECU as the single currency 
from the beginning of monetary union, i.e. when conversion rates have been irrevocably 
fixed, and the ECU has become a currency in its own right. 
With this in mind, the Commission has devised a reference scenario based on three criteria 
which, in its view, determine the choice of scenario. These are: feasibility; compliance 
with the legal framework and credibility of the process; simplicity, flexibility and low 
costs. 
Section 1 
Feasibility 
20. In many respects, the most satisfactory transition would be for all sectors to change 
simultaneously to the single currency at the start of stage three. This approach is known 
as the immediate big bang. 
However, it has become apparent that this solution raises insurmountable difficulties. To 
some extent, this was anticipated by the drafters of the Treaty who chose the word "rapid" 
for the transition, and not "immediate". These difficulties are of two kinds : 
• the need for preparation. The move to the single currency will impact upon the 
daily lives of hundreds of millions of consumers and citizens, tens of millions of 
firms, particularly on their accounting systems (see Part 2), and all public 
administrations, financial or otherwise. Past experience shows that the complete 
success of the transition depends on the launch well in advance of a comprehensive 
information campaign and continuing for some years (see Part 4); 
• the time required for technical changes. The EMI presently envisages that three 
years will be needed for the manufacture of banknotes, once their technical 
characteristics are decided upon. Directors of national mints have made a similar 
estimate for coins. 
12 
It has also been suggested that a period of several years will be required by the banks in 
order to fully adapt their management and information systems, and by vending machine 
operators who will need to adapt the existing stock of machines. 
It is now accepted that the necessary preparations cannot be fully launched before the 
Council's decision to move to EMU. The complete changeover to the single currency 
cannot therefore take place on the first day of stage three. 
Section 2 
Compliance with the Treaty and the credibility of the process 
21. The explicit reference in the Treaty to the ECU as a currency in its own right and to 
the rapid introduction of the single currency implies for the Commission that at the start of 
stage three, a sufficient number of activities must switch to the single currency. 
This also reflects the views of the operators on the financial markets, who consider that 
the political will of the authorities must be reflected in decisions accompanying the 
irrevocable locking of exchange rates. This has led the Commission to consider : 
• that monetary policy and exchange rate policy should be conducted in the single 
currency by the European Central Bank and the European System of Central Banks; 
• that governments should switch their public debt issues to the single currency within 
the shortest possible time, bearing in mind the technical constraints of the market. 
These two steps clearly reflect the balance between the monetary and economic provisions 
of the Treaty. They are complementary signals designed to show the combined 
determination of both the political and the monetary authorities. If one or other was 
absent, the credibility of the process could be questioned. 
One consequence could be a strong preference on the part of investors for securities 
denominated in national currencies enjoying the greatest reputation for stability prior to 
the monetary union, despite the new situation in which exchange rates were irrevocably 
fixed and refinancing conditions were the same. If this were to happen, there could be an 
impact affecting both the relative movement of long-term rates and the relative position of 
financial centres within the area of monetary union. 
13 
Section 3 
Simplicity, flexibility and low cost 
22. The technical difficulties raised by the move to the single currency must not be 
solved by creating pointless, incomprehensible and costly complications in the lives of 
citizens, consumers and business. As past experience shows, success depends on the 
choice of a process which is simple and transparent for the greatest number. 
This means in particular that the changeover in the various means of payment (notes and 
coins, cheques, cards, transfers, payment orders) must take place in an orderly basis, and 
in a simple way. 
The need for simplicity must not, however, lead to an excessively rigid approach. 
Flexibility is appropriate, for example : 
• when there are wide dissimilarities within a category of currency users. This is 
particularly the case for enterprises. Most of them will probably wish to adapt to 
the single currency gradually, but those which are heavily involved in intra-
-European trade may find it advantageous to convert their treasury management 
very early in the process. Even today, some international groups have adopted the 
basket ECU as a unit of internal management; 
• when it is possible and desirable to allow the free play of competition and the 
market, in particular as regards the services which banks will offer their private 
customers before the general changeover. 
Section 4 
Other scenarios 
23. Other scenarios than the one to be presented below have been put forward, but the 
Commission considers that they do not meet the above-mentioned criteria to the same 
extent. A general purely demand-led scenario would, for example, entail greater 
complexity and involve higher costs, especiallyfor the banking sector. 
14 
24. A delayed big bang would, on the other hand, have most of the advantages of an 
immediate big bang, especially with respect to the simplicity and cost criteria. All 
operators and all banks, even the smallest ones, would be put on the same footing and any 
possibility of dual accounting would be excluded. These are some of the reasons why 
such a scenario is favoured in various quarters and it is still under discussion. 
However a number of comments can be made about this scenario : 
• it is not a priori consistent with the Treaty provisions which call for a rapid 
introduction of the ECU; 
• it does not ensure as from the beginning the credibility associated with a widespread 
use of the ECU in the banking and financial sector; 
• it delays addressing issues of public acceptability and familiarisation. 
Therefore, even if there are other solutions, the Commission has preferred to focus at this 
stage on a specific reference scenario which, in its view, is most consistent with the 
criteria mentioned above. 
Chapter II 
A reference scenario for the move to the single currency 
25. The Commission in this chapter provides a reference scenario for discussion and 
clarification. The transition scenario is a crucial element in the practical arrangements for 
moving to the single currency. It must provide operators with the certainty they need to 
take the investment decisions that are essential for the smooth operation of the 
changeover. Rather than imposing a rigid solution, the Commission intends to identify the 
most suitable approach in collaboration with interested parties and in accordance..with 
respective competences. 
15 
The changeover must be as short as possible so as to mitigate the risks of confusion that 
would weaken the credibility of the process and the determination of operators to carry it 
through. It must proceed in a number of well-defined phases, with substantial progress 
being made during each successive phase. It must minimise the costs by avoiding 
arrangements which call for costly transitional measures which would become rapidly 
redundant. Lastly, it must inspire public confidence and allow individuals to become 
familiar with the single currency. 
26. A three-phase reference scenario is presented which corresponds to the letter, spirit 
and logic of the Treaty : 
• launch of economic and monetary union (PHASE A); 
• effective start of EMU and emergence of a critical mass of activities in ECU 
(PHASE B); 
• final changeover to the single currency (PHASE C). 
A smooth transition would be facilitated if the measures envisaged for each phase, 
whenever possible, were taken ahead of schedule. Public authorities concerned (Council, 
Commission, European Monetary Institute/European Central Bank, Member States) must 
send clear signals as quickly as possible to different currency users so as to convince them 
of the imminence of EMU. 
Section 1 
PHASE A : The launch of economic and monetary union (EMU) 
27. The start of PHASE A is characterised by the decision of the Council to move to 
monetary union in accordance with the procedure laid down in the Treaty (Article 109j 
and 1091). The aim of this phase is to take the decisions and measures required for 
moving to EMU, at PHASE B. The most significant is the establishment of the European 
System of Central Banks (ESCB) and the European Central Bank (ECB) with the 
appointment of the Executive Board of the ECB. In conjunction with banks and financial 
institutions, thlT ESCB/ECB would begin to introduce the operational instruments 
required for conducting monetary and exchange rate policy in ECU from the start of the 
16 
ensuing phase. On the basis of available estimates, these preparations should be 
completed within a maximum of twelve months, thus determining the maximum duration 
of PHASE A. 
28. In order to generate irreversible momentum, the Council, as part of the decision to 
move to monetary union, should announce the final date for the full introduction of the 
single currency (at the latest four years after the start of PHASE A). 
29. In addition, the Commission considers that at the beginning of PHASE A the 
following package of measures should be adopted : 
• the legal framework allowing the single currency to be introduced at the start of 
PHASE B. Inter alia, this would include conditions for using the new currency in the 
different sectors and relations with national currencies, continuity of contracts and 
legal obligations; legislation enabling financial and tax authorities to collect some 
payments in ECU at the start of PHASE B; 
• the characteristics and technical specifications of notes and coins such that cash 
handling machines and information systems can be adapted. The decision allowing 
the production of ECU notes and coins to begin would be taken by the competent 
authorities; 
• establishment of a national steering structure for supervising the move to the 
single currency, involving all the currency users concerned (government, central 
bank, private sector, consumers). It would draw up an action plan for adapting 
public administration at national and local levels. Some form of coordination would 
be put in place at the Community level; 
• definition of a changeover plan in each country by the banking and financial 
community which would specify the speed and scope of the technical adaptation of 
its members. Such a plan would establish a number of technical arrangements 
necessary for a smooth changeover (capital markets and their infrastructures -
quotation, settlement, delivery, registration, wholesale payments systems). 
This package should be prepared in advance, and some of the measures preferably should 
have been adopted well before the- start of PHASE A. Throughout this phase, private 
operators would continue, on a voluntary basis, their own preparations for the move to 
the single currency. 
17 
Section 2 
PHASE B - Effective start of monetary union and the emergence of a 
critical mass of activities in ECU 
30. Under the Treaty, the start of PHASE B is marked by the Council fixing the 
conversion rates of participating currencies and by the ESCB assuming responsibility for 
the single monetary policy. The ECU ceases to be defined as a basket of currencies and 
becomes a currency in its own right, for which the national currencies are perfect 
substitutes, i.e. different denominations of the single currency. The fixing of conversion 
rates will not in itself affect the external value of the ECU. The conversion rate of the 
basket ECU in relation to the single-currency ECU is 1:1. Officiai foreign exchange 
markets for the participating national currencies will disappear completely. 
31. This phase marks the entry into force of stage three of EMU and would last a 
maximum of three years. In order to reinforce the perceived credibility and irreversibility 
of EMU, the Commission believes it important to generate a rapid momentum for the 
introduction of the single currency by the immediate creation of a critical mass of activities 
in ECU. The emergence of this critical mass would require an initial changeover in the 
banking and financial sector, which would then have a maximum of three years to, 
complete the changeover of remaining operations and systems. 
32. The definition of this critical mass of ECU activities will have to be clarified in the 
months ahead in consultation with the banking sector and the EMI which is the 
responsible institution for preparing the monetary policy framework. However, the 
Commission would like the definition to be as broad as possible, so as to include monetary 
and exchange rate policy, inter-bank, monetary, capital and exchange markets, new 
government debt and wholesale payment systems.. 
• Monetary and exchange rate policy in ECU: the Commission takes the view that 
the single monetary policy should be defined and implemented in terms of the single 
currency from the start of this phase. The ESCB would conduct ECU transactions 
with all operators involved in monetary policy (national central banks, banks). This 
would affect the whole range of instruments associated with monetary policy : 
refinancing, open-market operations and, more generally, short-term transactions. 
In addition, and following the same logic, the ESCB" would deal exclusively in ECU 
vis-à-vis third currencies (dollar, yen). Settlement of monetary policy transactions 
18 
would be made through the real-time wholesale TARGET1 system that the EMI has 
undertaken to render operational by the end of 1996; 
• New issues of public debt: new debt issues by the public sector would be 
denominated in ECU as from the start of PHASE B to the extent that it is technically 
possible. The issues which would be most appropriately denominated in ECU would 
be those addressed to institutional investors and those maturing after the start of 
PHASE C. Private issuers could decide to follow a similar path; 
• Inter-bank, monetary and capital markets: globalisation implies that markets 
affected by the conduct of the single monetary policy would have to be able to work 
in ECU simultaneously from the start of PHASE B. This changeover concerns 
primarily Treasury bills, bonds and their derivatives. All operators on these markets 
(banks, investment funds, insurance companies, institutional investors, 
intermediaries) would operate in ECU, as would the associated market systems 
(quotation, settlement, delivery, registration); 
• The wholesale settlement systems, TARGET and the private system of the ECU 
Banking Association would be available to process large-value payments in ECU. 
33. The emergence of a critical mass in ECU activities would have various implications 
for the major categories of currency users. National currencies would continue to be used 
between banks and most of their customers (businesses, consumers). However, any 
private operator could decide voluntarily to anticipate the switch to the single currency. 
34. The changeover for banks and financial institutions to the single currency will 
begin through a single monetary and exchange-rate policy, market transactions and the 
associated settlement systems. The critical mass will basically concern well defined and 
homogeneous market activities which can be readily identified and processed according to 
independent procedures. 
The other information and management systems would change over during PHASE B in. 
accordance with the changeover plan, applying a decentralised approach that will be 
coordinated by the competent authorities. The nature of the transactions performed in 
retail banking, involving high volume but small value, means that the changeover in this 
area would take place only after the national payments systems have been adapted. 
see part 2, chapter 1, section 2 
19 
35. Public administrations would have a leadership role to play during PHASE B, in 
accordance with the action plan adopted by the national steering structure in the 
course of the preceding phase. It would be possible to pay some taxes in ECU. More 
generally, major items of public expenditures could be denominated, and wherever 
possible, paid in ECU as soon as possible, as could the presentation of national budgets. 
Moreover, public administrations would also have to mount an information campaign. 
36. Private businesses other than banks could conduct some of their operations in ECU 
circumstances permitting. Firms most heavily involved in international business might 
benefit from changing over all or part of their operations to the ECU in PHASE B. Other 
enterprises would probably be less inclined to anticipate the switch to the single currency. 
37. Consumers would continue to use their national currency during PHASE B, owing to 
the limited availability of ECU-denominated means of payment. However, competition 
and public demand may lead a number of private operators to introduce a range of 
services in ECU. This, however, is dependent on the changeover of corresponding 
payment systems to the ECU. More generally, public awareness would be systematically 
promoted through both public and private initiatives, for example the dual display of 
prices. 
Section 3 
PHASE C - Final changeover to the single currency 
38. This phase would have been announced when EMU is launched (at the start of 
PHASE A). However, this phase could begin before the pre-announced date if the Council 
meeting in the composition of Heads of State or Government so decides. It would last as 
long as necessary to complete the physical replacement of national notes and coins, i.e. 
several weeks. It would mark the completion of the introduction of the single currency 
and involve the following developments : 
• notes and coins are exchanged; 
• only the ECU is legal tender; 
• the changeover of the banks and the financial system is completed : all means of 
payment (transfers, cheques, cards) are converted into ECU, in conjunction with the 
domestic settlement systems; 
20 
• the private non-bank sector conducts all transactions exclusively in ECU. 
39. This replacement operation needs to be meticulously prepared. In a number of cases 
(cash registers, ticket machines and vending machines), preparations will start long in 
advance, as soon as the information is available on the technical specifications of the coins 
and notes so that software and hardware can be adapted. The actual changeover could be 
completed in a few weeks in order to avoid complications caused by a prolonged period 
of dual circulation. The old national currencies may be exchanged free of charge at the 
national central banks during the statutory period laid down in each country. 
40. Given the magnitude of what will be an unprecedented event, the Commission 
considers that a maximum period of four years between the decision to move to EMU 
(PHASE A) and the final changeover to the single currency (PHASE C) is not a priori 
excessive. This period is likely to be shortened. The duration of this process is largely 
dictated by the need to prepare the general public and by technical requirements (the time 
the banking industry needs in order to make necessary preparations, and the time needed 
to produce ECU notes and coins). 
41. It is difficult to predict exactly how long it will take to familiarise the general public 
with the ECU and to implement all the technical preparations required. But to the extent 
that authorities are willing to take preparatory measures before the start of PHASE A, and 
that the critical mass is sufficiently large, then PHASE B may be shortened. Hence the 
Commission proposes that the periods given in the reference scenario be viewed as 
maximum periods and that the dates fixed by the Council should be deadlines. 
42. This paper has greatly benefited from the work undertaken by the group of 
independent experts chaired by Mr. Cees Maas. The group proposes a noticeably shorter 
period: just one year between the actual start of EMU and the final changeover to the 
single currency, in place of a maximum period of three years proposed by the 
Commission. The Maas group's scenario clearly applies only if 1 January 1999 is chosen 
as the date for the start of EMU which is the group's preferred date. But if EMU were to 
start sooner - in 1997 or 1998, for example - a longer transitional period of a more 
substantive nature would be needed since preparations would be far less advanced. In that 
event, the differences between the two proposals become blurred. 
21 
INTRODUCTION OF A SINGLE CURRENCY / SEQUENCE OF EVENTS 
PHASEA 
Launch ôf EMU PHASES 
Start'of BMtJ Sin^e ctîrr^y My Mtrcdticed 
Start of the phase : 
• List of participating Member States 
• Date of start of EMU announced (or 
confirmed) 
• Deadline for the final changeover to 
the single currency 
• Setting up of the ESCB and the ECB 
• Start of production of notes and 
coins 
Throughout the phase : 
Stepping-up of preparations and 
implementation of measures that will, if 
possible, have been adopted 
beforehand : 
• Legal framework 
• National steering structure 
• Banking and financial community 
changeover plan Start of the phase : 
• Fixing of conversion rates 
• ECU becomes a currency in its own 
right 
• Monetary and exchange-rate policy in 
ECU 
• Inter bank, monetary, capital, and 
exchange markets in ECU 
• New government debt issued in ECU 
• Corresponding wholesale payment 
systems in ECU 
Throughout the phase : 
• Banks and financial institutions 
continue the changeover 
• Public and private operators other 
than banks proceed with the 
changeover circumstances permitting Start of the phase : 
• ECU notes and coins introduced 
• Banks have completed the 
changeover (retail business payment 
systems) 
• Notes and coins denominated in 
national currency are withdrawn 
• Public and private operators 
complete the changeover 
• Only the ECU is used 
l 
ÉtWÙiUtUi«*ii*Éi*Mi«a maximum *ÛXUÛMtMèMM*WéMttt*Ui UUéUWaéàkUMMMUéèWéÉÉÉé 3 yearsmâxtfoum UWHMUWiiNE — Several weeks 
ttméàièèitèèèàààààèàiiàèàùà 
22 
Part 2 - Role of the different operators 
23 
Chapter I 
The banking and financial sector 
43. This chapter first deals with the main features of the new monetary framework 
within which banking and financial institutions would operate during PHASE B of the 
reference scenario. 
It then examines the adjustments that banks and other financial institutions would have to 
make to their management and processing methods and the changes that would need to be 
made in payment systems. The consequences for the financial markets are also examined. 
The work done in these fields by the EMI, the European Banking Federation, the AMUE, 
the EBA and other banking associations has been taken into account. The same applies, 
of course, to the reports presented by the working party set up by the Commission and 
chaired by Mr. Cees Maas. 
Section I 
The banking sector 
44. The banking sector is essential to the introduction of the ECU as the single 
currency. The reason is simple. Alongside the notes and coins issued by the monetary 
authorities, the outstanding amount of sight deposits with banks represents a much larger 
quantity of money. While notes and coins are easily used between individuals as a means 
of payment, the growing automation of the various types of banking transactions 
(deposits; loans, foreign exchange, securities, etc.) and of payments by cheque, bank-card 
and other transfers has prompted banks to introduce increasingly sophisticated 
computerised processing and payment systems. Replacement of the national currency by 
the ECU means that banks will have to adapt each of these systems to operate in ECU. 
This adaptation should follow a coordinated approach in each financial community. 
By adapting their computer systems to the ECU, and modernising them at the same time, 
banks will start from an advantageous competitive position on the international money, 
financial and foreign-exchange markets in ECU, where the potential for growth will be 
considerable. 
24 
45. The European banking associations have indicated that the banks are ready to 
undertake the necessary adaptations but are reluctant to carry out major investments 
without assurances concerning the timetable and irreversibility of the move to EMU, the 
scenario for introducing the ECU and the launching of the legislative back-up measures. 
The purpose of this Green Paper is to help dispel these uncertainties. 
Banks and the new monetary framework 
46. The Treaty requires that the ECU becomes a currency in its own right from the start 
of PHASE B. Until such time as it circulates as the single currency of EMU, the 
participating currencies remain in existence. This situation has monetary, legal and 
technical implications for the banks. 
47. Monetary aspects : the participating currencies and the ECU become perfect 
substitutes for each other once their conversion rates have been irrevocably fixed. They 
cease to be distinct currencies and become the different expressions of one and the same 
monetary reality. Consequently, national currencies become different denominations of 
the ECU. 
For banks, this means that : 
• by applying the irrevocably fixed conversion rates, all bank deposits in a given 
national denomination have corresponding fixed values in ECU and in each of the 
other national denominations; 
• money creation by the banking system in a given denomination should be able to 
proceed, without any exchange risk, on the basis of assets in other denominations 
given the irrevocably fixed conversion rates. As denominations, they will no longer 
be exchanged against each other on the foreign-exchange markets but converted, by 
way of a simple calculation - the bank cashier replacing the foreign-exchange dealer; 
• since the different components of the money supply in EMU are fungible, the ESCB 
could, in principle, use any denomination, or all denominations simultaneously, to 
conduct its single monetary policy. 
48. Legal aspects : from a legal point of view each national currency will continue to 
exist as long as national monetary legislation designates it as the currency of the country, 
that is, until its actual replacement by the ECU (see Part 3). 
25 
Considering its future role as the single currency, each of the participating Member States 
should, from the beginning of PHASE B, confer legal status on the ECU, i.e. allow 
residents to use it on the same terms as the national currency. 
In addition, banks must be assured that they may rightfully regard the participating 
currencies and the ECU as different denominations instead of distinct currencies. Thus, if 
bank liabilities in the national denomination, covered by equivalent assets in ECU, do not 
constitute an open foreign-exchange position in monetary terms, they should not 
constitute an open position in accounting or prudential terms either. The ESCB must 
guarantee banks total convertibility at all times between the national denominations and 
the ECU at their respective irrevocably fixed conversion rates. 
49. Technical aspects : lastly, in order for the ECU to be treated materially on a par 
with each national denomination within a newly established EMU, banks must adapt their 
information and processing systems such that they can implement the necessary changes. 
Banks and the reference scenario 
50. Although, at present, the degree of preparation varies from one bank to another and 
from one country to another, the timetable should enable the banking sector as a whole to 
carry through the reference scenario, which implies a major initial changeover of the 
banking sector. 
Monetary policy in ECU 
51. The changeover in the banking sector would be initiated by the ESCB's monetary 
policy in ECU, which implies that banks will operate in ECU with the ESCB. Care would 
be taken such that all banks, whatever their size would have equal access to the ESCB. 
Using the instruments available to it, the ESCB will inject liquidity into, or withdraw it 
from, the banking system with a view to increasing or reducing money creation by this 
sector or in order to influence short-term interest rates. 
In choosing the ECU, the ESCB would use a single "denomination" for the dual purpose 
of formulating and implementing its monetary policy. Complete transparency and 
consistency would thus be ensured within EMU, as well as complete neutrality vis-à-vis 
the national denominations. 
26 
52. The choice of the ECU by the ECB would oblige banks to open ECU accounts in its 
books via the national central banks. These accounts would be consequently 
credited/debited in line with the monetary policy pursued - addition or withdrawal of 
ECU-denominated liquidity. 
If the use of the ECU were to be limited to transactions between the ESCB and individual 
banks, the latter would then translate the amounts of such operations in their national 
denomination - at the irrevocably fixed rate of conversion - and use it under that 
denomination in all their market operations. Under such a scheme, the ECU would hardly 
appear on the markets at all. 
An ECU interbank market 
53. Guaranteeing the credibility of the process by creating a critical mass of ECU 
activities would involve extending the use of the ECU to the interbank market. It is on 
that market that, among banks, liquidity is lent/borrowed at standardised maturities. From 
the start of PHASE B, given that conversion rates will have been fixed irrevocably and the 
TARGET system will be available,2 the various national interbank markets would merge 
into one. For reasons of transparency and operational simplicity, the banks should use a 
single "denomination". This denomination would be the ECU: in particular, this will be 
essential in ensuring the uniform nature of short-term interest on this market, thus 
safeguarding a level playing field for the various financial centres. 
54. For the banks, this choice would imply that their cash positions are managed in 
ECU. A Bank's treasury department is the point of convergence for the surplus liquidity 
of its other departments as well as the source of the funds the latter require. A bank's 
supply or demand position on the ECU interbank deposit market would depend on the 
Dalance of these inward/outward flows. If a bank's other departments continue to operate 
in the national denomination, an ECU/national denomination interface between them and 
the treasury department would handle the necessary conversion operations. 
An ECU exchange-rate policy 
55. A bank's treasury department also manages movements of assets or liabilities in the 
national currency resulting from the purchase or sale of foreign currency. 
See paragraphs 62 and 63. 
27 
The ECU counterpart of ECU/third-currency interventions by the ECB under its ECU 
exchange-rate policy would quite naturally form part of the banks' cash positions in ECU. 
Following the ESCB's initiative, banks are most likely to follow suit and proceed 
exclusively in ECU on the international exchange markets. If so, the national 
denominations would be withdrawn from the forex dealing rooms, and their value against 
the dollar would henceforth be calculated by reference to the ECU-dollar rate on the one 
hand and the national denomination/ECU conversion rate on the other. 
Dual indication in ECU and national currency 
56. w In the dialogue between a bank and its customers, dual indication - in ECU and 
national currency - of amounts requiring monetary expression would systematically occur 
in statements, in order to familiarise customers with the future single currency. 
Other technical prerequisites 
57. Dual indication in ECU and national currency would require banks to make a 
number of technical preparations. The same applies to systems for the display and 
printing of amounts (cash registers, payment software, etc.) so that they too can indicate 
prices or other values in ECU and national currency. 
These preparations require a rather long lead time. Consequently, Community rules 
should be defined as soon as possible : 
• the acronym to be used for the single currency in computer programming; it might 
be convenient to retain the acronym XEU in line with the ISO code; 
• the number of digits in which the future irrevocable conversion rates will be 
expressed; 
• the method of rounding to be applied to amounts converted; 
• the number of digits which will follow the decimal point for expressing prices. 
28 
58. These details are particularly important for the adaptation of electronic payment 
equipment using plastic cards (debit-credit-prepaid). From the start of PHASE B, card 
terminals would, therefore, be able to indicate the relevant amounts in national currency 
and in ECU on the tickets issued. This would help familiarise the retail trade and citizens 
with the single currency, and subsequently simplify the rapid and complete switch-over to 
the ECU. 
On the other hand banks should provide information to their customers on the 
implications of the single currency for their financial operations. They will have to ensure 
that their staff is properly trained to cope with the change. 
59. According to the reference scenario the banks' final changeover to the ECU would 
be completed no later than by the start of PHASE C, following the changeover plans 
agreed for each financial centre. The changeover plans may differ from country to 
country. 
60. The Commission invites banks to reflect and report upon the reference scenario 
and its technical implications by the end of the year and how this could be translated 
into a changeover plan for banking and financial communities. In particular, the 
Commission would welcome reactions regarding the emergence of a critical mass of 
activities in ECU at the start of monetary union and the time required for the full 
introduction of the single currency. 
Section 2 
The payment systems 
61. Payment systems transmit the value of economic activity within and between banks 
to customers' accounts. These systems are agnostic; they demand a technical (as opposed 
to economic or legal) reality in the form of recognisable characters with a commonly 
accepted meaning in their operating environment. National payment systems assume that 
all values within them are expressed in the national currency and in no other, unless and 
until modified to recognise a new unit of denomination. Today, the natural frontier of the 
payment system industry is that of the national currencies, because payment instruments 
by nature are essentially national. The creation of the single currency, by7~eliminating 
these frontiers will : 
29 
• modify national approaches in the direction of establishing European means of 
payment within the monetary union; 
• lead to a progressive increase in cross-border flows, the volume of which will 
remain relatively low compared with domestic markets; 
• improve the interoperability of European payment systems which today are 
heterogeneous. 
Large Value Payment Systems 
62. The conduct of a single monetary policy in ECU by the ESCB and the emergence of 
a critical mass of activities in ECU would require the establishment of a European system 
of real time gross settlement (RTGS) for wholesale payments. TARGET (Trans-
European Automated Real time Gross settlement Express Transfer) will be the payment 
system, specifically designed by the EMI, for the implementation of the monetary policy of 
the ESCB in ECU. This system will link the existing national RTGS systems to the 
ESCB. Its use would be compulsory for all payments directly related to the 
implementation of the single monetary policy. It may also be used by private market 
operators for processing large value payments. This new payment arrangement operated . 
by the ESCB should enhance technical efficiency, minimise systemic risk and be cost 
effective. As mentioned in the 1994 Annual Report of the EMI, the operational features 
of the system will be defined in the course of 1995 by the EMI in close co-operation with 
EU central banks and other parties such as credit institutions. 
63. TARGET will be supplemented at the start of EMU by the ECU netting and 
clearing system of the ECU Banking Association (EBA). Both will be available for 
domestic as well as cross-border operations. 
However, these systems are designed for wholesale payments mostly consisting of inter­
bank operations or treasury and currency transactions of large enterprises. They are not 
designed for the.high volume transactions of the general public and small enterprises. 
Retail, or Low-Value systems 
64. The problem of conversion to the ECU is more complex for systems which are retail 
or low value, because they carry a far larger number of payments, from a far greater 
variety of customers. It is not practicable for these high volume (or "retail") automated 
30 
payment systems to operate in two currencies simultaneously. For this reason it is 
assumed that the banking industry would opt to keep these payment systems in national 
currency until the final changeover to the ECU at PHASE C. This would have the 
advantage of giving the banks and payment systems enough time for preparing what is in 
effect the most technically challenging part of the changeover process, the full 
introduction of the ECU at retail level. 
65. It might nevertheless be possible to anticipate PHASE C in some countries or for 
some specialised retail payment instruments, e.g. payment cards. The, main problem with 
payment cards moving to the ECU is the adaptation of electronic equipment at the point 
of sale. However, as soon as a certain number of technical specifications are known in 
advance (see paragraph 57), a rapid changeover operation can be prepared. 
Banking communities might in any case find it attractive to complete whatever steps can 
be carried out in advance as early as possible, in order to free capacity for dealing with the 
other tasks involved in the immediate run-up to PHASE C. 
Cross-Border aspects 
66. Cross border payments are not only characterised by the exchange of currencies, but 
also by the fact that there is a switch from one payment system to another. However, the 
technical specifications of national payment systems are different notably for historical 
reasons. This explains why the 60 or so EU domestic payment systems existing in the 
European Union, if they interconnect within their home country, are not inter-operable 
between the Member States. In short, the domestic automated clearing houses (ACHs) of 
the Member States do not communicate with each other. As a consequence, credit 
transfers, for example, between Member States have to be processed through the rather 
time and cost-consuming channel of correspondent banking. The Commission recently 
proposed a draft Directive to improve cross-border payments. It is also important to 
accelerate work on the harmonisation of standards, procedures as well legislation on 
statutory declarations. 
67. Two major improvements should be forthcoming immediately as of the start of 
PHASE B for cross-border payments made within EMU : 
• a reduction in costs : since an ECU transfer will not involve a foreign exchange 
transaction, the buying/selling spread will disappear, together with all or most of the 
associated "exchange commission" fee. As to payments by card holders, similar 
31 
cost-savings should be forthcoming as, at the international processing centre, a fixed 
conversion rate would be applied on any card used within the monetary union. 
• a reduction in payment delays : the processing of the payment may be accelerated 
by up to 2 days as the usual "value 2 day" applicable to currency exchange 
transactions will also lapse. Eurocheque processing should also be adapted along 
the same lines. 
All in all, significant reductions in costs and delays for cross-border payments within EMU 
could be expected by bank customers of the participating countries, thus bringing these 
closer to the conditions of efficiency prevailing in national markets and move towards the 
overall objective of a "payment area" to correspond to the area of the single market. 
68. Payment systems operators and users are invited to reflect and report upon the 
technical implications of the reference scenario by December 1995. Oh the basis of 
these consultations, the Commission shall, during the course of 1996, take the 
measures required at Community level for the smooth introduction of the single 
currency. Moreover, it is the view of the Commission that the golden opportunity for 
moving towards the overall objective of a "payment area" which corresponds to the 
area of the single market should be seized Inter-operability of payment systems within 
the EU should therefore be associated to the single currency. 
Section 3 
The financial markets 
69. The establishment of EMU and the introduction of the single currency require an 
adjustment of the structures and operating methods of financial markets. In addition to 
that adjustment, it is also important to take account of the impact which financial markets 
might have on the process of establishing EMU. 
Impact of financial markets on the process of establishing EMU 
70. The expected market behaviour and the factors which might contribute to market 
stability will be different before and after the actual start of EMU. Given the duration of 
PHASE A and B of the reference scenario, it is important that the stabilising behaviour of 
markets be strengthened so that they can contribute to the smooth functioning of EMU. 
32 
In this respect, the process's credibility and the perception of its irreversibility will play a 
vital role. 
71. During PHASE A, increased stability of foreign exchange and financial markets can 
be expected ahead of the irrevocable fixing of exchange rates (start of PHASE B). This 
stability will result from the high degree of nominal convergence achieved between those 
Member States which are to join the single currency area, and from intensified monetary 
policy co-operation. 
Markets will tend to view these currencies as near-perfect substitutes for one another, and 
therefore stabilising behaviour can be expected on the part of the markets. Indeed, they 
will arbitrage any profit opportunities which arise henceforth in terms of significant 
differentials between comparable instruments in these currency sectors, subject to liquidity 
premia, differential credit risks and tax treatment. 
72. However, exchange rate pressures might still occur in certain circumstances : 
• markets may test the credibility of the decision to move to stage three of EMU : if 
they do not consider this decision as fully credible, for example if the decision is 
different to that expected by the markets, in terms of timetable and/or participating 
countries, participating currencies would not be seen by the market as perfect 
substitutes one for another, and this might result in tensions among the currencies of 
future participants. Especially in that case, sharp fluctuations in the exchange rates 
of third currencies (dollar and yen) could affect unevenly the currencies of 
participating Member States putting strains on the exchange rate relationship 
between them; 
• disturbances in exchange rates of non-participating currencies could result from 
expectations that they would not continue to adhere to the convergence and non-
inflationary policies to which they are committed under the Treaty; 
• uncertainty concerning the conversion rates at which the currencies will be fixed 
irrevocably. Once the date for the start of monetary union is known, operators will 
make guesses concerning final conversion rates and position themselves accordingly. 
Such shifts if they occur in a large scale, could push exchange rates significantly 
• away from levels justified on the basis of fundamentals; 
• finally, unexpected shocks cannot be excluded even in participating Member States. 
33 
73. Credibility is the best means for attenuating such pressures and is primarily based on 
the continued fulfilment of the convergence criteria. This credibility will be reinforced if 
markets are convinced that there is a complete consensus concerning all aspects of the 
decision to move to EMU. This consensus, which should be stated publicly, can only be 
built on the basis of a strict interpretation of the convergence criteria. 
It is up to Member States and national central banks, together with the Community 
authorities (Council, Commission, EMI/ECB) to develop the best strategy for promoting 
market stability. 
74. During PHASE B when national currency denominations still exist (until PHASE C), 
markets, in spite of the high degree of convergence among participants, may have doubts 
about the irreversibility of the EMU process. From this point of view, the shorter the 
period between the irrevocable fixing of parities and the replacement of national currency 
denominations by the ECU the better. Hence the importance that the use of the ECU 
achieves a critical mass of activities as of the start of PHASE B. The more economic 
agents move to the ECU for their operations, the more credible the EMU process. A 
critical mass at the start of PHASE B would provide a strong commitment to economic 
agents given that a significant volume of their operations will be carried out in ECU. 
The impact of EMU on financial markets 
75. The impact of EMU on financial markets will be different according to the markets 
concerned: foreign exchange, debt, equity and derivatives markets. 
76. Concerning the foreign exchange market of the participating currencies, the main 
impact has already been described: they will disappear. 
77. In the financial markets of the participating currencies, economic convergence and 
the elimination of the exchange rate risk premium would lead to a convergence of interest 
rates towards the currency with the lowest rate. This movement, would be anticipated in 
advance of PHASE A, and would continue after the decision on the move to the third stage 
of EMU is taken. Prices would adjust on the basis of the rates expressed in the single 
currency. 
78. The start of PHASE B would, according to the"reference scenario, require the 
introduction by market participants of technical changes necessary to work in the new 
ECU environment in their systems and procedures (quotation, clearing and settlements, 
delivery, custody). Those changes would have to be completed by the end of PHASE B. 
34 
In addition, every effort would have to be made during PHASE B to avoid unwanted 
volatility, instability, disruptions, delays and other inefficiencies of a technical nature. The 
best way to achieve this goal would be, for all parties concerned (issuers, intermediaries, 
stock & derivatives exchanges, International Central Securities Depositories -
EUROCLEAR and CEDEL -, National Central Securities Depositories, Custodian banks, 
and news vendors), to changeover to the ECU (presumably by all participants at the same 
time) in a co-ordinated fashion . This should be included in the changeover plans 
established by every country and every financial centre at the start of PHASE A. 
79. The transition to the ECU of securities markets would be less expensive and faster 
than in the case of commercial banking business because they do not have to deal directly 
with final retail customers. Furthermore, within this sector, securities markets A aie 
more technology-intensive are likely to carry out the transition more rapidly and at a 
lower cost than those relying heavily on paper-based systems. Indeed, they are already 
used to rapid changes in technology and procedures, and probably have sufficient in-house 
expertise to incorporate the introduction of the ECU in their periodic adaptations of 
technology. 
80. On the financial derivatives exchanges, some contracts (those related to domestic 
bonds, local interbank offer rates and intra-EMU foreign exchange) would disappear while 
others would be created. Contracts related to equities (individual equities or indexes) 
would presumably acquire greater relative importance. Exchanges dealing with financial 
derivatives (financial futures and options) are expected to be less affected from the 
technical view point than exchanges dealing with equities and debt instruments because 
they are already used to working in a multi-currency environment. 
81. On debt markets, as the exchange rate risk premium would disappear between 
participating currencies, remaining interest rate differentials would only incorporate a 
credit risk and liquidity premium. Since the level of liquidity of the leading ECU debt 
markets would be higher, a certain reduction of the liquidity premium incorporated in 
nominal interest rates could take place. 
For investors, since one single market would replace various national ones, investment 
decision will depend almost exclusively on the credit rating and the liquidity of existing 
issues. 
35 
The single currency will create a much larger debt market which will offer increased 
possibilities in terms of volume, instruments, and lengthening of maturities.- On the other 
hand, certain issuers benefit from a better rating in national currency denominated debt 
compared to foreign currency debt. This possibility will disappear and therefore Member 
States concerned will have to adapt their debt management. 
The methods of distribution of securities may be modified as a result of increased 
competition between the banks and other financial intermediaries. 
82. For investors, private and public issuers, the move to stage three of EMU will result 
in a reduction of operating costs. By concentrating on one single currency instead of 
many, they will no longer bear foreign exchange or hedging costs. The impact for 
intermediaries will be in the form of a reduction of their operating costs, an increase in 
competition, and a loss of fees and commissions from foreign exchange transactions. 
83. New debt issues by the public sector would be denominated in ECU as from the 
start of PHASE B, to the extent that it is technically possible. This would give a strong 
signal to the market of the commitment of public authorities on the introduction of the 
single currency. However* the issue of ECU denominated debt should not create 
disruptions in the market and should not have a direct impact on retail activities which 
would require further adjustments by financial institutions. Therefore trie issues which 
would be most appropriately denominated in ECU at the start of PHASE B would be those 
addressed to institutional investors, and those maturing after PHASE C. Private issuers 
could decide to follow a similar path. 
84. On equity markets, domestic equity instruments will adapt through normal 
arbitrage adjustments reflecting for each company the possible alteration in foreign 
exchange exposure resulting from the start of PHASE B. Portfolio management should 
however tend to become Community-wide and based on "sectoral" analysis within the 
whole EMU area rather than on "country" analysis. Furthermore, an increase in cross-
border flows is to be expected, leading to an increase in liquidity. 
85. The main impact on investors will be the reduction of cross-border transaction costs 
and the elimination of hedging costs vis-à-vis foreign exchange rate risk when investing in 
non-domestic shares. 
36 
86. The introduction of the ECU would encourage companies whose existing financial 
operations are domestically based to become increasingly active in other Member States. 
Some companies may decide to list their securities in the stock exchanges of other 
Member States in order to become more visible to local investors and customers. This 
reasoning would be applied not only to large companies but also to a number of small and 
medium-sized companies active in, for instance, border regions. 
87. The Commission invites banks, financial market and payment system operators 
who will be affected by the introduction of the single currency to reflect upon the ideas 
and proposals in the Green Paper. The Commission would welcome their views and 
reactions by the end of the year. Professional associations will have a key role in 
presenting their conclusions. The Commission suggests that Member States establish 
an institutional framework for co-ordinating the activities of the actors concerned 
Chapter II 
Public Administrations 
88. This chapter examines the many changes needed for the introduction of the single 
currency which have to be made by public administrations at both the Community and 
national levels. If they assume the leadership role which is theirs, then public 
administrations will also act as catalysts, mobilising private sector operators into making 
the necessary investments. These investments are unlikely to be made if public 
administrations adopt a wait-and-see attitude about the single currency. The chapter does 
not provide an exhaustive catalogue of measures required of public administrations. 
Instead, the main challenges are identified as well as the deadlines by which time the 
legislative and operational frameworks need to be in place. 
Section 1 
Public administrations as leaders and catalysts 
89. As major currency users, public administrations will have lengthy preparatory 
agendas. Timely action by them can provide a strong signal to private users that EMU is 
approaching and that essential government functions ( for example taxes and social 
security) will operate smoothly during the transition process. 
37 
They face important challenges at all levels: from the Community ar.d national levels down 
to state, regional and local bodies. In changing to a single currency, public 
administrations will need to undertake two types of measures : 
• replacing references to national currencies in legislation and administrative notices; 
• introducing the ECU for all budgetary operations. 
90. The timing of the changeover to the single currency would vary for different aspects 
of public administrations. The three-phase scenario set out in part 1 would require that 
new issues of public debt be progressively denominated in the single currency from the 
start of PHASE B. Most currency users would continue to use national denominations 
until the final introduction of the single currency at PHASE C. It is likely that many 
aspects of public administrations would continue to operate in national denominations 
until their "clients" changeover to the single currency, i.e. PHASE C 
91. However, some financial institutions and private enterprises may choose to convert 
all internal operations and accounting to the ECU in PHASE B. As a general principle, 
these private operators should be able to fulfil their legal obligations. (tax payments, 
prudential regulation etc.) in the single currency as soon as they convert their internal 
operations. This means that relevant areas of public administration would need to be 
prepared for ECU transactions as of PHASE B, implying the need for taking legislative and 
administrative measures prepared beforehand. The requirement to accept the single 
currency as of the start of PHASE B would relate to a limited number of areas of public 
administrations and would involve a relatively small number of private sector operators. 
Section 2 
Community institutions 
92. Altering legislative texts : some 1600 Community legal texts presently contain 
references to one or more national currencies. All such references will require 
modification.3 The large number of texts makes it desirable to adopt a "catch all" 
Regulation to alter automatically as many of these references as possible. Changes to 
Examples of legislation requiring such changes include, Company law (nominal value of 
securities). Directive 77/91/EEC of 13.12.76: Accounting (bases of conversion into local 
currency). Directive 78/660/EEC of 25.7.78 : Insurance (matching rules). Directives 73/239/EEC 
of 24.7.73; 88/357/EEC of 22.6.88; 92/96/EEC 10.11.8; Communication 94C360/08 of 17.12.94: 
Capital Adequacy Directive (foreign exchange rules). Directive 93/6/EEC of 15.3.93 
38 
Commission Acts should prove easier to undertake than Council Acts which require 
implementing national legalisation. In any event, all legislative texts will have to be 
reviewed separately so as to ascertain the changes required. 
93. Introducing the ECU for all Community budgetary activities, as well as borrowing 
and lending activities currently conducted in national currencies, should be undertaken at 
the start of PHASE B. Although the basket ECU is currently the unit of account of the 
Community budget, both revenues and expenditures are wholly or partly realised in 
national currency values. This«, complicates project management and imposes some 
exchange risk on the Community budget. Introducing the necessary legislative changes 
and reforming administrative practices (such as software, accounting and control systems, 
currency management ) is a major logistical challenge. Nonetheless, using the single 
currency for the execution of the budget would greatly facilitate the administration of 
Community policies. 
While small compared with national administrations, the scale of measures required at the 
Community level is extensive, and clearly illustrates that lengthy lead times will be 
required. The Commission has therefore already established an inter-service working 
group to examine the implications of the introduction of the ECU. 
Section 3 
National administrations 
94. Altering legislative texts : all levels of authority in the Member States would be 
required to alter references in legislative texts from national currencies to the single 
currency. The timing of the required changes would vary, but it is evident that some areas 
of national public administrations would need to be in a position to accept the single 
currency as of the start of PHASE B. National authorities should ensure that the use of 
ECU is placed on an equal footing to the national currency in PHASE B where 
appropriate. National, state, regional and local .authorities might find it useful to adopt 
the intended Commission approach of a "catch all" legislative act which ensures that all 
references to national currencies are read as references to the single currency as of 
PHASE C. Separate legislation may be required for rounding, such as for tax allowances 
and charges for public services. 
39 
95. Introducing the single currency for all budgetary activities : the challenge facing 
public administrations clearly depends upon the nature of the particular activity in question 
and the timing of changeover. After the start of PHASE B, public debt would be 
increasingly issued in the single currency. Major public spending items would also be 
made in ECU. 
96. In addition, some banks, financial institutions and private enterprises could switch 
over their internal operations to the ECU, after which they would need to be able to 
conduct financial transactions with public authorities in, the single currency. This would 
mean facilitating the use of the ECU and resolving specific issues, such as accounting 
rules, which arise from the changeover process. Decisions of this nature should be clear, 
certain and available well in advance of PHASE B. Fiscal authorities will have a 
particularly important role to play, as outlined in the following section. 
97. Major administrative changes will be required to cope with the introduction of the 
ECU. Among other things, all software, documentation with references to national 
currencies and internal accounts will require alteration. 
The most significant problems will arise in departments making large numbers of low-
value payments, engaged in cash handling and dealing directly with the public at large. 
Social security departments will be particularly affected because they deal with vulnerable 
population groups which would be adversely affected by any disruption to the normal 
functioning of public services. Close attention is also required for personal income 
taxation, with clear explanations provided to the public on the practical implications of the 
changeover, e.g. conversion into the ECU of tax allowances. 
98. Fiscal authorities : A key concern for enterprises is the fiscal framework envisaged 
for the changeover. Fiscal authorities would need to clarify the necessary arrangements 
well in advance of PHASE B, which implies that preparations should begin' immediately. 
Some of the main concerns of enterprises regarding the fiscal framework include : 
• the date from which fiscal declarations and payments can be made in the single 
currency. It would be necessary for measures to be in place at the start of 
PHASE B. This applies to all taxes affecting enterprises including customs duties, 
corporate, withholding and VAT; 
• whether the introduction of the ECU is a taxable event. Typically, capital 
investment gains by enterprises on assets denominated in a foreign currency are not 
taxable until the asset is sold. At PHASE B, it would be immediately apparent 
40 
whether the investor has registered a profit or loss since a direct comparison can be 
made between the exchange rate at the time of purchase and the irrevocably locked 
conversion rate. The question arises as to whether this constitutes a taxable event in 
which recorded profits would be taxable and losses could be written off; 
• the treatment of administrative errors and delays, omissions and errors are an 
inevitable by-product of complicated taxation systems. Fiscal authorities heavily 
penalise enterprises for mistakes and delays. The introduction of the single currency 
may increase such occurrences. Fiscal authorities would need to carefully consider 
the practical difficulties facing enterprises when implementing transition 
arrangements. Ideally, pre-emptive measures by national fiscal authorities offer the 
best palliative, in particular the timely and clear presentation of fiscal arrangements 
for the changeover, organisation of seminars and training courses for accountancy 
and finance personnel and the provision of assistance to representative organisations 
(industry association, chambers of commerce) which provide technical assistance to 
enterprises; 
• arrangements for dealing with the changeover during a fiscal year : ideally 
enterprises and accountants would prefer to convert accounts into the ECU at the 
start of a fiscal year, i.e. accounts for the past year would be closed in national, 
currency, balances would be converted into the single currency using the fixed 
conversion rates and accounts for the new fiscal year would be opened in the ECU. 
Fiscal authorities would need to consider arrangements for enterprises which 
undertake this changeover in the middle of the fiscal year. They should also 
consider whether some flexibility is possible to allow accounts to be converted into 
the single currency at a date that is close to, but not actually, the starting day of 
PHASE C. 
99. The Commission considers that all levels of public administration must assume a 
leadership role in preparing for the introduction of the ECU. To this end the 
Commission proposes : 
• that other Community institutions establish working groups to examine the 
implications of the introduction of the ECU. These working groups could 
consider, inter alia, the need for legislative changes and the introduction of the 
ECU for budgetary operations; 
41 
that national public administrations at all levels establish working parties to 
examine and plan the legislative and administrative measures required to ensure 
a smooth introduction of the ECU. The progress and findings of such working 
parties could be reported to the Commission by December 1995 with a view to 
organising an exchange of views on technical problems encountered; 
that public administrations and public utilities, to the maximum extent possible, 
conduct dual display of prices as a means of familiarising the general public 
with the ECU as of the start of PHASE B. Examples of where dual pricing 
displays could be undertaken include bills for gas, electricity, water, fiscal 
statements, tolls etc Dual pricing displays might be maintained for some time 
after the start of PHASE C, even beyond the final withdrawal from circulation of 
national notes and coins. 
Chapter HI 
Enterprises 
100. This chapter considers the main implications i f the changeover to the single 
currency for enterprises. Particular attention is given to ti.e need to develop strategies for 
the introduction of the single currency, most notably whether to conduct all or :o«n° 
operations in ECU during PHASE B and how to cope with the physical introduction of 
ECU notes and coins. The implications of the single currency for core activity areas in 
enterprises are reviewed (cash handling, sales and marketing, accounting and fiscal 
activities, personnel). 
Section 1 
Defining a changeover strategy : a key decision for enterprises 
A "single currency introduction strategy" for enterprises 
101. By increasing economic stability and removing exchange risk and transaction costs, 
the single currency will greatly facilitate the functioning of the single market and therefore 
be of considerable benefit to enterprises. Nonetheless, the actual changeover to the ECU 
will require adaptations in many aspects of daily business activity. The impact across 
42 
enterprises will not be uniform; in each company it will depend upon the scale of rros? 
border activity, the amount of cash handling involved in daily activities and the degree of 
contact with the general public. Domestic retailers will clearly face different types of 
problems to multi-national enterprises. Preparations for the changeover will take time to 
implement and require investments to be undertaken. 
102. It is therefore essential that enterprises establish as soon as possible a "single 
currency introduction strategy". This would ensure that sufficient lead-times are available 
to implement technical preparations needed for a smooth continuation of normal business 
operations. Moreover, it would enable enterprises to incorporate changeover investments 
in ongoing capital investment plans, thus spreading any costs over a longer time period. 
Finally, it would allow enterprises to identify commercial opportunities which may arise 
with being an early mover in preparing for the single currency. 
The three-phase scenario presented in part 1 would mean that there are two key aspects to 
a strategy : 
• whether to convert all or part of internal accounting and operations to the single 
currency during PHASE B, or whether to wait and make one complete changeover 
to the ECU at the start of PHASE C; 
• during PHASE C, whether to accept national notes and coins (and if so, for how low 
long), or whether to accept only ECU notej and coins. 
These choices will be entirely voluntary,, and strongly influenced by market forces. 
Enterprises require clarity and certainty regarding the changeover process. 
The option of an early adaptation 
103. Enterprises may find that there are many advantages in choosing to conduct all or 
part of their internal operations in the single currency before PHASE C. In particular, 
enterprises with large treasury operations may prefer to conduct these activities in the 
ECU rather than to continue using several national denominations. An early changeover 
may also prove convenient for companies engaged in cross-border trade and with affiliates 
or subsidiaries in participating countries. It could, for example, facilitate invoicing, 
transfer payments and currency management. 
43 
Enterprises would, however, be obliged to continue using national currencies for some 
purposes, notably cash transactions, until PHASE C. In such cases, they would need to 
construct some form of interface between those parts of their activities operating in the 
single currency and those continuing to operate in national currencies. They would also 
need to establish appropriate accounting and control procedures as well as to adapt 
computer software and ensure that staff are properly trained. 
Small and medium sized enterprises, companies who mainly operate on domestic markets 
and retailers are likely prefer to change over to the single currency in one go at the start of 
PHASE C. The advantage of waiting until then is that enterprises would not have to 
develop transitional systems. Since all accounts and balances will have to be converted 
from national currency into ECU in PHASE C advance preparatory measures will be 
required. 
Coping with the physical introduction of ECU notes and coins 
104. Enterprises, and in particular retailers, would face a choice at the start of PHASE C. 
On the one hand, they could completely changeover to the ECU and refuse to accept 
national notes and coins - but at the risk of encountering technical difficulties associated 
with changing over all systems in a very short period and of antagonising clients who 
wish to continue using national currencies for some time. On the other hand, enterprises 
could choose to accept both currencies for some time during PHASE C. Here, other 
problems would arise. In particular, provision for some form of dual pricing would have 
to be made, and the facility created for handling two sets of notes and coins (requiring, 
additional slots in tills, cash storage and security measures). Such measures would be 
costly, particularly if the vast majority of the general public adopt the ECU in a short 
space of time. 
Section 2 
Implications of the ECU for enterprises 
105. It is important to identify the most important implications for areas of core activity. 
Those examined below include cash handling and recording activities, sales, marketing, 
administration and information systems, accounting and fiscal activities, personnel and 
training. 
44 
Cash handling and recording : 
106. All forms of recording machines (cash registers, petrol pumps, accounting 
machines) coin machines (vending machines, ticket dispensers) and note machines 
(ATMs) will have to be converted from national currency to ECU denomination. Given 
that there are millions of such devices in use, the development and manufacture of new 
machines or devices capable of handling the ECU will require significant investments and 
could involve lengthy preparatory lead-times. It is therefore imperative that producers of 
cash handling and recording equipment receive, as soon as possible, definitive technical 
specifications (e.g. dimensions and characteristics of notes and coins, name and 
abbreviation of currency and sub-units etc.). This should occur even in advance of 
PHASE A, the decision to move to monetary union. 
107. The 1994 Annual Report of EMI reports that a considerable degree of consensus 
has been reached with respect to the number and value of denominations and the 
boundary between notes and coins. Coins would have a highest value of ECU 2, and 
ECU 5 would be the smallest denomination of banknotes. Consensus also exists in favour 
of seven banknotes ranging from ECU 5 to ECU 500. Regarding the appearance of 
European banknotes, either a completely identical banknote will circulate throughout the 
single monetary area or they will be identical on one side but contain a limited national 
feature on the other. 
108. It may take some time (up to several months) to adjust all such cash handling 
devices, in particular vending machines and note and ticket dispensers. Enterprises will 
need to develop well planned changeover programmes so that a sufficient stock of 
machines can work in the ECU from the start of PHASE C. This will mean beginning the 
conversion process in the weeks leading up to PHASE C. Technical difficulties and 
conversion bottlenecks would be mitigated if early decisions on the technical 
specifications of notes and coins allow enterprises to progressively acquire "ECU 
compatible" equipment as part of their normal investment schedule, e.g. equipment that 
can recognise (albeit separately) both national and ECU sets of notes and coins. 
109. As mentioned above, enterprises which choose to accept national notes and coins 
during PHASE C would have to deal with two sets of notes and coins. This would imply 
either having separate cash handling and recording equipment for both the national 
currency and the ECU, or installing equipment which can deal with both currencies 
simultaneously. Enterprises will have to decide for themselves how best to cope with this 
challenge. Some difficulties associated with two sets of notes and coins may be reduced 
through the introduction of new technologies (bar codes, cash registers capable of dealing 
45 
with multiple currencies, electronic payment systems) which can make automatic 
conversions between the ECU and national currency. Again, early preparation is the key 
to a smooth and cost effective changeover. 
Sales, marketing, administration and information systems 
110. By PHASE C at the latest, references to national currencies would disappear and 
thereafter appear in ECU. This would require a range of administrative measures, 
principally : 
• Contract negotiations, invoices, bills, and information systems would be converted 
into ECU together with all payments to suppliers and contractors. Inter aliay the 
changeover will require replacing references to national currency in official 
documents (invoices, receipts), promotional material and computer software. 
Companies which decide to use the ECU during PHASE B, and/or which agree to 
accept national currencies during PHASE C, may have to undertake some dual-
pricing with the attendant increase in administrative formalities; 
• Pricing decisions : actual pricing decisions will prove sensitive given that an 
application of conversion rates is likely to result in awkward ECU counter values. 
Retailers will need to decide upon convenient ECU prices that do not create hostile 
reactions. For low-value items, minor rounding can result in large percentage price 
changes. Ultimately, competitive market forces should limit price increases, and 
many enterprises may even attempt "rounding down" marketing campaigns. The 
issue of dual pricing displays is examined in paragraph 122; 
* Advance promotional material : A specific problem may arise with respect to 
pricing displays in promotional material. Mail order companies and enterprises 
dependent upon brochure marketing (travel companies) will face particular 
difficulties (some brochures are prepared up to 18 months in advance). A difficulty 
may arise from the fact that conversion rates would not be known until the start of 
PHASE B; 
* Provision of information to clients regarding the changeover implications will be 
essential. While in some cases such explanations will involve a straightforward 
demonstration of the application of conversion rates with sensible rounding 
decisions, in other areas enterprises will need to launch substantial information 
campaigns about such matters as contracts of a long-term nature such as mortgages, 
pension fund investments, hire purchase and leasing agreements. 
46 
111. Accounting and fiscal activities : in PHASE C at the latest, all accounts and balance 
sheets must be presented in the ECU. As set out in Part 2 - Chapter 2, fiscal authorities 
must establish the precise rules which will apply for the changeover process. 
112. Personnel and training : enterprises will need to ensure that staff are fully informed 
and trained about how the ECU will affect their work duties as well as their wages and 
other terms and conditions (e.g. company pension schemes, reimbursement of expenses). 
Ensuring that staff are properly trained and understand the changeover process is essential 
to avoid disruptions to business activity and to facilitate relationships with clients. 
The nature and timing of the training will depend upon the tasks involved and the ECU 
introduction strategy adopted by enterprises. Enterprises having ECU dealings during 
PHASE B will need to ensure staff are trained even before the start of monetary union. 
Specialised training could be afforded to staff dealing with financial matters. Particular 
attention will also need to be paid to staff having direct dealings with the public, to ensure 
that they can competently respond to customer queries and requests for assistance. 
113. Business federations, professional associations (lawyers, accountants, notaries) and 
unions have a crucial role to play in the training process. For example, they could prepare 
information packages and videos to be supplied to their members for in-house training 
programmes. They might consider organising conferences and workshops where 
interested parties could meet and discuss problems of common concern, and develop 
mechanisms for sharing solutions to widespread technical difficulties. Public 
administrations should facilitate such initiatives, by providing background material, 
information packages and speakers for conferences. 
114. The Commission invites enterprises, representative and professional associations, 
unions, including organisations representing SMEs, to analyse the implications of 
introducing the ECU for their particular sector/profession. Working parties in 
enterprises, representative associations and unions could be established with a view to 
distilling reactions to the Green Paper, cataloguing the changeover measures required, 
and listing the legislative and technical decisions required of governments and public , 
administrations. It might be useful for a single currency officer to be appointed in 
each representative organisation. The Commission invites Member States to facilitate 
the setting up of such working parties. 
47 
In addition, the Commission suggests that Member States establish a framework for 
coordinating the activities of private enterprises and organisations. This could avoid 
duplication of work and encourage the sharing of experiences and ideas. The 
Commission also proposes that national authorities provide a single contact point for 
information and assistance on the introduction of the ECU. 
Chapter IV 
Consumers 
115. This chapter deals with the particular challenges facing consumers with the 
introduction of the single currency. It recognises the difficulties they will face in adapting 
to a new monetary scale and the need for a major communications campaign which clearly 
explains the practical implications of the ECU for their daily financial activities. The 
chapter contains a guide to impact on consumers at all phases of the changeover process. 
Section 1 
Preparing consumers to make the change 
116. It is known from past experience of currency changes in France and the UK that 
people do not become instantly accustomed to new money. In at least one respect, 
adjusting to it is somewhat like learning a language - it takes time and practice before it is 
possible to "think" in the new currency. Preparing consumers to pass smoothly through 
the changeover will be a very important priority for public policy. Otherwise, that popular 
support which is a precondition for the success of the whole enterprise will be 
jeopardised. 
The impact on consumers of each phase in the changeover process must be carefully 
examined and, where necessary, measures taken to protect their interests. Their 
representative organisations can be expected to be extremely vigilant, but also anxious to 
overcome suspicions, allay fears and remove difficulties. 
48 
For some people, the change will feel almost like a change of identity so accustomed are 
they to viewing their own currency as a national symbol. National identity is not in peril, 
however. It is, in fact, being broadened to embrace a symbol of European integration for 
the many good and practical reasons set out in this Green Paper. 
117. The Communications Section of this Green Paper (Part IV) will deal with the 
importance of communications strategies for winning popular acceptance and support and 
achieving the technical preparations needed for the transition to a single currency. It 
stresses the importance of telling consumers as soon-,as possible about the advantages of a 
single currency, of reassuring them that the changeover will not be to their disadvantage 
and with helping them to get used to calculating from national currencies to ECU and 
back again. It also draws attention to the need to give particular help to vulnerable 
groups, including the elderly and the visually handicapped. All of these points emerged 
clearly from the hearings with consumer organisations organised for the preparation of the 
Maas Report. 
Almost certainly, the biggest problem for consumers will be handling conversions and 
comparing the value of goods. They will lose their sense of prices. In many cases, 
conversion rates will probably be sufficiently awkward as to make multiplication 
calculations difficult. 
118. To cope with the changeover, consumers will need both time and precise 
information. The reference scenario presented in this Green Paper certainly would allow 
ample time for public authorities to prepare and launch information campaigns for 
consumers. The Commission, the European Parliament, the European Monetary Institute, 
the central banks and others will have their roles to play in informing consumers and 
protecting their interests during the transition. But it is the national authorities who will 
be able to respond best to local needs and concerns that will not be identical across 
Member States. 
Part IV also emphasises the importance of familiarisation exercises, including dual pricing 
displays on financial statements, fiscal declarations and in retail outlets and "trial runs", 
allowing consumers advance use of notes and coins in controlled environments. 
It is essential that banks, industry and retailers fully assume their responsibilities in 
preparing consumers for the changeover. They must mount their own information 
exercises, especially for explaining to their clients the implications of the changeover for 
their particular services. 
49 
Section 2 
The practical impact of the changeover on consumers 
119. In the main, consumers would only tangibly experience the implications of monetary 
union at PHASE C when ECU notes and coins are introduced and ail transactions are in 
the single currency. But the world around them will be changing in various ways before 
then. Here is a guide to some of the things they could expect. 
PHASE A - launch of Economic and Monetary Union. 
What will be the same? 
• everything will be the same for consumers. This would be a period of intense 
preparation for banking and financial operators but everything in the economic 
system will continue as before. 
PHASE B - Effective start of EMU and emergence of a critical mass of activities in 
ECU 
What will be the same? 
• national currencies would still be in circulation; 
• bank accounts, mortgages and loans, and all other contracts would still be in 
national currencies. 
What will change? 
• reduction in the delay and costs for banking operations within the monetary union; 
• ECU financial services to consumers could become available; 
• dual pricing of goods and services would steadily appear; thus increasing the 
transparency of prices across borders; 
• cross-border travel will be facilitated; 
• conversion tables could be required to be prominently displayed in retail outlets. 
50 
PHASE C - Final changeover to the single currency 
What will change? 
• the single currency is introduced; 
• national currencies would be speedily replaced by ECU notes and coins. The two 
currencies would circulate together for only brief time. This would relieve 
consumers of the confusion of carrying two sets of notes and coins; 
• retailers would be free to accept national currencies, but obliged to accept the single 
currency; 
• consumers will be able to exchange national notes and coins for the ECU fora very 
long time; 
• references to national currencies in contracts will be converted into ECU using the 
fixed conversion rates without any other changes to terms and conditions. In other 
words, the principle of continuity of contracts will apply; 
• bank accounts, wages, salaries, pensions - the entire cash economy - will be 
denominated in ECU. 
Section 3 
Consumer protection 
120. The Commission is firmly of the opinion that consumers must not be subject to any 
special charges as a result of the changeover to the single currency. It is imperative that 
consumers are capable of undertaking transactions in ECU in confidence. The display of 
financial balances and prices in ECU is a key element in familiarising consumers. 
121. Before PHASE C, financial institutions will be allowed to charge an administrative 
fee for converting bank notes from one Member State to those of another. However, they 
will need to display charges for services rendered in a transparent manner and not charge 
for exchange rate cost. 
51 
122! Dual pricing displays will play a crucial role in familiarising consumers with the 
ECU. Enterprises and retailers for commercial reasons would have strong incentives to 
display dual prices from the start of PHASE B onwards, and perhaps continue to do so 
well into PHASE C since they will want their consumers to be confident of conducting 
transactions in the ECU. Moreover, prominent displaying of dual prices would help 
relieve consumer suspicions of hidden price increases. Market forces in favour of dual 
pricing displays would affect all enterprises, even those changing over to the ECU at the 
start of PHASE C. 
The question arises as to whether the commercial incentives for undertaking dual pricing 
displays are sufficient, or whether legislation should be introduced to require them during 
PHASE B and perhaps for a fixed period of time thereafter. It is open to discussion 
whether Community legislation is required in this regard. The Commission intends to 
consult all groups of currency users concerned with a view to reaching a consensus on the 
need for Community legislation to be in place in PHASE B, such that appropriate measures 
could be taken in spring 1996. The subsidiarity principle leaves scope for the Member 
States to determine binding requirements at the national level. 
In drafting any binding requirements on dual pricing displays, a balance should be drawn 
between the interests of the consumer and the costs of developing and implementing dual 
display systems (all of which will eventually be passed on to consumers). The cost of dual 
pricing displays largely depends on the scope of its application. For example, it would be 
costly and complicated to require every reference to a currency to appear in a dual form. 
This would "mean that all products on display would have two price displays: cash 
registers would also have to display amounts both in national currency and the ECU on a 
transaction by transaction basis. A less costly option would be to require only totals to be 
expressed in national currency and the ECU (since this would require only one 
multiplication calculation to be displayed). A further option could be to require 
conversion tables to be prominently displayed in all retail outlets. The precise nature of 
any binding dual pricing requirements should be drawn up on the basis of round-table 
discussions involving representatives of producers, retailers, public administrations, unions 
and consumers. 
123. Strict legislative rules on rounding will be needed to govern the conversion from 
national currencies of existing contracts such as wages and bank accounts. Rounding is a 
common feature in the existing financial system which operates smoothly and without 
serious problems. 
52 
Rounding will be needed to obtain convenient figures for some balances appearing in 
legislative acts such as income tax allowances, charges for public services and some social 
security benefits. The relevant authorities will have to decide what rounding takes place 
on a case by case basis. 
The freedom of retailers to use conversion as an opportunity to increase prices should be 
limited by competition. Overall, the net impact on prices should be limited, with price 
increases caused by rounding up on some items cancelled out by reductions through 
rounding down on other goods. 
124. Throughout the Green Paper, the Commission has tried to anticipate as many 
possible of the key problems that consumers will face However, it relies on their 
representative organisations to confirm their judgement of the main impacts of the 
introduction of the ECU. It would welcome comments and any additional information 
that would be of help in developing policies to ensure a smooth changeover for 
consumers. The Commission intends to consult all groups of currency users 
concerned with a view to reaching a consensus on the need for Community legislation 
obliging dual pricing displays, such that appropriate measures could be taken in 
spring 1996. 
53 
Part 3 - The Legal framework for the ECU 
54 
125. The European economies are deeply integrated open markets with highly developed 
legal systems. The functioning of a complex modern economy, where economic agents 
are linked to each other by a dense network of financial claims is conditional upon legal 
certainty. To ensure a smooth introduction of the ECU, authorities both at Community 
and Member State level must ensure legal certainty which currency users require well in 
advance of the start of monetary union (PHASE B). This implies beginning the preparation 
of the legal framework, including the adoption of legislation where possible, even before 
the decision is taken to move to monetary union at PHASE A. 
This chapter does not attempt to catalogue all the legal measures required for the 
introduction of the single currency, but rather address the principal issues which form the 
main aspect of the legal framework. Five4 issues in particular need to be addressed as a 
matter of urgency to reduce uncertainty surrounding the introduction of the ECU, 
namely : 
the ECU and national denominations in PHASE B; 
legal tender; 
continuity of contracts; 
rules for rounding; 
legal issues relating to bank notes. 
Section 1 
The ECU and national denominations in Phase B 
126. Once the ECB conducts a single monetary policy and irrevocable conversion rates 
are fixed at the start of PHASE B, the ECU will exist as a currency in its own right. 
National currencies will be substitutes, and in fact will no longer be distinct currencies but 
different denominations of the ECU. 
Legal measures will also be required for the changeover scenario : in the scenario presented in 
Part 1, legislation would be required to ensure that certain operations would be conducted in 
ECU as of PHASE B, e.g. wholesale payment systems. 
55 
During PHASE B, however, national currencies would continue to exist in the legal sense, 
and national provisions relating to the currency would remain valid as long as no 
legislative measures are taken at national or EU level. At the start of PHASE B, the basket 
ECU will be converted into the ECU at the conversion rate of 1:1, and the ESCB may 
issue the ECU in the form of book money (the issuing of ECU bank-notes requires further 
legislation). 
Article 109L states that the ECU will become a currency in its own right. The ECU and 
national currencies as substitutes will not automatically translate in the legal sense. It is 
national currencies which will continue to function as the unit of account and means of 
payment within national boundaries. In the absence of legislation, the ECU could only be 
used as a unit of account and a means of payment provided that contracting parties agree 
and/or national law do not require using the national currency. 
127. Community legislation would therefore be required to be in place by the start of 
PHASE B to ensure that ECU and national currencies of participating countries are perfect 
substitutes in the legal sense, i.e. national currencies would be different denominations of 
the ECU with changes between denominations being made according to irrevocably fixed 
conversion rates and not exchange rates. For example, Community legislation would be 
needed to ensure that bank deposits in ECU, payments in ECU and transactions in ECU 
would be considered as being equal to transactions in the national currency at irrevocably 
fixed conversion rates. However, a party could not be obliged to accept payment in ECU 
(e.g. wages) until PHASE C. 
Section 2* 
Legal tender 
128. Legal tender is money which a creditor cannot refuse for payment. In all but one 
Member State, legal tender is limited to national bank notes (and to coins up to a certain 
amount); cheques, debit and credit cards, fund wires, foreign bank-notes are not legal 
tender. In the Netherlands, bank deposits too have a legal tender value: payment via 
credit transfers cannot be refused by the creditor. However, the concept of legal tender is 
rarely invoked, and does not reflect the functioning of modern economies. It is open to 
discussion whether the introduction of the ECU will require the harmonisation of the 
definition of legal tender among participating countries. Nonetheless, in a monetary union 
some questions of general interest arise : 
56 
notes and coins denominated in national currencies will only enjoy legal tender 
status in the territory of the issuing country and will not be extended to other 
countries participating in the monetary union. Therefore, one would not have a 
right to use notes and coins from one Member State in another Member State from 
the start of PHASE B. ECU notes, when they appear in PHASE C will enjoy legal 
tender status within the entire territory of the monetary union; 
in PHASE C, national notes and coins will lose their legal tender status and only 
ECU notes and coins will henceforth enjoy this privilege. Legislation will be 
required to ensure that this eventuality occurs. Retailers would be obliged to accept 
ECU notes and coins as a means of payment, but would retain the choice as to 
whether they accept national currency notes and coins as of this date; 
statutory provisions in some Member States (e.g. France, Italy) limit the use of 
bank-notes for certain types of payments or for payments above a certain amount 
for reasons of public order. Without further action, such restrictions will remain in 
force; 
decisions on legal tender may have implications on rules governing price displaying 
in that one would expect prices to be displayed in the currency enjoying legal tender 
status; 
without additional measures on the legal tender status of coins, national rules on the 
maximum amount which can be paid in coins would continue to be applicable. 
Section 3 
Continuity of contracts 
129. Provisions exist in the national law of some Member States which allow one 
contractual party to terminate or modify the terms of a contract or an agreement without 
the consent of the other contractual party in case of a fundamental disruption in economic 
factors. Economic operators need to be certain that EMU will not constitute a 
fundamental disruption in economic factors such that contracts in national currencies and 
basket ECUs could be unilaterally revoked and would therefore need to be re-negotiated. 
This "non revocability" principle should apply in all cases. 
57 
Continuity and the move to monetary union 
130. The move to monetary union will not constitute, either in the legal nor economic 
sense, a fundamental disruption . Therefore, variations in the value of claims and liabilities 
stemming from increased monetary stability do not give rise to continuity questions. 
There are several reasons supporting this conclusion. Changes in the level of interest rates 
associated with changes in macroeconomic policy have been experienced in many 
countries and constitute the usual uncertainties associated with economic developments. 
Participation in EMU, in economic terms has to be seen in the context of a long-standing 
predictable commitment. The convergence criterion on long-term interest rates ensures 
that during the run up to the start of EMU, interest rates of participating countries will 
move close together. 
Continuity and introduction of the ECU 
131. As long as national currencies maintain their legal existence (i.e. until PHASE C), a 
formal continuity problem does not arise since contracts can be settled in the same 
currency as before. A different continuity issue, essentially of a technical nature, arises at 
the moment when the ECU is introduced and national currencies lose their legal existence. 
However, the moment at which this change occurs depends upon the nature of the 
contract in question : 
• for contracts denominated in basket ECU, the change-over into a legally different 
currency would occur at the start of PHASE B. The Commission has already issued 
a Recommendation (94/284/EC) concerning the legal treatment of contracts 
denominated in basket ECU.5 As the transformation of the ECU from a basket 
currency into a currency in its own right (Art. 109g and Art. 1091.4 of the Treaty) 
will not by itself modify the external value of the ECU, the Treaty establishes that 
the conversion rate of the basket ECU into the ECU will be 1:1. As a consequence, 
the unilateral decision of a contractual party to apply a different conversion rate 
should be considered as a violation of the terms of the contract; 
Regulation 3320/94 of 31.12.94 (OJ L N°350/27) will have to be accordingly amended in order to 
ensure a transformation of any reference to the basket ECU in Community law to the ECU single 
currency at the 1:1 conversion rate. 
58 
• for contracts denominated in national currency, the conversion would occur in 
principle at the start of PHASE C, but could intervene already at the start of 
PHASE B in those sectors which would use the ECU in line with the reference 
scenario. Contractual parties would always be entitled to decide by mutual consent, 
before PHASE C, that their contracts must be read in the ECU. 
Legislative action 
132. Neither the move to monetary union nor the introduction of the ECU constitutes a 
fundamental disruption in economic factors such that the millions of contracts in existence 
warrant re-negotiation. Contractual parties will not have legal grounds for unilaterally 
terminating or modifying the terms of a contract. However, contract law is embedded in 
national legal systems, and the principles which determine the conditions under which 
contracts may be revocable are not identical across Member States. The Commission 
invites Member States to review national contract law provisions with a view to 
identifying any changes needed to guarantee the uniform application of the principle of 
non-revocability to the extent that it is related to EMU. Based on this review, a legislative 
package could be enacted to ensure that the principle of non-revocability is applied 
everywhere well in advance of the start of EMU even before PHASE A. The rules must be 
the same for all Member States and should therefore be adopted at the EU level and be 
applicable in all Member States. 
133. Another legislative package must be enacted before the final changeover to the 
single currency which would include : 
• references to national currencies in all contracts shall be read as references to the 
ECU implying there will be no changes in the terms of contracts. Likewise, 
references to a national currency in laws and regulations and all documents shall 
read as references to the ECU. Such legislation would also remove any need to 
include continuity clauses in contracts; 
• a rule that the conversion rates adopted at the start of monetary union shall be used 
for the conversion of national currency into ECU amounts. 
134. In those sectors, which would be converted in ECU according to the reference 
scenario as from the start of PHASE B, this legislative action should be taken in due time. 
59 
For third countries, the recognition of the ECU as the successor to the national currencies 
at the fixed conversion rates ("lex monetae") can be expected, as well as the recognition 
of the continuity of the other terms of a contract ("lex obligationis") such as coupon rates, 
interest rates and other ancillary obligations. 
Further examination will be necessary before it is possible to judge whether in certain 
cases it might be necessary to have additional legislation, for example to oblige 
contractual parties to inform their counterparts about the new denomination of a contract. 
Section 4 
Rounding 
135. The transition from a monetary regime with many national currencies to one with an 
ECU will inevitably raise questions related to the rounding of amounts expressed in 
currency units. Rounding already prevails in the present regime: for example, exchange 
rates used in small transactions are usually expressed with fewer significant numbers than 
for wholesale transactions. Questions of rounding seem to be settled in the present regime 
without the need for extensive legislation. However, in the transition to the ECU some 
specific questions could arise and require clarification. 
Legislation will be required to guarantee the application of conversion rates subject to 
mandatory rounding rules (e.g. all long term contracts such as mortgages, wages, 
conversion of financial balances). Legislation may also be required to ensure an 
application of conversion rates whenever dual prices are displayed. Decisions on 
rounding issues are required as a matter of some urgency. In particular, enterprises and 
banks need to have certainty even before the start of PHASE A. 
Section 5 
Legal issues relating to bank-notes 
136. While the technical preparation of bank-notes is a competence of the EMI, and the 
issue of bank-notes will be a matter for the ESCB, some legislative measures may be 
required. It would fall to the Commission in conjunction with the ESCB to make 
legislative proposals : 
60 
• the legal protection of bank-notes against counterfeiting; 
• rules on the unauthorised issuing and use of monetary tokens (stamps, coins, notes 
or other instruments capable of being used in payment in place of coins or bank­
notes authorised by law); 
• replacement of mutilated or destroyed bank-notes; 
• various issues related to the withdrawal of national bank-notes and the introduction 
of ECU notes; 
• although not strictly limited to bank-note law, a further issue relates to whether 
specific legal protection needs to be given to the name of the single currency against 
abusive use. 
137. Economic operators demand that complete legal certainty be established well in 
advance of the start of monetary union, PHASE B. Hence, preparations need to begin 
well before PHASE A, the decision to move to monetary union. The Commission 
therefore proposes that Member States report by December 1995 on legislative changes 
required to ensure that the single currency can be used on the same basis as national 
currency as of the start of PHASE B. Based on these submissions, the Commission 
intends to present draft proposals for the legal framework required at the Community 
level by spring 1996. These proposals will cover the issues raised in this chapter, but 
particular attention will be given to the status of the single currency and the continuity 
of contracts. 
61 
Part 4 - Communications 
62 
Chapter I 
Two primary objectives : winning popular support and 
stimulating technical preparations 
138. The purpose of any communications strategy is to transmit relevant, verifiable 
information in an organised, coordinated way in support of certain objectives. Organised 
in support of public policy, such a strategy makes an essential contribution towards 
transparency, public education and democratic debate. It is not about manipulation. 
It is safe to say that the transition to the single currency cannot succeed without the 
support of clearly defined communications strategies for the Union as a whole, and for 
individual Member States. Their core objectives will be to win popular support for the 
single currency and to stimulate and encourage the necessary technical preparations 
throughout the private sector of the economy. Achieving them depends on successfully 
implementing a number of supporting strategies. 
The changeover to a single currency would be a dynamic process divided into the three 
phases already described in this Green Paper. During these phases, some communications 
objectives would remain constant, others would become less important. Stimulating 
technical preparations in the banking sector, for example, would clearly be less of a 
priority towards the latter part of PHASE B because the sector would be well into its 
transition programmes. 
139. There will, of course, be several communications policies devised and implemented 
by public authorities, including the Commission, the European Parliament, the Member 
States, central banks, the European Monetary Institute and, once it is set up, the European 
System of Central Banks. Efforts will be needed to ensure that these are complementary 
and mutually reinforcing which means that important questions of organisation, sharing of 
responsibilities, resources and timing need to be addressed. 
Member States actions will be crucial because they must take responsibiUty for the main 
public information and communication initiatives directed at their citizens. Although the 
Commission will have an important role, the subsidiarity principle, as well as differences 
of culture, language and styles of communication reserve a central role for the Member 
States. 
63 
Chapter II 
The Communications Challenge 
Section I 
Doubts and lack of information 
140. There is evidence of doubts among the Union's citizens in the likelihood of EMU 
and lack of information of what the transition to a single currency would involve. 
According to the Maas Group, there is not a great deal less doubt among important 
partners whose cooperation in preparing for the changeover is essential to its success. 
EMU tends to lack credibility for a number of reasons which include : 
• low awareness that the commitment is embodied in the Treaty on European Union; 
• consequently low awareness that 1997 is an objective for the single currency and 
that 1 January 1999 is an effective legal deadline for those Member States which 
fulfil the necessary conditions; 
• the balance of media comment in many Member States had given the impression that 
upsets in the Exchange Rate Mechanism over the last three years made EMU less 
likely; 
• economic performances in a number of countries still fall short of the convergence 
criteria; 
• outside of the corporate sector, belief in EMU among influential elites has seemed 
uncertain and wavering and neglectful of its very positive aspects. 
Communications policies cannot remedy all of these weaknesses, but they can seek to 
create a climate of more informed opinion about a single currency. And after the key 
political decisions are taken, they can help to mobilise support and action. 
64 
Section 2 
Uneven support 
141. Available poll evidence, shows a declining belief among the population in all 
Member States (except Sweden, Finland and Austria, for which there are no equivalent 
data) that a single currency will be in use by the year 2000. In June 1991, 64% thought 
so. By June 1994, only 51% believed in the prospect - a slender overall majority. In 
Denmark, Germany, Greece and the UK, believers were in a minority while they were 
exactly 50% of the sample in Portugal. 
Other poll evidence shows very high proportions (more than a third of Europeans) never 
having heard of the ECU and strong resistance to its use as a single currency in Austria, 
Denmark, Germany and the UK. Just over half of all respondents want to know more 
about its advantages. 
Those able to identify advantages thought that it would benefit companies most and 
strengthen Europe in global competition. Just over 46% thought that the ECU would 
help to deal with future economic problems. 
Nevertheless, if one takes into account that almost six Europeans out of ten declare 
themselves "quite" or "very much" in favour of the single currency, then popular attitudes 
across the Union (of 12) as a whole are encouragingly positive, (although rather less so in 
some particular Member States). This is fertile ground upon which to build efforts to 
educate the public about the advantages of a single currency and about what to expect 
during the transition. 
Chapter III 
Tasks for a Communications Strategy 
142. The twin objectives of winning popular support and encouraging technical 
preparation will be equally important throughout the period beginning with the publication 
of this Green Paper and culminating in the introduction of notes and coins. They will not, 
however, require equal commitments of effort and resources at every stage of the 
changeover because of the nature of the transition exercise. 
65 
Although the public must be helped to understand what is going on and why from the very 
beginning, the first priority, at least until the start of PHASE B, is to encourage and 
stimulate the necessary preparations in the banking and finance sectors and by public 
administrations. After that, as the (non-cash) use of the ECU widens to include private 
companies, and even some individuals, and as the date for the substitution of the new 
notes and coins approaches, communicating with the public at large will take precedence. 
Moreover, a successful technical changeover in the financial sector is bound to have a 
positive impact on popular perceptions of the single currency. 
The Communications tasks can be best discussed in relation to the reference scenario 
timetable outlined in this Green Paper, beginning with a preliminary period opened by the 
publication of this Green Paper. 
Section I 
From the Green Paper until the start of PHASE À 
143. This Green Paper is a first step in dealing with the communications tasks and 
objectives set out below. Recognising the need for a broad mobilisation on the 
communications front, the Commission will organise a Round Table in the autumn on 
objectives and strategies for achieving them. Those invited will include representatives of 
the European Parliament, Member States' administrations, the European Monetary 
Institute, the media, the banking and financial sectors, trans-border companies, consumers 
and trade unions. The aim will be to launch coordinated campaigns from the beginning of 
1996. 
At the same time, the Commission is making special efforts to ensure that the key 
messages in this Green Paper reach their targets. These efforts will include publication in 
the autumn of a brochure designed for a mass audience. It is also examining how it will 
satisfy the growing demand for information which is likely to follow publication of the 
Green Paper, and the final decisions on the changeover scenario. 
66 
144. In this phase, the two main tasks are : 
• mobilising key currency users to begin technical preparations for the transition. This 
category includes banks and finance houses, traders of financial instruments, 
accountancy and insurance companies, large companies involved in cross-border 
trading, public administrations and utilities, vending machine operators and users; 
• informing the general public on the advantages of the single currency and 
responding to demands for information on the transition. 
These tasks imply the following communications objectives : 
for stimulating technical preparations : 
• to convince key users that the Treaty objective of a single currency will be achieved. 
This will encourage them to invest in preparing for the changeover; 
• to create a sense of urgency about launching preparations; 
• to ensure that the technical requirements for the changeover are understood and 
accepted by those concerned; 
• to allay anxieties about the feasibility of the changeover. 
for informing the general public : 
• to explain the advantages of the single currency; 
• to explain the main lines of the changeover scenario; 
• to promote acceptance of the single currency as equivalent to the strongest national 
currency; 
• to allay anxieties about the impact of the changeover on pensions, savings, bank 
accounts etc. 
67 
Section 2 
From PHASE A onwards 
During PHASE A - launch of Economie and Monetary Union 
145. During this period, the tasks and objectives above would remain substantially 
unchanged. However, participating Member States should assume full responsibility for 
informing and mobilising their own key users and for issuing general information to the 
public on the legislative and administrative changes they are making. 
During PHASE B- effective start of EMU and emergence of a critical mass of 
activities in ECU 
146. After the start of PHASE B, the communications priority would gradually shift in the 
direction of preparing the public for the replacement of national currencies by the single 
currency's notes and coins. In the six months or so before this changeover, highly 
concentrated public education and familiarisation campaigns would be needed. These 
would include dual displays of prices in national and single currencies and many other 
approaches set out in the following paragraphs. 
During PHASE C - final changeover to the single currency 
147. Public education campaigns should continue for some time after the withdrawal of 
national currencies. Special attention should be given to the needs of the elderly and the 
visually impaired. 
Certain approaches could be pursued at both national and Union levels at the appropriate 
time during the changeover. These could include : 
• every effort should be made to involve representative organisations as 
communications "multipliers" able to reach large target audiences (consumer 
groups, trade unions, industry federations, organisations of SMEs, chambers of 
commerce, professional associations, unions and special interest groups such as the 
visually impaired); 
• special information campaigns targeted on schools could be a particularly effective 
means of transmitting into the home knowledge of and interest in the single 
currency. Moreover, children are major currency users in their own right; 
68 
campaigns targeted on the socially disadvantaged who can be reached through their 
own representative organisations as well as charities and other voluntary groups; 
obviously the media, which will be a major influence on public perceptions and 
attitudes, must be continuously supplied with high quality written and audio-visual 
information; 
dual pricing displays could begin as of the start of PHASE B and continue for some 
time after national notes and coins have been removed from circulation; 
special events should be created (competitions, lotteries, sporting events) to 
stimulate interest in the single currency and to familiarise the public; 
trial runs of the single currency in certain localities when consumers would actually 
use advance copies of the notes and coins; 
everything possible must be done to make it easy to understand and use the new 
currency - this means a plentiful supply of conversion tables (with explanations of 
conversion rates, rounding rules, denominations of notes and coins) and possibly, 
even a supply of customised calculators (to pensioners, for example) able to convert 
from national to single currency and back again at the touch of a button. 
Section 3 
Organisation 
148. At Community level : it will be necessary to coordinate the communications 
activities of the institutions in a manner which is clear to currency users. One possibility 
would be to create a Task Force representing the various Community institutions. 
149. Bearing the prime responsibility for information and communications, .Member 
States have several organisational options. They have to decide whether they want a 
central coordinating body for non-legislative actions or whether to have a number of such 
bodies at regional and local levels. Having a single contact point would greatly assist 
private enterprises, representative associations and the general public and could provide a 
forum for dialogue with all currency users. 
69 
If a central coordinator is to be established, governments will have the choice between 
placing the responsibility within their administrations or delegating the tasks to a quasi-
independent "Single Currency Committee", along the lines of the UK body which 
supervised the conversion of sterling into a decimal currency. 
Once they have set themselves precise communications objectives, it is essential that 
Member States, the Commission and the EMI monitor their progress. This can be 
measured in a variety of ways, including by means of regular opinion polls. The 
monitoring task can be shared, but conclusions should be drawn at least twice a year, and 
more often after the start of Stage Three. Communications strategies should then be 
adjusted in the light of these conclusions. 
150. The importance of well-designed and effective public communications for the 
success of the switch to a single currency cannot be exaggerated. The Commission 
intends to underline the priority by organising a Round Table in the autumn of all 
public and private interests involved in the changeover to discuss objectives and 
strategies, including organisation and the sharing out of responsibilities. 
As a first step and before the autumn round table discussions, the Commission invites 
Member States to establish a contact point to which currency users can address 
questions on EMU. This contact point could also receive comments on issues raised in 
this Green Paper. 
Chapter IV 
Follow-up to the Green Paper 
151. This Green Paper is designed to raise awareness among all currency users about the 
introduction of the single currency and to encourage interested parties to reflect on the 
practical implications associated with the changeover. 
To this end the Commission wants to encourage all groups of currency users (banks and 
financial enterprises, those involved with payment systems, public administrations, 
enterprises and consumers), to reflect upon the implications of the changeover to the 
single currency. The Commission suggests that they establish working parties where 
appropriate (e.g. consumer organisations, industry federations, professional associations, 
unions, working parties in public administrations) to give their reactions to this Green 
Paper by December 1995, 
70 
In autumn 1995, the Commission intends to organised a Round Table discussion on 
communication strategies with a view to launching coordinated campaigns in early 1996. 
The Commission invites the Member States, by the end of 1995, to report on : 
• progress in reviewing the legislative measures required at the national level for the 
introduction of the single currency; 
• organisational plans for a communication campaign; 
• the establishment of working parties in public administrations to examine the 
administrative changes required for the introduction of the single currency as well as 
the changes required to existing legislation which refer to national currencies. 
Member States are also invited to report on plans for establishing a national steering 
structure for supervising the move to the single currency. 
After having received and analysed the reactions to the Green Paper of all groups of 
currency users and the Member States, the Commission will develop and implement the 
necessary technical and legislative programmes during 1996. Depending on the area, this 
will happen in constructive cooperation with the other authorities involved, in particular 
the Council, European Parliament and the EMI. 
71 
Review of the operational conclusions 
The Banking and financial sector 
The Commission invites banks, financial market and payment system operators who will 
be affected by the introduction of, the single currency to reflect upon the ideas and 
proposals in the Green Paper. The Commission would welcome their views and 
reactions by the end of the year. Professional associations will have a key role in 
presenting their conclusions. The Commission suggests that Member States establish an 
institutional framework for co-ordinating the activities of the actors concerned 
The Commission invites banks to reflect and report upon the reference scenario and its 
technical implications and how this could be translated into a changeover plan for 
banking and financial communities by the end of the year. In particular, the Commission 
would welcome reactions regarding the emergence of a critical mass of activities in ECU 
at the start of monetary union and the time required for the full introduction of the single 
currency. 
Payment systems operators and users are invited to reflect and report upon the technical 
implications of the reference scenario by December 1995. On the basis of these 
consultations, the Commission shall during the course of 1996 take the measures 
required at Community level for the smooth introduction of the single currency. 
Moreover, it is the view of the Commission that the golden opportunity for moving 
towards the overall objective of a "payment area" which corresponds to the area of the 
single market should be seized. Inter-operability of payment systems within the EU 
should be associated to the single currency. 
Public administrations 
The Commission considers that all levels of public administration must assume a 
leadership role in preparing for the introduction of the ECU. To this end the 
Commission proposes 
that other Community institutions establish working groups to examine the 
implications of the introduction of the ECU. These working groups could consider, 
inter alia, the need for legislative amendments and the introduction of the ECU for 
budgetary operations; 
72 
• that national public administrations at all levels establish working parties to 
examine and plan the legislative and administrative measures required to ensure a 
smooth introduction of the ECU. The progress and findings of such working 
parties could be reported to the Commission by December 1995 with a view to 
organising an exchange of views on technical problems encountered The Member 
States could also consider whether a national steering structure for the 
introduction of the single currency is required; 
• that public administrations and public utilities, to the maximum extent possible, 
conduct dual display of prices as a means of familiarising the general public with 
the ECU at the start of PHASE B. Examples of where dual pricing displays could be 
undertaken include bills for gas, electricity, water, fiscal statements, tolls etc. The 
dual pricing displays might be maintained for some time after the start of PHASE C, 
even beyond the final withdrawal from circulation of national notes and coins. 
Enterprises 
The Commission invites enterprises, representative and professional associations, 
including organisations representing SMEs to analyse the implications of introducing the 
ECU for their particular sector/profession. Working parties in enterprises and/or 
representative associations could be established with a view to distilling reactions to the 
Green Paper, cataloguing the changeover measures required, and listing the legislative 
and technical decisions required of governments and public administrations. It might be 
useful for a single currency officer to be appointed in each representative organisation. 
The Commission invites Member States to facilitate the setting up of such working 
parties involving enterprises. 
In addition, the Commission suggests that Member States establish an framework for co­
ordinating the activities of private enterprises and organisations. This could avoid 
duplication of work and encourage the sharing of experiences and ideas. The 
Commission also proposes that national authorities provide a single contact point for 
information and assistance on the introduction of the ECU. 
Consumers 
Throughout the Green Paper, the Commission has tried to anticipate as many as possible 
of the key problems that consumers will face. However, it relies on theix-representative 
organisation to confirm its judgement of the main impacts of the introduction of the 
ECU. It would welcome comments and any additional information that would be of help 
in developing policies to ensure a smooth changeover for consumers. The Commission 
73 
intends to consult all currency users concerned with a view to reaching a consensus on 
the need for Community legislation obliging dual pricing displays, such that appropriate 
measures could be taken in spring 1996. 
Legal framework 
Economic operators demand that complete legal certainty be established well in advance 
of the start of monetary union, PHASE B. Hence, preparations need to begin well before 
the start of PHASE A, the decision to move to monetary union. The Commission therefore 
proposes that Member States report by December 1995 on legislative changes required 
to ensure that the single currency can be used on the same basis as national currency as 
of the start of PHASE B. Based on these submissions, the Commission intends to present 
draft proposals for the legal framework required at the Community level by spring 1996. 
These proposals will cover the issues raised in the Green Paper, but particular attention 
will be given to the status of the single currency and the continuity of contracts. 
Communications 
The importance of well-designed and effective public communications for the success of 
the switch to a single currency cannot be exaggerated The Commission intends to 
underline the priority by organising a round table in the autumn of all public and private 
interests involved in the changeover to discuss objectives and strategies, including 
organisation and the sharing out of responsibilities. 
As a first step and before the autumn round table discussions, the Commission invites 
Member States to establish a contact point to which currency users can address questions 
on EMU. This contact point could also receive comments on issues raised in this Green 
Paper. 
74 

ISSN 0254-1475 
COM(95) 333 final 
DOCUMENTS 
EN 01 09 
Catalogue number : CB-CO-95-274-EN-C 
ISBN 92-77-89854-2 
Office for Official Publications of the European Communities 
L-2985 Luxembourg V