WRITTEN QUESTION E-0088/02

by Erik Meijer (GUE/NGL) to the Commission

(24 January 2002)

Subject: Use of the euro to make domestic payments in areas outside the European Monetary Union zone

1. Can the Commission confirm that, as of 1 January 2002, the euro was not only introduced as a currency to replace all the separate currencies which had previously existed in the twelve EU Member States participating in EMU, including their very remote territories outside Europe, but also became legal tender in the former Yugoslav federal states and autonomous provinces of Kosovo, Montenegro and Bosnia-Herzegovina, which are not involved in EMU?

2. Are any other currencies besides the euro still legal tender in Kosovo, Montenegro and Bosnia-Herzegovina? If so, which, and for how much longer than the transition period being applied in most EMU states, i.e. the first two months of 2002?

3. Who is organising the collection and distribution of coins and banknotes in the areas referred to in question 2, and who is paying for these operations? Is this a responsibility of the Federal Republic of Germany, which is taking back its marks, or of a body connected with the European Union?

4. Are there any states or parts of states other than the areas referred to in questions 1 and 2 where the euro is in mass circulation or is being placed in mass circulation to replace the old currency for purposes of domestic payments? How was it introduced and who is bearing the cost?

5. Does the Commission anticipate that the euro will be adopted for use in domestic transactions in yet more non-members of EMU in the near future without the state in question simultaneously joining EMU? If so, where and under what conditions?

6. What, in practice, is the difference, from the point of view of national authorities and residents, between participation in EMU and acceptance of the euro as the most generally used domestic currency? What role are these differences likely to play in decisions by potential new members to join EMU?

Answer given by Mr Solbes Mira on behalf of the Commission

(18 March 2002)

1. to 3. United Nations Interim Mission in Kosovo (UNMIK) Regulation No 4, signed on 2 September 1999, legalises the use and possession of any foreign currency in Kosovo, recognising the fact that Kosovo was and still is a largely cash-based economy, with the German mark/euro being the preferred currency. However, under this Regulation, the Yugoslav dinar retains, in principle, its status as sole legal tender. In Montenegro the German mark/euro is the sole legal tender, replacing the Yugoslav dinar. In Bosnia and Herzegovina the konvertible marka (KM) was introduced in mid-1998 under a currency board regime, pegging the KM to the German mark (and now the euro). The KM is the only legal tender in Bosnia and Herzegovina. The Banking and Payments Authority of Kosovo (BPK) has been given overall responsibility for organising the changeover to the euro in Kosovo. The Kosovo budget is covering the costs incurred. In Montenegro the Monetary Council adopted a euro introduction plan in mid-2001. The changeover was facilitated through a commercial arrangement with a German private bank that delivered euro notes and coins before the end of 2001. The costs of the changeover in Montenegro were borne by the general public.

Germany did not take any responsibility for the changeover of German marks into euros in third countries. The European Central Bank (ECB) and national central banks facilitated the changeover in third countries via the frontloading of euro coins and notes against collateral.

4. to 6. The euro has also been introduced in Monaco, Andorra, San Maríno and the Vatican State. Monaco, San Maríno and the Vatican State mint euro coins under a special agreement with the Community based on Article 109(3) of the EC Treaty and Declaration No 6 annexed to the Final Act of the Treaty on European Union. Banknotes, on the other hand, have been introduced mainly by commercial banks.

The Commission does not expect the euro to become the transaction currency in non-member countries, except occasionally in some border or tourist regions. Since such practices develop de facto and not de jure, no specific conditions have been laid down.

Only countries participating in the euro may issue euro coins and take part in the decision-making mechanisms of the Eurosystem, which is responsible for issuing banknotes and formulating monetary policy. If a non-EU country adopts the euro as its national currency, this implies that it will cease to issue national currency (and forgo the resulting income) and that it will have no influence whatsoever over monetary policy, which will be decided without reference to the economic situation in its territory.