Communication from the Commission - The impact of the changeover to the euro on community policies, institutions and legislation
Date: 1997-11-05
Institutions: European Commission
Subjects: EU law, EU policy, European Monetary System, euro, impact study

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

Brussels, 05.11.1997 
COM(97) 560  final 

COMMUNICATION FROM THE COMMISSION 

THE IMPACT OF THE CHANGEOVER TO THE EURO 
ON COMMUNITY  POLICIES, INSTITUTIONS  AND  LEGISLATION 

THE IMPACT OF THE CHANGEOVER  TO THE EURO ON  COMMUNITY 
POLICIES,  INSTITUTIONS AND  LEGISLATION 

Table of content 

Page 

A. 

INTRODUCTION, 

B. 

IMPACTS  OF THE CHANGEOVER  IN CERTAIN 
SECTORAL AREAS 

B.1 
B.2 
B.3 

Community  budget 
Agricultural  policy 
Administrative  expenditure 

C.  THE CHANGEOVER  OF COMMUNITY  LEGISLATION 

C. 1 
C.2 

The  legal framework for the euro 
The main implications of the euro for  EU 
legislation 

D.  OPERATIONAL ASPECTS  OF THE CHANGEOVER 

D.1 
D.2 
D.3 
D.4 

Treasury  and financial  management 
Statistics 
Informatics 
Other 

E.  CONCLUSIONS 

Annexes: 

1.  Execution of payments from the  1996 budget 

2. 

Impact of the changeover  on policy areas managed 
separately from the Community  budget 

4 

4 

4 
6 
8 

10 

10 
10 

15 

15 
16 
18 
18 

20 

21 

21 

23 

3.  Estimated agri-monetary  gaps for  1997 based on the 

25 

situation on  01/10/1997 

4.  Changeover  of remunerations:  related issues 

5.  The introduction  of the euro  in Community  secondary 

legislation 

26 

27 

6.  Types  of  euro  sensitive  threshold  and  ceiling  clauses  in 

29 

legislation 

7.  Guidelines  on  the  legal  changeover  of  monetary  references  30 

8.  Overview  of  the  impact  of the  changeover  on  Community 

34 

legislation 

CUSTOMS 

Customs  Code 

COMMON AGRICULTURAL  POLICY 

Agrimonetary  regime 

FREEDOM OF MOVEMENT  FOR  WORKERS 

Social security  of  migrant workers 

INTERNAL  MARKET 

Cultural objects 
Public procurement 
Banking 
Insurance 
Securities 
Company  Law 
Accounting 
Defective  products 
Intellectual  property 

INDIRECT  TAXATION 
VAT legislation 

COMMON  COMMERCIAL  POLICY 

Export Credits 

EXTERNAL  RELATIONS 

International  agreements 
CONSUMER  PROTECTION 

Consumer  credits  and certain other contracts 

BUDGETS 

Financial  Regulation 

ADMINISTRATIVE  EXPENDITURE 

Remunerations  and  pensions 

35 

38 

40 

41 
42 
44 
46 
49 
51 
53 
55 
57 

58 

61 

63 

64 

65 

66 

THE IMPACT OF THE CHANGEOVER  TO THE  EURO 
ON COMMUNITY  POLICIES, INSTITUTIONS  AND  LEGISLATION 

A. 

INTRODUCTION 

1.  The  present  communication 

to  provide  a  comprehensive 
intends 
assessment  of the impact of the changeover to the euro at Community  level 
and  the  resulting  effect  on  Member  States. 
It  reflects  the  outcome  of 
preparatory  work within the  Commission,  involving  each of  its services,  and 
of  contacts  with  representatives  of  the  other  Community  institutions  and 
organs. 

This  preparatory work has covered in particular  the following areas: 

the practical  consequences for Community  policies; 
the euro-compatibility  of Community  legislation; 
the 
(information 
technology,  administrative  changes,  information  and  training  of  staff, 
etc.). 

technical  and  operational  sphere 

in  the 

impact 

2.  Besides  the  assessment  of  the  various  consequences  of  the  transition  to 
the  single  currency,  this  communication  will  also  provide  an overview  of  all 
work  (legislative  and  other)  which  will  need  to  be  carried  out  before  and 
after  the  start  of  Stage  Three.  This  work  programme  is  presented  in  detail 
in annex 8. 

Part  of  these  preparations  will  involve  other  Community  institutions,  for 
In  addition, 
example  whenever  specific  legislation  needs  to  be  enacted. 
this  legislation  initiated  at  Community  level will  produce  a direct  or  indirect 
impact  at  Member  State  level.  In this  respect,  the  present  communication 
will  assist  both  the  Member  States  and  the  Community  institutions  in 
general  in the finalisation  of their own internal  preparations. 

B. 

IMPACTS  OF THE CHANGEOVER  IN CERTAIN  SECTORAL AREAS 

B.1. 

COMMUNITY  BUDGET 

3.  The present  legal framework  (Art.  11 of the  Financial  Regulation)  enshrines 
a  situation 
in  which  the  Budget  is  cast  in  ECUs  but  both  revenue 
(resources)  and  expenditure  are  wholly  or  partly  realised  on  the  basis  of 
national  currency values: 

On  the  revenue  side,  the  contributions  are  paid  by  Member  States  in 
national  currency.  The  traditional  own  resources  are  paid  as  collected 
(less  a  10  %  collection  charge  retained  by  Member  States),  whereas 
the  provisional  VAT  and  GNP  contributions  are  determined  and  paid 

according  to  a formula which  involves  two  ECU  exchange  rates  (1st  of 
February,  last working day of the year)1. 
On the expenditure  side, a significant  part  of the  overall  appropriations 
are  presently  committed  and  paid  in  ECUs  (e.g.  Structural  Funds, 
research,  other  operational  sectors,  etc.).  Generally  speaking,  all 
expenditure  is  executed  in  ECUs,  except  the  payments  obligations 
under 
the 
administrative  budget  (of which  staff  remunerations  and  pensions  form 
In relative  terms  however,  CAP  expenditure  represents 
a  major  part). 
more than  half  (almost  52  % of  payment  appropriation  in  1996)  of  total 
Community  budget  expenditure,  and  administrative  expenditure  a 
further  3.5  %  (see  table  in  annex  1A).  Both  areas  are  examined  in 
greater depth in sections  B.2 and B.3. 

the  Guarantee  section  of 

the  EAGGF  as  well  as 

4.  Operations  carried  out  in national  currency,  as opposed  to  ECUs,  result  in 
the  Community  budget  having  to  bear  the  exchange  risk  associated  with 
the  movement  of  national  currencies.  This  is  presently  the  case  on  the 
revenue side and, to a lesser extent, the expenditure side. 

With the  introduction  of the euro, the participating  Member  States will  have 
their  currency  in  common  with  the  Community  budget.  Exchange  rate 
effects will vanish as far  as these countries  are concerned, while  remaining 
in  place  for  the  other  ones.  Generally  speaking,  exchange  risks  will  thus 
be considerably  mitigated, both for resources  and for expenditure. 

As from  1 January  1999, the Commission  intends, as a general  rule  and as 
far  as  budget  expenditure  payable  in  participating  Member  States  is 
concerned,  to  make  use  of  the  possibility  offered  to  a  debtor  to  settle  his 
debt  in the euro unit2. 

5.  The 

resulting 

immediate  benefits 

from  monetary  union  could  be 
consolidated  and  even  reinforced  through  complementary  measures.  This 
would  for  instance  be  the  case  if,  whenever  feasible,  the  use  of  the  euro 
were  to  be  extended  in  all  Member  States  to  those  areas  of  budgetary 
expenditure  which  are  currently  still  executed 
in  national  currency 
(guarantee  section  of  the  EAGGF,  administrative  expenditure,  ...).  As  far 
as the "pre-in" countries  are concerned, the underlying  payment  obligations 
would  however  continue  to  be expressed  in national  currency  units  i.e.  the 

An  adjustment  mechanism  rectifies  all  provisional  contributions  in  year  "n+1",  so  that  the  definitive 
contributions  correspond  to  the  tax  basis  in  national  currencies,  as  effectively  realized  in  year "n". 

By  virtue  of  article  8.3  of  Council  Regulation  .../98  on  the  introduction  of  the  euro,  based  on  EC  Art. 
109.1(4),  which  will  be  adopted  in  mid-1998,  once  the  list  of  participating  Member  States  has  been 
decided.  See  also:  Resolution  of  the  Council  of  7  July  1997  on  the  legal  framework 
the 
introduction  of  the  euro  (OJ  C236  of  2.8.97,  pp.  7 -  12). 

for 

exchange  risk  would  thus  continue  to  be  borne  by  the  budget3.  Further 
information is provided in annex 8 (see fiche on the Financial  Regulation). 

6.  The  changeover  to  the  euro  will  produce  further  consequences  on  the 
operation  of  the  Community  budget,  in  particular  as  far  as  treasury 
operations  and  financial  management  is  concerned.  Because  of  their 
operational  character,  these impacts are dealt with in section D. 

Revenue  and expenditure  under the ECSC and  EDF budgets  are  governed 
by  distinct  rules  (see  description  in annex  2).  In both  cases,  contributions 
and  payments  are  expressed  in  ECUs,  and  the  changeover  is  therefore 
expected to occur  in a straightforward  manner. 

B.2. 

AGRICULTURAL  POLICY 

7.  Under  present  agrimonetary 

rules,  prices  and  other  amounts  are 
established  in ECUs, although they  are paid or collected  by Member  States 
in  national  currency.  To  this  effect,  the  agricultural  conversion  rates  are 
being  used, while the  date  of  the  operative  event4  serves  as  the  reference 
date  for  the  conversion.  The  agricultural  conversion  rates  follow  the 
evolution  of the daily  exchange  rate with certain  lags, the  latter  being  more 
important  in case the  national  currency  appreciates  vis-à-vis  the  ECU  than 
in  the  opposite  case.  Whenever  a  monetary  revaluation  gives  rise  to  an 
important  decrease  in  the  agricultural  conversion  rate,  and  hence  in  the 
level  of  prices  and  amounts  expressed  in  national  currency,  temporary 
financial  support  can  be  granted  in  order  to  compensate  farmers  for 
revenue  losses. 

8.  Each  month, the  guarantee  section  of the  EAGGF  reimburses  the  Member 
States  in their  national  currency  for  the  expenditure  made  under  the  CAP. 
For  budgetary  accounting  purposes,  these  payments  are  converted  into 
ECUs  at  the  accounting  rate5.  The  system  thus  gives  rise  to  systematic 
discrepancies  between  prices  and  other  amounts  as  fixed  in  ECUs  in  the 
CAP,  and  the  amounts  which  are  eventually  entered  into  the  budgetary 
accounts.  The table  in annex  3 shows that the gaps  between  agrimonetary 

Already  in  the  course  of  1994,  the  Commission  tabled  a  similar  proposal,  which  consisted  in 
amending  Art.  11 of the Financial  Regulation  so as  not  only to  label  the  budget  in  ECUs,  but  also  to 
execute  it  in  ECU,  except  where  sectoral  Regulation  provide  otherwise.  At that  time,  a few  Member 
States  had  raised  reservations  on  this  generalized  use  of  the  ECU,  although  on  specific  grounds 
which  are  not directly  relevant to the  present situation. 

4 

The  date  at  which  the  economic  purpose  of  the  operation  has  been  attained,  as  defined  in  CAP 
legislation. 

The  accounting  rate  corresponds  to  the  exchange  rate  of  the  ECU  on  the  10th  day  of  the  month 
following the  month  during which the expenditure  has  been reported. 

conversion  rates  and  market  rates  are  generally  below  3  to  4  %  in  most 
areas of intervention, although peaks in excess of  10 % may be reached for 
certain  countries  and  sorts  of  amounts.  As  a  rule  of  thumb,  an  overall 
difference  of  1  %  between  conversion  rates  and  market  rates  roughly 
corresponds  to  ECU 400 million  of  expenditure. 

9.  Following the introduction of the euro on 1.1.1999, the agrimonetary  regime 

will be affected  in different ways: 

in the case  of a participating  Member  State, the  Community  budget  will 
in principle reimburse earlier expenditure  made in euros  by the  Member 
State concerned, without  any need for further  adjustment  or  conversion 
(elimination of exchange risk). 
for  the  "pre-in" countries,  the  need for  a  conversion  rate  will  persist  in 
order to use the funds  in these Member  States.  However,  this does  not 
imply  that  the  existing  system  should  necessarily  be  carried  over  in  its 
present form.  Some  or  all  of the  key  elements  (agricultural  conversion 
rates,  operative  events,  accounting  rates,  etc.)  could,  for  instance,  be 
redefined. 

10.  The  transition  to the  new  agrimonetary  regime  will  require  the  settling  of a 

certain number of technical  difficulties' 

for  the  "ins",  the  difference  between  the  agrimonetary  arrangements 
(between  ECUs  and  national  currencies)  prevailing  at  the  end  of  1998 
and the  fixed  and  irrevocable  conversion  rates  (between  the  euro  and 
the  national  currencies  of  the  participating  countries)  will  have  to  be 
dismantled  in a way which remains to be defined; 
a  similar  transition  might  prove  necessary  for  the  "pre-ins"  if  the 
agricultural  conversion  rates  are  defined  in  a  different  manner  from 
1.1.1999 onwards; 
technical  adjustments  will  prove  indispensable  in  order  to  manage  the 
transition  from  the  old  regime  into  the  new  one. 
For  example, 
transactions  based  on  operative  events  dating  back  to  1998  or  before, 
will have to be executed on the basis of old rules. 

11.  In any  event,  Commission  proposals  should  be  based  on  relatively  reliable 
estimates  of  the  aggregate  gaps  to  be  eliminated  and  thus  notably  take 
account  of  the  list  of  participating  Member  States,  as  well  as  of  the 
evolution  of  markets  in  the  run-up  towards  monetary  union.  Specific 
proposals will be tabled towards the end of the first  half  of  1998,  and would 
enter  into  force  on  1.1.1999  (see  also  annex  8).  Adjustments  to  the 
agrimonetary  regime will also apply to the fisheries  sector,  more  specifically 
for  all  amounts  directly  or  indirectly  fixed  on  the  basis  of  Art.  43  of  the 
Treaty. 

B.3. 

ADMINISTRATIVE  EXPENDITURE 

12.  For  all  Community  institutions  and  organs  combined,  these  expenses 
represent  about  ECU 2.7 billion  in  absolute  terms  (1996 figures),  and 
(1996  payment 
correspond 
appropriations).  The  payment  of  remunerations  and  pensions  constitutes 
by  far  the  largest  part  of  this  category  of  expenditure,  and  is  paid  in 
national currency (see annex  1B).  This  is also the case for office  rents  and 
corresponding  maintenance  expenditure. 

to  about  3.5  %  of 

the  overall  budget 

13.  The  calculation  and  payment  of  staff  remunerations  is  based  on  the  staff 
regulations  (Arts.  63  to  65)6.  This  method  is  based  upon  the  following 
principles: 

remunerations  are  calculated  and  paid  in  the  national  currency  of  the 
country  in which the official  is established7 ; 
the  monthly  remuneration  level  in  national  currency  remains  fixed 
(subject  to  one  or  two  annual  adjustments  in  order  to  take  account  of 
the  evolution  of  prices  and  of  the  purchasing  power  of  national 
officials).  As  a  consequence,  the  budgetary  expenditure  expressed  in 
ECUs  varies  each  month.  With  the  introduction  of  the  euro,  this 
exchange  risk  will  obviously  disappear 
for  all  remunerations  or 
pensions paid to officials  established in participating  Member  States, 
purchasing power equivalence  is ensured through the adjustment  of the 
remunerations 
outside 
Brussels/Luxembourg.  To this  effect,  a correction  coefficient  is  applied 
which,  in combination  with  a fixed  exchange  rate,  takes  account  of  the 
general  price level in comparison with B/L. 

established 

officials 

the 

of 

14.  The  majority  of  Community  staff  are  concentrated  in  just  a  few  Member 
States.  Some  national  currencies  therefore  have  a more than  proportional 
weight  in  the  overall  totals.  For  example,  about  90  %  of  the  29.650 
Community  officials  working  for  the  different  institutions  and  organs  are 
established  in  Brussels  or  Luxembourg.  A  majority  of  pensioners  (55  % of 
the  8.350  pensioners)  also 
The 
significance  of  the 
impact  of  the  changeover  will  thus  be  primarily 
conditioned  by  the  participation  of  Belgium  and  Luxembourg  in  monetary 
union.  Some  other  categories  of  expenditure  are  closely  connected  to  the 
remuneration  system  (see  annex  4)  and  will  thus  be  affected  in  a  similar 
manner. 

in  Belgium  or  Luxembourg. 

lives 

Generally  speaking,  the  same  provisions  are  applicable  to  pensions,  which  are  calculated  in  a 
comparable  manner. 

Community  staff  established  in  countries  outside  the  European  Union  are,  as  a  general  rule, 
remunerated  in  BEF, with the  possibility  to  exchange  part  of their  salary  in local  currency. 

15.  In  the  present  situation,  the  salary  grid,  as  well  as  all  other  financial 
amounts  (thresholds,  ceilings,  ..)  in  the  staff  regulations  are  expressed  in 
BEF. 
In  case  Belgium  joins  the  euro  area,  the  changeover  of  these 
amounts  to  their  euro  equivalents  at  the  official  conversion  rates  would,  if 
there  were  no  further  legislation,  only  take  place  at  the  end  of  the 
transitional  period  (31.12.2001)  in  accordance  with  the  provisions  of  the 
euro  Regulation on the introduction of the euro*. 

the  symbolic  value  and  political  significance  of 

the 
Because  of 
remuneration  of  Community  staff,  it would  be appropriate  to  ensure  that  all 
staff  regulations  would  be  expressed  in  euro  terms  as  from  the  start  of 
Stage Three  (1.1.1999).  This  immediate transition  to the  euro would  result 
from  a  horizontal  changeover  clause  (see  fiche  on  remunerations  and 
pensions  in  annex  8)  which  would  reduce  the  length  of  the  transitional 
period to nil  in this  particular  area, and thus  anticipate  the transformation  in 
euros  of  all  monetary  references  presently  expressed  in  BEF.  This  clause 
would ensure the  immediate changeover,  as from  1.1.1999, of the  currency 
unit  in which the legal rights  in the field of staff  remunerations  and  pensions 
are  being fixed  and  expressed  (as  distinct  from  the  currency  unit  in  which 
It  should 
these  remunerations  and  pensions  are  actually  being  paid  out). 
moreover  be  noted  that,  although  this  operation  leaves  the  substance  (i.e. 
the final amounts received by the staff)  entirely  unchanged, all the  pay  slips 
would  be expressed  in euro  and the  remunerations  and pensions  would  be 
paid  in  euro  in the  participating  countries  and  in the  national  currencies  in 
non-participating  countries. 

16.  Finally,  an  important  and  well  prepared  information  campaign  will  be 
launched,  in order  to fully  brief  Community  staff  on the  euro  in general  and 
on the  changeover  of their  remunerations  and  pensions  in  particular.  This 
campaign should be launched well  in advance  of  1.1.1999,. and prepared  in 
consultation  with  the  unions.  Specific  information  efforts  should  be 
undertaken  towards  the  Community's  pensioners,  for  whom  information 
might  otherwise  be less readily  accessible.  The campaign will  be  prepared 
and launched  in parallel  in all Community  institutions. 

Article  14  of  Council  Regulation  .../98  on  the  introduction  of  the  euro,  based  on  EC  Art.  109.1(4), 
which  will  be  adopted  in  mid-1998,  once  the  list  of  participating  Member  States  has  been  decided. 
See  also:  Resolution  of the  Council  of 7 July  1997  on the  legal  framework  for  the  introduction  of  the 
euro  (OJ  C236  of 2.8.97,  pp.  7-12). 

C.  THE CHANGEOVER  OF COMMUNITY  LEGISLATION 

C.1. 

THE  LEGAL FRAMEWORK  FOR THE EURO 

17.  The  legal  framework  for  the  transition  to  the  euro  is  provided  by  the  two 
euro  Regulations9  (see  summary  description 
These 
Regulations  will  ensure  a smooth transition,  based  on the  principle  of  legal 
continuity.  Besides settling certain practical questions  (e.g. conversion  and 
rounding  rules)  these  Regulations  also  set  out  the  basic  monetary  law  in 
the participating  Member States. 

in  annex  5). 

As far  as the  replacement  of  monetary  references  in  legal  instruments  (i.e. 
laws, contracts, etc.)  is concerned, the following provisions  are foreseen: 

as  of  1.1.1999,  references  to  the  ECU  will  become  references  to  the 
euro on a 1 to 1 basis; 
as  from  1.1.2002,  references  to  national  currency  units  will  read  as 
references to the euro unit at the conversion rates. 

18.  Community  legislation  is  directly  affected  by  the  two  euro  regulations.  A 
guided  search  through  the  Celex data  base, which  includes  all  Community 
legal  acts  (including  international  agreements),  has  identified  the  texts 
(about  4000  in total) which  are concerned  by the  changeover,  i.e.  the  ones 
which  contain  references  of  a  monetary  nature  (amounts  expressed  in 
ECUs  or  national  currency,  references  to  interest  or  exchange  rates, 
conversion  and  rounding  clauses,  etc.).  The  Commission  services  have 
carried  out  a  detailed  screening  of  this  legislation  with  a  view  to  ensuring 
It 
that  each  of  these  texts  would  be  fully  "euro-compatible"  on  1.1.1999. 
appears 
texts  only  contain  simple 
references  to  ECU  amounts.  At  administrative  level,  contracts  and  other 
agreements  signed  with  third  parties  (suppliers  of  goods  and  services, 
experts, etc.) have also been screened. 

large  majority  of  these 

that 

the 

C.2. 

THE MAIN  IMPLICATIONS  OF THE EURO  FOR  EU  LEGISLATION 

a)  References to amounts, ceilings, thresholds, etc. expressed  in ECUs 

19.  The  first  and  most  obvious  implication  for  EU  legislation  is  caused  by  the 
fact  of  the  ECU  being  replaced  by  the  euro  on  1.1.1999.  At  a  technical 
level this  is relatively  easy to adapt to, given the fact that,  unlike  in the  case 

1.  Council  Regulation  1103/97  of  17.6.1997,  based  on  EC Art.  235,  on  certain  provisions  relating  to 
the  introduction  of the euro (OJ L162 of  19.6.1997,  pp.  1 - 3). 
2.  Council  Regulation  .../98  on the  introduction  of the  euro,  based  on  EC Art.  109.1(4), which  will  be 
adopted  in  mid-1998,  once  the  list  of  participating  Member  States  has  been  decided.  See  also: 
Resolution  of the  Council  of  7 July  1997  on the  legal  framework  for  the  introduction  of the  euro  (OJ 
C236of2.8.97,  pp.  7-12). 

10 

of  national  currencies, the  rate of  1:1  is already  known  and  indeed  already 
certain. 

institution, 

the  minimum  capital  of  a  credit 

In  the  case  of  simple  references  where  the  agreed  Community  figure  for, 
is  expressed  as 
say 
ECU 5 million,  it  is  clear  that  with  effect  from  1.1.1999,  the  figure  in  the 
directive will  legally  speaking, have changed to euro  5 million as a result  of 
the euro  regulations, without  any other  action  needing to  be taken  either  at 
EU  level  or  at  national  level,  provided  that  national  legislation  is  in 
compliance with Community  law.  Simple  references  are those  references  to 
current  values  where  the  value  of  the  ECU  figure  has  to  be  respected  in 
national  currency  equivalent  at all times  (e.g. in the  context  of  a  regulation 
or directive which is applicable  in all Member States). 

20.  The  case  becomes  more  complex  if  the  common  figure  in  ECUs  in  a 
Community  legal  instrument  is  accompanied  (as  a  great  many  are)  by  a 
clause  on  the  conversion  to  the  respective  national  currencies.  Typically 
such  clauses  provide  a  reference  date  (or  formula)  for  converting  ECU 
amounts  into  national  currency,  often allowing for  some  degree  of  rounding 
by  national  authorities  (e.g. up to  10  % of the  size  of  the  amount)  in  order 
to  arrive  at  suitable  amounts  expressed  in  national  currency. 
The 
converted  amounts  are then frozen  until  the  next  review  in  one,  two,  three 
or  occasionally  more  years  (revision  clause).  In  some  cases,  the  clause 
requires  Member  States  to  adjust  if  its  currency  has  fluctuated  beyond  a 
certain  tolerance  margin,  hence  leading  to  revisions  without  a  fixed 
periodicity  and actually  at different  times  and frequencies  for  each  Member 
State.  Still  other  provisions  use  a  conversion  rate  applicable  on  a  given 
date  without  any  possibility  of  revision.  The  table  in  annex  6  provides  a 
typology  of the most common conversion clauses  in Community  legislation. 

21.  Two  principles  need  to  be  kept  in  mind  when  interpreting  the  relevant 

legislative texts: 

level 

under  the  principle  of  legislative  continuity  the  amounts  which  have 
for  a 
fixed  under  a  directive  at  national 
already  been 
predetermined  period  of 
time  should  arguably  not  be  changed 
immediately  as  a  result  of  the  introduction  of  the  euro.  Under  this 
principle,  the  various  amounts  in  national  currency  units  could  be 
retained  for  some  time  during  the  transitional  period,  notably  because 
of  the  fact  that  national  currency  units  will  continue  to  constitute  the 
reference  in  each  Member  State  until  the  end  of  2001,  in  view  of  the 
"no compulsion, no prohibition" principle; 
under  the  principle  of  legislative  coherence  (and  of  equal  treatment 
among  the  "ins")  it  is  arguable  that  all  such  harmonised  Community 
amounts  should  be  "re-based"  with  effect  from  1.1.1999,  in  order  that 
the participating  Member  States should apply  identical  values from  then 
onwards,  hence ensuring  equal treatment  amongst them.  The  rounding 
option  would  consequently  become  void  for  the  "ins",  as  there  will  no 

H 

longer  be  a  possibility 
irrevocable  conversion  rates. 

to  convert  at  any  different  rates  than 

the 

22.  The  preferred  policy  approach  will  be  constrained  by  the  above 

legal 
principles.  The  result  will  depend  on  the  precise  wording  used  in  the 
legislation  concerned.  Because  such  monetary  conversion  clauses  exist  in 
large  numbers  and  varieties,  the  Commission  has  worked  out  certain 
guidelines  and  decision  criteria  presented  below,  which  are  destined  to 
ensure  consistency  across  policy  areas  and 
to  avoid  unnecessary 
In  certain  policy  areas,  this  approach  has  already  been 
legislation. 
discussed  with  Member  States  in order  to  verify  its  practical  implications. 

legislation  give  rise  to 
In  those  cases  where  amounts 
payment  obligations  (e.g. from  the  part  of  the  Community  budget),  a  strong 
case  exists  in  favour  of  equal  treatment,  under  the  principle  of  legislative 
coherence,  and  hence  the  earliest  possible  alignment  (i.e.  on  1.1.1999). 

in  Community 

For  amounts  which  are  being  used  as  legal  references  (e.g.  thresholds, 
ceilings,  etc.),  the  situation  will  notably  depend  on whether  the  text  contains 
is  not 
fluctuation  clause 
an  automatic 
systematically  the  case)  and whether  rounding  is  allowed: 

revision  or  currency 

(which 

In  those  cases,  specific 

in  the  absence  of  a  revision  clause  (e.g.  the  "fixed  date"  clause),  the 
principle  of  continuity  might  lead  to  a  situation  where  the  amounts  in 
national  legislation  would  never  converge  in  euro  terms  for  the  "ins", 
legal  steps  (e.g. 
even  after  1.1.2002. 
amendment  of  the  conversion  clause,  possibly  combined  with 
the 
introduction  of  an  automatic  revision  clause  for  the  pre-ins)  might  be 
appropriate  to  ensure  identical  euro  values,  at  least  from  1.1.2002 
onwards; 
in  the  case  of  revisions  with  fixed  frequency  (e.g.  pre-scheduled 
revisions  the  timing  of  which  is  fixed  in  advance  under  the  instrument), 
the  underlying  approach  should  preferably  be  based  on  continuity  in 
1.1.1999,  up  to  the  first  revision  occurring  after  this  date.  At  this  first 
revision,  the  revision  clause  is  generally  no  longer  applicable  for  the 
"ins"  to  the  extent  that  it  has  become  void  of  purpose  (it  aims  to 
compensate 
rates 
consequently  become  directly  applicable. 
revision  process 
however  remains  unaffected  as far  as the  "pre-ins"  are  concerned, 
in 
(e.g.  currency 
fluctuation  clauses),  the  purpose  of  the  clause  consists  in  keeping  the 
national  figures  as  close  as  practicable  to  the  figure  in  Community  law. 
These  clauses  therefore  become  inapplicable  for  "ins"  with  effect  from 
1.1.1999  and  participating  Member  States  should  thus  proceed  with  the 
adjustment  of  their  national  figures  to  the  national  currency  equivalent 
of  the  amount  stated  in  Community  legislation. 

the  conversion 
The 

revisions  with  variable 

fluctuations),  and 

the  case  of 

for  currency 

frequency 

12 

Member  States can  however  continue to apply  rounding  clauses  if they 
so  wish,  as  the  underlying  rationale  for  such  clauses  (i.e.  determining 
suitable  amounts  in  national currency  units)  continues  to  be  applicable 
during  the  transitional  period.  For  the  "ins",  such  clauses  however 
become  void  at  the  end  of  the  transitional  period  and  the  Member 
States which have decided to make use of them should thus take  steps 
to ensure that the euro amount contained  in Community  legislation  also 
becomes  applicable  at  the  level  of  national  legislation  on  1.1.2002  at 
the  latest.  For  consistency  reasons,  it  would  often  be  desirable  for 
participating  Member States to refrain from using the rounding faculty. 

23.  The  consistent  application  of  the  guidelines  described  above  will  ensure 
overall  coherence  of  Community  legislation.  In those  instances  where  the 
outcome  is  not  deemed  appropriate  from  a  policy  point  of  view,  specific 
measures  (e.g. tabling  of  amendments,  or even  new  legislation)  will  be  put 
forward.  A  more  extensive  description  of  the  guidelines  is  provided  in 
annex  7.  The  outcome  of  the  Commission's  detailed  examination  of 
Community  legislation,  and  any  complementary  measures  envisaged,  is 
described  in a series of technical fiches  (see annex 8) which  cover  different 
areas  of  Community  policy.  The  fiches  moreover  illustrate  the  application 
of the guidelines. 

In  most  instances,  these  fiches  take  the  form  of  "clarification  notes", 
providing  the  legal  interpretation  of  the  meaning  and  effect  of  the  various 
clauses  in  the  light  of  the  introduction  of  the  euro. 
In  other  cases,  the 
fiches  describe  why  and when  the  Commission  intends  to table  legislation. 
In a number  of cases, the  Commission  has  already  discussed  certain  legal 
interpretations  with the Member  States, e.g.  in the framework  of  Committee 
meetings.  All such texts are currently available"1. 

In  addition,  much  Community  texts  require  implementation  by  Member 
States  (e.g.  transposition  of  a  Directive  into  a  national  legal  text,  regular 
update  as  necessary  of  "current  value"  clauses  in  Directives).  Such  texts 
should be continuously  monitored for conformity  by Member  States. 

24.  Numerous  references  exist  in  EU  legislation  to  "national  currencies". 
These  references  do  however  not  become  obsolete  as far  as  the  "ins"  are 
concerned  by the mere fact that  several  Member  States  will  have the  same 
currency  as from  1 January  1999.  They  clearly  remain  in full  effect  for  the 
"pre-ins";  as for  the  "ins" they  clearly  refer  to the  euro  as the  currency  and 
will  generally  be  interpreted  as  referring  to  the  "national  currency  unit"  of 
the euro until 2002. 

m 

(XV/1057/97),  Consultative 
Insurance  Committee 
Committee  on  Public  Procurement  (CC/97/11  and  CC/97/26),  Consultative  Group  on  Accounting 
Legislation  (XV/7002/97). 

(XV/2049/97),  Banking  Advisory  Committee 

13 

b)  Cases requiring a specific  solution 

25.  In  a  small  minority  of  the  cases  which  have  been  screened,  the  result  of 
applying  continuity  would  lead  to  an  unsatisfactory  result,  either  by  not 
providing  the  answer  to  a  technical  problem  or  by  leading  to  a  legal  or 
economic  anomaly.  Such  cases  are  relatively  small  in  number  and  will 
have  to  be dealt with  on a case  by case  basis.  They  often  require  ad  hoc 
legislation and are also covered in annex 8. 

An  example  is the  difficulty  which  can arise when  reference  is  being  made 
to  specific  interest  rates  (e.g.  in the  context  of  penalty  clauses).  Some  of 
these  rates  will  no  longer  be  available  once  the  euro  is  introduced. 
In 
some  cases,  a  major  revision  will  prove  necessary  as  will  for  instance  be 
the  case  for  the  present  system  of  minimum  interest  rates  (called  CIRR 
rates),  which  applies  to  the  various  currencies  being  referred  to  in  the 
OECD  Arrangement  on  Officially  Supported  Export  Credits.  The  euro's 
entry  on  the  stage  will  require  a  rethinking  of  existing  methods  for  setting 
these  minimum  rates, as far  as participating  Member  States  are  concerned 
(see fiche on export credits  in annex 8). 

c) 

Implications for agreements with third countries 

26.  A  large  number  of  bilateral  agreements  exist  between  the  Community  and 
third  countries  covering  diverse  fields  (e.g.  insurance,  fisheries,  etc.). 
Usually  these  agreements  include  monetary  references  and  all  therefore 
affected  by the  introduction  of the  euro.  Having  until  the  end  of  1998  been 
based on financial obligations  and references  expressed  in ECUs, they  will, 
"  without  any  specific  action  by  any  party,  be  automatically  converted  into 
euro  by  the  euro  regulations.  As  a  result  of  international  monetary  law 
doctrine,  which  is  widely  accepted  as  covering  the  ECU,  there  is  formally 
speaking  no  need  to  "negotiate"  the  change  to  euro  with  the  partners 
involved.  Indeed  this  is  fortunate  given  the  long  procedural  steps  that  it 
would  take  to  formally  amend  such  agreements.  For  practical  reasons, 
some  form  of  information  towards  the  parties  concerned  in  advance  of 
1.1.1999  would  be  advisable  (see  fiche  on  international  agreements  in 
annex 8). 

14 

D.  OPERATIONAL ASPECTS  OF THE  CHANGEOVER 

D.1. 

TREASURY AND FINANCIAL  MANAGEMENT 

is  paid  out  in  ECUs,  the  Commission's 

27.  As  a  result  of  the  situation  described  in  section  B.1, whereby  virtually  all 
inflowing  revenues  are  contributed  in  national  currencies,  while  about  half 
of  the  expenditure 
treasury 
department  is presently confronted with an important  and structural  shortfall 
of ECUs.  Because of this  ECU "deficit", the treasury  needs to  buy  between 
ECU 33-35 billion  per  year  on  the  open  market,  normally  using  the 
currencies  of the  Member  States which  are  net  contributors  to  the  Budget. 
The  changeover  to  the  euro,  and  the  accompanying  inflow  of  resources 
paid  in  euros,  will  tend  to  close  the  loop  and  thus  drastically  reduce  the 
need  for  these  massive  currency  purchases.  As  from  the  start  of  Stage 
Three,  the  Commission's  foreign  exchange  transactions  will  thus  represent 
a  much  smaller  proportion  of  budgetary  receipts  and  payments  than  is 
presently  the  case.  The  significance  of  this  reduction  will  notably  depend 
on the respective  sizes of the euro and non-euro areas. 

28.  A  second  factor  will  contribute  to  this  reduction  of  foreign  exchange 
activities.  Member  States  pay  their  contributions  to  the  Budget  via  "own 
resource"  accounts,  which  are  either  kept  at  the  Treasury  of  the  Member 
State  concerned,  or  otherwise  at  their  central  bank.  The  Commission's 
treasury  department  subsequently  draws  on  these  accounts  in  order  to 
cover  the  Community's  payment  obligations.  Once  or  twice  a  month,  the 
Commission  issues  a series  of transfer  orders  between  these  accounts,  so 
as  to  ensure  that  the  outstanding  amounts  on  these  15  accounts  are 
roughly  proportional  to the  budgetary  contribution  of  each  Member  State11. 
The  foreign  exchange  operations  resulting  from  this  monthly  rebalancing 
exercise  (which  currently  represents  about  ECU 1.5  billion  per  month  on 
average)  will  be  greatly  reduced  from  1  January  1999  onwards,  as  many 
transfers  will  simply  be  carried  out  in  euros  without  the  need  to  convert 
currencies. 

29.  The  overall  reduction  of  the  number  of  currencies  which  results  from  the 
introduction  of  the  euro  will  have  further  beneficial  effects  in  terms  of 
currency  and  account  management.  The  Commission  presently  keeps  at 
least two commercial  bank  accounts  in each Member  State, one  of which  is 
used  for  operations  in  national  currency,  while  the  other  is  used  for  ECU 
operations. 
In the  participating  countries,  the  two  accounts  will  eventually 
be  merged  into a single  one  (by  1.1.2002 at the  latest).  It  is  being  actively 
considered  to  proceed  with  this  simplification  at  an  early  stage  of  the 

This  rebalancing  requirement  results  from  Art.  12.4  of  Council  Regulation  89/1552  of  29.5.89  on  the 
system  of the Communities'  own resources. 

15 

transitional  period.  Discussions  with  financial  institutions  as  regards  the 
practical  aspects  of  payment  operations  during  the  transitional  period  and 
beyond are ongoing. 

30.  In  its  role  of  borrower  under  the  EC,  ECSC  and  Euratom  Treaties,  the 
Commission  will  determine  its  position  as  regards  the  redenomination  in 
euros  of  its  outstanding  debt  issues  in  the  light  of  the  decisions  of 
participating  Member  States  on  the  question  of  redenomination.  As  it 
stands  presently,  most  of  the  debt  issued  by  the  EC,  the  ECSC  and 
Euratom  will  have  been  redeemed  prior  to  1999.  A  majority  of  the 
remaining  debt  is  denominated  in  ECU  and  does  not  require  any  specific 
action  at  the  time  of  the  changeover.  Other  remaining  debt  consists  of 
small  issues  and consequently  redenomination  is  not  seen  as  an  essential 
priority. 

the 

lending  side, 

the 
On 
redenomination  of  their  debt  in  euros.  Debtors  will  also  be  reminded  of 
their  right to switch to the  euro for  all  payments  relating to  loans  expressed 
in the currencies  of participating  Member States. 

the  debtors  might  be  willing 

to  accept 

31.  The  Commission  through  its  treasury  department 

intends  to  establish 
working  relations  with  the  ECB  as  far  as  the  conduct  of  its  financial 
operations  are  concerned,  notably  with  a  view  to  further  simplifying  and 
rationalising existing money flows whenever  possible and appropriate.  The 
Commission  is  currently  discussing  with  the  EMI  how  it  could  participate, 
on  a  voluntary  basis,  in  the  ECB's  future  system  of  notification  of  large 
foreign  exchange transactions,  which will form  part  of the  Bank's  monetary 
policy supervision  instruments. 

D.2. 

STATISTICS 

32.  A  significant  number  of  Eurostat's  statistical  time  series  are  expressed  in 
monetary  units and therefore  directly  concerned  by the changeover.  Some 
of  these  monetary  series  are  expressed  in  national  currencies  (primary 
series),  while  others  are  expressed  in  ECUs  (common  reference  series). 
The  former  are  usually  the  primary  series,  while  the  latter  are  mostly  used 
for  comparisons  and/or  aggregations  (e.g.  computation  of  Community 
GDP).  Other  series,  such  as  the  ones  on  price  indices,  are  also 
concerned,  although  in an indirect  manner. 

33.  Eurostat's  preparatory  work  on 

the  practical  consequences  of 

the 
changeover  to  the  euro  has  been  conducted  in  the  framework  of  the 
Working  Group  of  Statistics  within  the  EMI  (where  IMF  and  BIS  also 
participated).  Member  States  have  also  been  associated  through  the 
Committee  on  Monetary,  Financial  and  Balance  of  Payments  Statistics. 
In 
addition,  Eurostat  has  proposed  the creation  of a specific  LEG  (Leadership 

16 

Group;  a  new  form  of  partnership  between  Commission  and  Member 
States)  on  the  euro.  The  LEG  will  prepare  input  which  will  help  Member 
States  for  the  changeover  of  their  national  statistics  to  the  euro. 
In  the 
present  case,  INSEE  in  France will take the  lead,  while  Finland,  Germany, 
Italy,  Luxembourg,  the  Netherlands  and  Spain  are  also  represented  in  the 
group. 

34.  The  main  operational  conclusions  reached  so  far  by  Eurostat  are 

summarised  hereunder: 

in 

the 

"pre-in"  countries 

the  currencies  of 

primary  time  series  (expressed  in  national  currencies)  of  participating 
Member  States  will  be  rescaled,  by  dividing  them  by  the  conversion 
rate,  as  far  as  the  data  prior  to  1.1.1999  are  concerned  (data 
expressed 
remain 
unaffected): this ensures continuity of statistical figures  and also  leaves 
all  statistical  properties  of  the  series  intact  (e.g.  growth  rates,  etc.). 
Three other solutions  are still being discussed  (keeping  heterogeneous 
series, publishing only the data  in ECUs, developing  a specific  solution 
for each series); 
common reference time series (expressed  in  ECU at the  exchange  rate 
published  in  the  O.J.  of  the  EC)  remain  unaffected  as  far  as  the  pre-
1999  figures  are  concerned.  Subsequent  data  will  be  expressed  in 
euros. 
new statistical  aggregates  will  be produced  for  the  euro  zone,  together 
with  corresponding  statistics  for  the  pre-in  countries  which  do  not  yet 
belong to this zone. 

These  recommendations  apply  only  for  the  publication  of  the  data.  A 
common  conversion  policy  is  to  be  preferred  for  the  whole  European 
Statistical System. 

35.  The fixing of exchange  rates  and their  publication  have to be ensured for a 
variety  of  purposes,  notably  references  in  legal  texts.  Following  the 
request from market practitioners for the daily  publication  of reference  rates 
for  the  euro  by  an  official  and  authoritative  body,  the  EMI  has  stated  its 
intention to propose that the ESCB would be responsible for the  publication 
of  these  rates  (cf.  EMI  policy  message  issued  on  1 July  1997).  This  will 
also  ensure  legal  continuity  in  respect  of  the  present  daily  publication  by 
the  Commission  of  ECU  exchange  rates,  which  are  often  referred  to  in 
Community  legislation. 

The  need  for  appropriate  interest  reference  rates  for  the  euro  also  merits 
attention,  notably  because  of  their  application  in  certain  areas  (export 
credits,  ..) and by external  users.  This would moreover  ensure  continuity  in 
respect  of  the  present  ECU  Yield  Curve  model.  Different  technical  and 
methodological  questions are currently being examined. 

17 

D.3. 

INFORMATICS 

36.  The  introduction  of  the  euro  will  have  an  impact  on  existing  information 
systems  in  the  different  Community  institutions,  as  will  the  millennium 
problem  which  is  largely  concurrent.  The  necessary  adjustments  to 
computer  programmes  are  in  general  prepared  and  implemented  in  a 
decentralised  manner. 

is  concerned,  a  specific  working  group 
As  far  as  the  Commission 
"Euro/Year  2000"  has  been  created  in  order  to  support  the  efforts  of  the 
different  services  in preparing  their  systems for  both events.  The  group  is 
establishing  an  inventory  of  all  major  systems  and  programmes  which  will 
be  concerned  be  either  of  these  two  questions.  From  a  first  survey,  it 
appears  that  the  efforts  in the  informatics  field  relating  to  the  euro  will  be 
concentrated 
treasury 
operations  (budgetary  receipts  and  payments),  contract  follow-up  and 
agricultural  monetary  systems. 
In each  of  these  areas,  it  is  foreseen  that 
work will be completed in time for the transition to Stage Three. 

in  the  following  areas:  statistical  data  bases, 

Finally, the  Commission  is preparing the integration  of the euro  symbol  into 
the standard Commission  informatics  configurations. 

D.4. 

OTHER 

37.  With  the  start  of  Stage  Three  approaching,  the  Commission  is  becoming 
increasingly  involved in information and communication  activities  relating  to 
the  practical  aspects  of the  changeover  and  the  preparation  of  enterprises 
and  citizens  in  this  respect.  Technical  documents  covering  legal  or 
financial  subjects,  which  were  originally  prepared  for  internal  Commission 
use,  are  often  of  interest  for  outside  parties.  Such  papers  are  therefore 
increasingly  made  available 
institution, 
particularly  when  they  can  assist  third  parties  in  their  preparation  to  the 
changeover.  Some  of  these  internal  reports  actually  result  from  specific 
inquiries or requests for clarification addressed to the Commission. 

for  circulation  outside 

the 

A special series of euro-related  publications, entitled  EURO  PAPERS12,  has 
recently  been  launched  in  order  to  circulate  documents  of  a  technical  or 
practical  nature.  The  new series aims to assist  economic  agents  and  other 
parties  in  their  preparations  for  the  transition  to  the  euro. 
In  addition, 
EUROPA,  the  Commission's  official  Internet  server,  and  the  EURO  site  in 
particular  (http://euro.eu.int)  is  increasingly  being  used  to  publicise  these 
documents  and all other material aimed at the general  public. 

N°1 "External Aspects  of Economic  and  Monetary  Union",  N°2 "Accounting  for the  introduction  of the 
euro",  N°3 "The  impact  of the  introduction  of the  euro  on capital  markets",  N°4  "Legal  framework  for 
the  use  of  the  euro",  N°5  "Round  Table  on  Practical  Aspects  of  the  Changeover  to  the  euro",  N°6 
"Checklist  on the  introduction  of the euro for enterprises  and auditors". 

38.  As all Community  institutions  and organs  are concerned  by the  changeover 
to the  euro,  albeit  to varying  extents,  an  informal  inter-institutional  network 
of  contact  points  has  been  created with  a view  to foster  the  exchange  and 
dissemination  of  information.  The  network  will  also  ensure  coordination  of 
all actions of common interest  (e.g. staff  information campaign on the euro). 
Other  fora  for  inter-institutional  cooperation  are  the  "Collège  des  chefs 
d'administration"  (notably  dealing  with  remuneration 
the 
"Comité  Interinstitutionnel  de  l'Informatique". 

issues)  and 

19 

E.  CONCLUSIONS 

39.  The  Commission's  overall  assessment  of 

impact  and  practical 
consequences  of  the  changeover  to  the  euro  is  largely  positive,  both  in 
relation  to the  effect  on  Community  policies  and to  the  internal  functioning 
of the Commission and the Community  institutions  in general: 

the 

the  impact  on  the  Community  budget  will  be  beneficial,  both  on  the 
revenue  and  expenditure  side:  the  exchange  risk  borne  by  the 
Community  budget  will  for  instance  be  substantially  reduced,  currency 
management will be facilitated, etc.; 
certain  policy  areas  will  be  considerably  simplified;  the  agrimonetary 
regime probably  constitutes the most prominent  example; 
while  certain  specific  tasks  will  have  to  be  undertaken  in  order  to 
prepare  a smooth  changeover,  the transition  effort  appears  to  be  quite 
reasonable 
For  example,  specific 
the  benefits. 
changeover  legislation  will  be  extremely  limited,  while  the  operational 
changeover  is not  expected to cause  any disruptions  provided  ongoing 
preparations  continue as scheduled. 

in  relation 

to 

As  far  as  the  legislative  changeover  is  concerned,  the  Member  States  will 
have  a  greater  part  of the  task.  This will  have to  be tackled  in the  context 
of their  overall  review of national  legislation,  in some cases with  effect  from 
1.1.1999,  in most cases with effect from 2002 or before. 

40.  The  Community's  changeover  effort  will  largely  be  concentrated  before 
1.1.1999,  contrary  to the changeover  at  national/regional/local  level, where 
the  transition  effort  will  be  spread  over  the  entire  length  of  the  transitional 
period,  and  in  a  few  instances  be  concentrated  towards  the  end  of  it 
(1.1.2002),  when  national  currency  units  will  start  to  disappear.  As 
Community  financial  operations  are  mostly  ECU-based,  the  changeover  to 
the  euro  will  almost  exclusively  take  place  on  1.1.1999  i.e.  without 
transitional  period.  Despite  the  fact  that  most  adjustments  will  thus  be 
"front  loaded",  the  introduction  of  the  euro  will  occur  in  a  smooth  and 
orderly  fashion  as far  as  Community  policies  and  legislation  is  concerned. 
This  will  also  apply  to  the  internal  organisation  and  functioning  of  the 
different  Community  institutions. 

20 

EXECUTION OF PAYMENTS  FROM THE  1996  BUDGET 

Description 

Payments  in 

ECUs 

P a y m e n ts  in 

National  C u r r e n c i es 

ANNEX 1A 

Total 

Sub-

Sections 

Part A 
PartB 

Administrative  appropriations 
Operating  appropriations 

ECU 
million 

% 

ECU 
million 

% 

ECU 
million 

% 

639.80 

24.03 % 

2023.10 

7 5 * 9 7% 

2662.90 

100.00 % 

BO 
B1 
B2 

B3 

B4 
B5 

B6 
B7 
B8 

Guarantees,  reserves 
EAGGF  Guarantee  Section 
Structural  operations,  structural  and  cohesion  expenditure, 
financial  mechanism,  other  agricultural  and 
regional 
operations,  transport  and fisheries 
Training,  youth,  culture,  audiovisual  media,  information  and 
other  social  operations 
Energy,  Euratom  nuclear  safeguards  and  environment 
Consumer  protection,  internal  market, 
European  networks 
Research  and technological  development 
External  actions 
Common  foreign  and security  policy 

industry  and  trans-

936.40 
40.10 
24142.30 

100.00% 
0.10 % 
98.00 % 

0 
39041.80 
493.60 

0% 

99,90 % 
2,00 % 

936.40 
39081.90 
24635.90 

1O0.00 % 
100.00% 
100.00% 

654.30 

95,55 % 

30.50 

-'4,45% 

684.80 

100.00% 

163.80 
538.20 

2615.90 
3642.20 
51.40 

94.35 % 
96,68 % 

90.27 % 
97.07 % 
100.00 % 

9.80 
18.50 

281.90 
110.10 
0 

S.65 % 
3.32 % 

9.73 % 
2.93 % 
0% 

173.60 
556.70 

100.00% 
100.00% 

2897.80 
3752.30 
51.40 

100.00% 
100.00% 
100.00% 

Total  Part  B 

Total  Parts  A  +  B 

32784.60 
33424.40 

45.05 % 
44.31  % 

39986.20 
42009.30 

54.95 % 
55.69 % 

72770.80 
75433.70 

100.00 % 
100.00% 

21 

EXECUTION OF PAYMENTS  FROM  PART A OF THE 1996 BUDGET 

Description 

Payments  in 
ECUs 

Payments  in 
National  Currencies 

ANNEX 1B 

Total 

Sub-
Sections 

A1 
A2 

A3 

A4 

A5 
A6 

ECU 
million 

% 

ECU 

million  iiiiiij  ECU 

million 

% 

operating 

equipment  and  miscellaneous 

Expenditure  relating to persons working with the institution 
Buildings, 
expenditure 
Expenditure  resulting  from  special  functions  carried  out by 
the  institution 
Inter-institutional  cooperation,  inter-institutional  services and 
activities 
Data  processing 
Staff  and  administrative 
Community  delegations 
Publications  Office 

expenditure  of  European 

94.20 
165.80 

5.54 % 
47>S0 % 

1606.90 
183.20 

ililiiliiip 
; | | | | | | | | | | | l li 

1701.10 
349.00 

100.00 % 
100.00 % 

193.80 

97.05 % 

5.90 

ii:lll!til&9§I%l: 

199.70 

k  100,00% 

50.40 

64.53 % 

27.70 

mmmmmmm 

78.10 

100.00 % 

95.20 
14.60 

97.64 % 
8.59 % 

2.30 
155.30 

111I11ÉIIÉ1 
iiii§&ii$i;%i 

97.50 
169.90 

100.00% 
1OÛ.00 % 

25.80 

38.17 % 

41.80 

mmmmmmm 

67.60 

100.00% 

Total Part A 

639.80 

24.03 % 

2023.10  l l l t l S MM 

2662.90 

100.00 % 

22 

Impact of the changeover  on policy  areas 
managed separately from the Community  budget 

ANNEX 2 

A.  ECSC 

A.1. 

Revenues and expenditure 

Budgetary  revenues are twofold: 

the  levies  on  the  production  of  coal  and  steel,  which  are  paid  by  the 
enterprises  in the  two  sectors;  it  is however  expected  that  these  levies  will 
be abolished as from  1998; 
financial  revenue  resulting  from  the  investment  of  the  ECSC  reserves 
(essentially  the guarantee fund for borrowings); 

Expenditure covers the following items: 

social measures  (readaptation, social housing for coal and steel workers); 
research  programmes  in the two sectors; 
interest  subsidies for job-creating  reconversion  loans. 

As  the  ECSC  has  a  commitment  budget,  all  expenditure  items  are  solely 
accounted for  in commitment  terms.  Outstanding  commitments  are written  into 
the  passive  side  of  the  ECSC  balance  sheet  and  subsequently  paid  (or 
otherwise cancelled  in whole or  in part). 

A.2. 

Legal framework 

The  legal  framework  for  the  ECSC's  budgetary  activities13  specifies  that  the 
in  European  units  of  account 
levies  on  ECSC  products  are  expressed 
(subsequently  converted  to  ECUs  by  virtue  of  Decision  3334/80/ECSC),  while 
all  expenditure  should  also  be  expressed  in  European  units  of  account  (now 
ECUs).  As  a  result,  all  exchange  risks  are  fully  borne  by  the  contributors  to 
and  beneficiaries  from  the  ECSC  budget.  Even  when .payment  requests  are 
expressed  in  national  currency,  they  are  limited  to  the  ECU  countervalue 
originally  agreed,  irrespective  of  exchange  rate  evolutions  between 
the 
currency  concerned  and  the  ECU.  As  the  euro  Regulations  will  automatically 
convert  references  to the  ECU  into references  to the  euro, no specific  action  is 
required  in order to ensure a smooth transition to the euro. 

Articles  49  and  50  of  the  ECSC  Treaty,  complemented  with  the  decisions  2/52/ECSC  and 
3/52/ECSC  (ECSC  revenues)  and decision  3289/75/ECSC  (expenditure). 

23 

B.  The European  Development  Fund (EDF) 

B.1. 

Revenues 

The  contributions  from  Member  States  are  paid  in  ECUs,  except  for  Germany 
which  pays  in  national  currency.  All  references  to  amounts  in  the  Lomé 
Convention  are also expressed  in ECUs.  The changeover  to the  euro will  thus 
be automatic and without apparent  difficulties. 

B.2. 

Payments 

All  bank  accounts,  as  well  as  most  treasury  operations,  are  ECU-based.  A 
certain  volume  of  operations  is  carried  out  in  Community  currencies,  and 
occasionally  also other ones (USD, YEN, ...). 

Local projects  are often paid  in the currency  of the recipient ACP  country.  As a 
result  of  conventions  with  local  banks,  the  accounts  which  the  EDF  keeps  in 
these  countries  are however  always expressed  in European currencies  and the 
switching of these accounts to the euro should occurs without  difficulty. 

24 

ESTIMATED AGRIMONETARY GAPS FOR 1997  BASED  ON THE  SITUATION OF 01/10/1997 

ANNEX 3 

mm  mmm  mm  mmm  msm  mm  mmm  mm 

i R tl 

LIT 

OS 

PTA 

SKR 

UKL 

A.  Agrimonetary  gaps  between  RMR and ACR  (% of  ACR) 

1)  for market  prices  and amounts 

0.82 

0.79 

0.77 

0.37 

0.10 

1.19 

2.54 

0.78 

0.09 

2.67 

0.75 

0.67 

5.25 

1.09 

2)  for per ha aid for arable  crops 

0.58 

3.25 

-0.90 

0.37 

0.10 

1.19 

2.54 

-0.85 

8.56 

11.23 

-0.91 

0.67 

8.91 

15.03 

3)  for aid per head of livestock  and structural aid 

0.58 

3.25 

-0.90 

0.37 

0.10 

1.19 

2.54 

-0.85 

8.56 

5.37 

-0.91 

0.67 

15.02 

14.38 

B.  Annual  cost for  a 1 % gap14  (ECU million  / %) 

1) for market  prices  and amounts 

11.33 

6.83 

22.84 

19.21 

3.00 

32.59 

1.16 

14.98 

10.05 

27.83 

1.74 

19.07 

1.26 

11.41 

2) for per ha aid for arable  crops 

1.56 

6.11 

30.88 

5.44 

1.86 

46.47 

2.12 

1.39 

1.09 

18.28 

3.35 

16.65 

4.31 

16.20 

3) for aid per head  of livestock  and structural aid 

1.34 

0.64 

6.61 

1.07 

2.20 

11.53 

2.05 

0.38 

7.25 

5.06 

3.61 

6.45 

1.61 

7.11 

C.  Total  annual  cost15  (ECU million) 

for  agrimonetary  gaps 

10.90 

27.32 

-16.1 

9.57 

0.68  108.06 

13.50 

10.20 

72.27  306.67 

-5.05 

28.34 

69.21  358.15 

Total  EU-15  (ECU  million) 

993.72 

14  Estimated according to the 1997 budget.  ( ACR:  agricultural  conversion  rate ; RMR:  representative  market  rate) 
15  Part C is calculated by multiplying the corresponding  amounts  in parts A and B of the table, and by adding  up the three  products  obtained. 

25 

ANNEX 4 

Changeover  of remunerations: 
related issues 

1.  Remunerations  outside the  Union 

These  remunerations  are  paid  in  BEF  at  the  weighting  factor  applying  to 
Belgium.  On  request,  part  of  the  remuneration  can  be  paid  out  in  local 
currency  at the remuneration  rate and local weighting  factor. 

2.  Mission  expenses 

Within  the  EU:  all  lump  sum  amounts  and  ceilings  are  expressed  in  BEF 
and are paid out at the monthly exchange rate. 

Outside  the  EU: all  amounts  are expressed  in  ECUs  and will  automatically 
be converted to euros from  1.1.1999 onwards. 

3.  Free lance  interpreters 

The  current  agreement  applies  until  31.12.98  and  will  be  renegotiated  in 
the  course  of  1998. 
Increases  are  currently  weighted  according  to  the 
relative weight  of the different  currencies  in the  ECU basket.  Payments  are 
made in ECUs and will thus convert to euros. 

4.  Health  insurance  scheme 

All  ceilings  are  expressed  in  BEF.  Payments  are  made  at  the  accounting 
rate. 

26 

ANNEX 5 

The introduction of the euro in Community  secondary  legislation 

Under  the  Madrid  scenario16 for  the  changeover  to  the  single  currency  it  was 
decided that a Council  Regulation  entering  into force  on  1 January  1999 would 
provide the legal framework for the use of the euro.  It is against the  background 
of  the  Madrid  scenario  and the two  euro  regulations17 which  will  implement  the 
scenario, that the implications for existing EU legislation have to be assessed. 

The euro regulations  have three main consequences for  EU legislation: 

(1)  The principle of continuity  of  legislation 

Regulation  1103/97 on certain provisions  relating to the  introduction  of the euro 
provides  that  "legal instruments"  are to continue  unchanged  by the  introduction 
of  the  euro,  except  of  course  for  the  substitution  of  the  euro  in  place  of  the 
existing  currency  unit  (national  currency  or  more  frequently  in  EU  legislation, 
the  ECU). This will  be the case  unless the  legislator  decides  to  introduce  some 
change.  There  are  obviously  limits  to  the  legislators'  discretion  here;  e.g.  a 
change  which  was  in  conflict  with  the  very  principle  of  continuity  would  not  be 
acceptable. 

(2)  "No compulsion and no prohibition" 

This  approach was established  by the Heads of State  in the  Madrid  scenario  in 
order  to  offer  the  maximum  possible  freedom  to  economic  agents  to  manage 
the  pace of their transition, while  at the same time guaranteeing that  those who 
wished to  make a  late transition  at the very  end of  Phase  C,  should  be  able  to 
continue  using  their  familiar  national  currency  unit  until  the  end  of that  time.  In 
the  context  of the  euro  regulation  the  principle  of freedom  to  use  the  euro  unit 
in contractual  relations  implies the consent of a counterparty. 

In  the  legislative  setting  the  euro  regulations  make  it  clear  that  both  the 
national  currency  unit  and  the  euro  unit  can  be  used  during  the  transitional 
period  to  set  up  new  legal  instruments.  The  use  of  the  euro  unit  can  however 
not  be  imposed  during  this  period  other  than  in the  clearly  defined  and  limited 
circumstances  described  in  the  euro  regulations;  public  administrations  can 
however  decide to add the euro unit (or allow for the use of the euro  unit)  as an 
alternative  option for citizens, companies etc. 

Approved  by  the  Heads  of  State  and  Government  at  the  summit  in  Madrid  of  December  1995. 

17 

Council  Regulation  1103/97  of  17.6.1997  (OJ  L162  of  19.6.1997,  pp.  1  -  3)  and  draft  Council 
Regulation  ..798  (see  Council  Resolution  of  7.7.1997  on  the  legal  framework  for  the  introduction  of 
the  euro;  OJ  C236  of  2.8.1997,  pp.  7 -  12). 

, 

27 

(3)  Derogations  to  "no  compulsion"  and  the  standstill  for  legislative  measures 

imposing use of the euro unit 

The  draft  euro  regulation  under  Article  1091(4) Treaty  establishes  that  Member 
States  may  not  legislate  to  impose  the  use  of  the  euro,  except  by  a  co 
from  certain 
ordinated  procedure 
exceptions  explicitly  provided  for  in  the  second  regulation  (e.g.  payments  by 
crediting  an  account,  redenomination  of  outstanding  debt,  changeover  of 
organised markets and payment systems). 

involving  a  common 

timetable,  apart 

28 

A N N EX  6:  TYPES OF EURO SENSITIVE. THRESHOLD AMP C£IUN<5 CLAUSES IN LgOISiATtOf* 

Timescale: 
ECU & national currency  equivalents 

PRE 

-EMU 

Date: 01.01.99 
ECU = euro 
National  currency  into euro 

Timescale: 
PERIOD 
CHANGEOVER 
National  Currency  Unit  ("NCU")  expression 
of euro, at conversion  rate 

Date 1.1.02 
End of National Currency  Units  (NCUs) 

Continuity  clearly  applies. These clauses are straightforward  and continue to  apply equally to both "ins" and "outs" 

and  Cultural 

Continuity  clearly  applies.  This  type  of  clause  will  perpetuate  differences  (very  large  in  cases  such  as  this  1976  insurance 
directive)  between the values  in national  implementing  legislation. 

1. Current value  clauses 
(e.g. Banking) 
2. Fixed date  clauses18 
(e.g. 
Objects) 

Insurance  76/580 

3A.  Automatic  revision  clauses  with  a 
timetable  and  complete  mechanism  for 
converting  into national  currency 
(e.g.  Public  Procurement  and  most 
Insurance  directives) 

revision 
E.g.  Procurement: 
every  2  years  based  on 
fluctuations  in  past  2  years. 
E.g.  Insurance:  annual  revision 
on 01.01 as at  specific date 

At  the  first  revision  to  take  effect  on  or  after  01.01.1999  it  is  considered  that  conversion 
clauses  should  not  apply  to  'ins'.  The  argument  for  continuing  to  apply  the  clause  for  "ins"  is 
overridden  by the  main object  of the directive  i.e. to  set  a harmonised threshold. For "outs" the 
clause  continues to  apply. 

3B. Currency  fluctuation  clauses 
(e.g.; Securities, 2nd. Company  Law) 

4.  "Rounding"  clauses 
reach  a 
convenient  national  currency  amount, 
(e.g. Accounts). 

to 

These  clauses  require  Member 
States  to  take  action  to  adjust 
their  threshold/ceiling 
if  their 
currency  has fluctuated  beyond 
a tolerance  margin 
These  clauses  are  intended  to  assist  the  national  legislator  to  translate  a 
round ECU amount  into  a convenient  national  currency  amount.  As such they 
can be applied from  01.01.1999  until  31.12.01. 

The  rationale  of  fluctuation  clauses  ceases  for  "ins"  w.e.f.  01.01.1999.  The  underlying  legal 
basis  for  the  amounts  in  national  currency  in  the  "ins"  national  laws  (if  different  from  the 
ECU/euro  amount  in a directive)  also  ceases. "Ins" should  use the  conversion  rate  of the  euro 
regulation w.e.f.  01.01.1999. 

Clauses cease to  apply w.e.f.  01.01.2002 

(application  of  clause  could  only  frustrate  object 
of directive). 

Some of these also have a clause providing that the Council may revise the thresholds on a Commission proposal 

29 

Guidelines on the legal changeover of monetary  references 

ANNEX 7 

A. 

INTRODUCTION 

In view of the multiplicity  of monetary  references  (e.g. in the form  of thresholds, 
floors  and  ceilings,  payment  and  reporting  obligations,  etc.)  in  Community 
legislation,  either  expressed  in  ECUs  and/or 
in  national  currencies,  the 
Commission  has  developed  some  guidelines  on  the  interpretation  of  these 
references  in  order  to  ensure  a  consistent  application  across  policy  areas  (cf. 
section C.2 of the  communication). 

It appears  that  in many  instances  the  interpretation  of  monetary  references  will 
be  affected  by  the  introduction  of  the  euro,  although  in  general  no  specific 
legislation  will  have  to  proposed  as  the  meaning  of  the  clause  can  be 
Individual 
interpreted 
interpretations  of  such  clauses  are  provided  in  annex  8,  while  the  present 
annex provides  a more general presentation of the guidelines. 

legally  consistent  manner. 

robust  and 

in  a 

B.  MONETARY  REFERENCES 

Monetary  references  in Community  legislation  are, as a general  rule, defined  in 
ECU  terms  and  will  therefore  automatically  change  to  euro  as  from  1.1.1999 
without  apparent  problems.  Legal  difficulties  can  however  arise  in  a  second 
stage  because  of  the  need  to  convert  some  of  these  amounts  into  national 
currencies. 

B.1. 

Simple  references 

Simple  references  to  amounts  in  ECUs  are  those  where  there  is  no  clause  in 
the  legislation  to  determine  the  conversion  of  the  ECU  amounts  into  national 
currencies.  These simple references can be of two types: 

In  its  most  simple form,  reference  amounts  in  ECUs  apply  directly  (e.g. an 
amount  both  established  and  paid out  in  ECUs  by the  Community  budget). 
It is clear that  in such cases the introduction  of the euro will  not require any 
specific  steps at Community level; 

instances,  conversion 

into  national  currencies,  even 

In  other 
if  not 
expressly  specified  in  the  EU  legislation,  is  implicit  in  the  nature  of  the 
legislation,  for  example  whenever  a  Community  legal  act  defines  a  ceiling 
or threshold which needs to be satisfied at all times, without  mentioning any 
conversion  arrangements 
(e.g.  all  operations  exceeding  a  certain 
threshold  labelled  in  ECUs  need  to  be  reported).  As  noted  above,  no 
specific  steps  are  necessary  at  Community  level  as  it  is  up  to  Member 
States  and parties concerned to ensure  at all times that the  provision of the 
Community  legislation  is being applied, and that  the  amounts  expressed  in 

30 

national  currency  correspond  to  the  ECU  values.  This  will  continue  from 
1.1.1999  with  the  simple  replacement  of  the  ECU  amount  by  a  euro 
amount.  National  authorities  are  however  advised  to  check  national 
implementing  rules to  ensure  that  they  are  indeed  up to  date  on  1.1.1999. 
It  should  also  be  noted  here  that  the  practical  difficulties  resulting  from 
exchange  rate fluctuations will disappear for the "ins", as the euro  becomes 
their  national  currency  from  1.1.1999  onwards.  For  the  "pre-ins",  the 
situation remains as before. 

B.2. 

References 
conversion  in national  currencies 

to  ECU  amounts,  with  associated  provisions  on 

Unlike  simple  ECU  references  discussed  in  the  previous  section,  many 
references to  ECU amounts  in Community  law are accompanied  by  Community 
provisions  on  conversion  of  the  ECU  amounts  into  national  currencies.  Many 
references  in  legislation  covering  the  internal  market,  the  customs  code, 
indirect taxation, etc. are of this  kind.  Typically,  these  provisions  have  one or a 
combination of the following elements: 

Provisions  relating  to  the  exchange  rate  (and  in  some  cases  its  method  of 
calculation) 
to  national 
currencies; 

to  be  used  for 

the  conversion 

from  ECUs 

Provisions  establishing  a  periodical  revision  of  the  exchange  rates  to  be 
used (and hence of the amounts  expressed  in national  currencies),  in order 
to adjust for exchange  rate fluctuations.  These revisions  either  occur with a 
pre-established  frequency  (e.g.  every  two  years)  or  as  soon  as  a  certain 
fluctuation  margin has been exceeded; 

Limited  rounding  options  (e.g.  maximum  10  %  up  or  down),  designed  to 
allow for the establishment  of convenient  amounts  in national  currencies. 

In the case of participating  Member  States,  it would seem logical to  ensure  that 
discrepancies  between  monetary  references  in  Community  law  and  in  national 
law,  and  which  simply  result  from  past  exchange  rate  fluctuations  or  from 
rounding, are eliminated within a reasonable period. 

At least two general policy approaches could be followed to this  effect: 

One  could  for  instance  seek  an early  alignment  of  monetary  references  in 
Community  and  national  law  i.e.  with  effect  from  1.1.1999.  This  would 
require  specific  legislation  at  EU  level  to  amend  the  relevant  provisions. 
This  approach would be likely to pose fewer  problems  in cases where  there 
are  no  provisions  on  periodical  revision.  However,  even  in  this  case  the 
equivalent  of  the  (by  then)  euro  amounts  in  the  national  currency  units  of 
"ins" would  not be known until  1.1.1999 as the conversion  rates will  only  be 
determined on this date. 

A  second  option would  be  to  leave  the  outcome  entirely  to  the  principle  of 
continuity  as confirmed  in the euro Regulations.  While  this would work well 

31 

for  cases  where  there  are  provisions  on  periodical  revision  due  to  take 
place  within  the  transitional  period,  absence  of  a  revision  clause  in  the 
legislation  would  risk  that  no  alignment  of  amounts  in  "in"  Member  States 
would ever take place. 

It  is  clear  that  neither  of  these  policy  options  produces  an  entirely  satisfactory 
result for  all cases.  A pragmatic  approach  is therefore  necessary,  based  upon 
the  particular  nature  of  the  provisions. 
In  this  respect,  a  policy  distinction 
should be introduced between: 

amounts  giving  rise  to  payment  obligations  (e.g.  payments  made  by  the 
In  such  cases,  strong 
Community  budget  under  the  agrimonetary  rules). 
reasons exist to bring them in line as soon as possible  i.e.  on  1.1.1999; 

amounts  being  used  as  legal  references  (e.g.  thresholds,  etc.),  where  the 
need for early alignment  is usually  less compelling, particularly  if one keeps 
in mind that  the  amount  expressed  in  national  currency  will  continue  to  be 
the  reference  in  each  Member  State  during  the  transitional  period,  in 
compliance with the "no compulsion, no prohibition" principle. 

In relation to legal references, the following guidelines  could be followed: 

for  legislation without  a revision  clause  (or with  the  next  revision  date  after 
the end of the transitional  period), a legislative proposal  is required  in order 
to  ensure  a  revision  at  the  latest  by  the  end  of  the  transitional  period 
(1.1.2002).  After  the  transitional  period,  uniform  euro  amounts  would  thus 
apply.  In practice, only a few cases of this nature exist. 

thereby 

for legislation  including a revision clause, the introduction of the euro would 
be  catered  for  at  the  scheduled  revision  date  (unless  this  revision  occurs 
after  the  end  of  the  transitional  period).  At  the  date  of  the  revision,  the 
conversion  rates  would  become  directly  applicable  for  the  participating 
the 
countries, 
legislation,  as  this  method  would  be  void  by  then. 
If  this  legislation 
includes  a  rounding  option  clause,  participating  Member  States  would  be 
allowed  to  continue  to  make  use  of  this  clause.  At  the  end  of  the 
transitional  period,  this  rounding  clause  would  become  void  for  them  as 
well  and,  to  the  extent  they  would  have  made  use  of  it,  specific  steps 
should thus be taken to revert to the euro value contained  in the directive. 

the  specific  method  described 

replacing 

in 

These  guidelines  ensure  that  all  legal  references  are  eventually  equalised  in 
the  participating  Member  States,  at  the  latest  when  the  transitional  period 
comes  to  an  end.  The  amount  of  extra  legislation  remains  limited  (because 
most  of  the  legislation  has  within  it  the  necessary  flexibility  to  deal  with  the 
changes), which  minimises  any  possible  risks  of  contention  in  sensitive  areas. 
Non-participating  Member  States  in  particular  have  an  interest  in  keeping 
"extra"  legislation to a minimum as they will not derive any  benefit from it. 

More  generally,  a  sufficient  degree  of  flexibility  should  be  allowed  in  the 
implementation  of  the  proposed  approach,  notably  in  order  to  take  account  of 

32 

sectoral  specificities,  possible  difficulties  of  implementation,  overall  legislative 
coherence  in the policy area concerned, etc. 

C. 

INTERPRETATIVE  NOTES 

Following  a  detailed  screening  of  Community  legislation,  it  appears  that  the 
number  of  cases  where  specific  legislation  is  necessary  are  rather  limited  in 
number.  However,  it  is appropriate  to  provide  the  Commission's  interpretation 
of  certain  legal  provisions  (including  details  of  this  approach),  notably  in  order 
to  foster  consistent  applications  and  interpretations  by  all  parties  concerned 
and  thereby  to  increase  legal  certainty.  Annex  8  therefore 
includes  a 
description, in the form of an interpretative  or clarification  note, of all  legal texts 
which  do  not  require  a  legislative  amendment,  but  need  to  be  interpreted  and 
applied  consistently  beyond  1 January  1999.  These  interpretations  are  based 
upon the guidelines  described under  B above. 

Similarly,  the  numerous  references  in EU legislation  to "national  currencies"  do 
not  become  obsolete  by  the  mere  fact  that  several  Member  States  will  have 
their  national  currency  in  common.  They  clearly  remain  in  full  effect  for  the 
"pre-ins";  as for  the  "ins" they  clearly  refer  to the  euro  as the  currency  and  will 
be interpreted as referring to the "national currency  unit" of the euro until 2002. 

33 

OVERVIEW  OF THE IMPACT OF THE  CHANGEOVER 
ON COMMUNITY  LEGISLATION 

ANNEX 8 

CUSTOMS 

Customs Code 

COMMON AGRICULTURAL  POLICY 

Agrimonetary  regime 

FREEDOM  OF MOVEMENT  FOR WORKERS 

Social security  of migrant workers 

INTERNAL  MARKET 

Cultural  objects 
Public  procurement 
Banking 
Insurance 
Securities 
Company  Law 
Accounting 
Defective  products 
Intellectual  property 

INDIRECT  TAXATION 

VAT  legislation 

COMMON  COMMERCIAL  POLICY 

Export  Credits 

EXTERNAL  RELATIONS 

International  agreements 

CONSUMER  PROTECTION 

Consumer  credit  and certain other  contracts 

BUDGETS 

Financial  Regulation 

ADMINISTRATIVE  EXPENDITURE 

Remunerations  and pensions 

34 

POLICY AREA: 

CHANGEOVER  TO THE EURO 
Community legislation 
CUSTOMS 

MEASURES  CONCERNED: 

Customs Code 

A.  DESCRIPTION 

1.  Council  Regulation (EEC)  No 2913/92,  as  amended  by  Regulation  (EC) 
Implementing 
No 82/97,  establishes 
provisions  are  contained  in  Commission  Regulation (EEC)  No 2454/93,  as 
last amended by Regulation (EC)  No 1427/97. 

the  Community  Customs-  Code. 

Council  Regulation (EEC)  No 918/83,  as  last  amended  by  Regulation  (EC) 
No 355/94, sets up the Community system of reliefs from customs duty. 

Council  Regulation 
(EC)  No 2469/96, lays down rules concerning the export of cultural goods. 

(EEC)  No 3911/92,  as  last  amended  by  Regulation 

B.  COMMENTS 

2.  Article  18(1)  and  (2)  of  the  Community  Customs  Code  stipulates  that  "the 
value of the  ECU in national  currencies  ... shall  be fixed once a month. The 
rates to  be  used for this  conversion  shall  be those  published  in the  Official 
Journal  of  the  European  Communities  on  the  penultimate  working  day  of 
the  month"  or  "...  in  cases  other  than  those  referred  to  in  paragraph  1  ... 
once  a  year.  The  rates  to  be  used  for  this  conversion  shall  be  those 
published  in the  Official  Journal  of  the  European  Communities  on  the  first 
working  day  of  October  ...".  These  provisions  will  no  longer  be  relevant 
from  1.1.1999  for  Member  States  participating  in  EMU  and  will  therefore 
cease to  be applicable  to them.  This  is because  their  purpose  is to  obtain 
the  value  of  the  ECU  in  national  currencies  in  respect  of  the  various 
amounts  expressed  in ECUs  in the Regulation.  Given that this value will  be 
precisely  known  from  1.1.1999,  there  will  no  longer  be  any  need  to  apply 
the  provisions  to the  participating  Member  States19.  Nevertheless,  they  will 
remain  fully  applicable  to  the  currencies  of  non-participating  Member 
States. 

The  provisions  on  the  rounding  of  amounts  laid  down  by  paragraph 3, 
under  which  customs  authorities  may  round  up  or  down  the  sum  resulting 
from the conversion  into their  national  currency  of  an  amount  expressed  in 

i')  Provisions  which  are  similar  to  the  ones  in  Article  18  are  applicable  for  the  conversion  in  national 
currencies  of  price  undertakings  (expressed  in  ECUs)  signed  between  the  Commission  and  certain 
exporters  in  the  framework  of  anti-dumping  procedures.  The  same  reasoning  thus  applies  for  the 
conversion  of these  price undertakings  as from  1.1.1999. 

35 

ECUs  provided  the  rounded  sum  does  not  differ  from  the  original  amount 
by  more  than  5%,  will  remain  in force  since  their  underlying  purpose  (i.e. 
the  need  to  obtain  round  figures  in  national  currency)  will  still  be  relevant 
during  the  transitional  period.  At  the  end  of  that  period,  the  participating 
Member  States will directly apply the amounts  in euros. 

3.  During  the  transitional  period,  businesses  will  be  able  to  use  either  the 
euro or their national currency  in filling out their  customs  declarations  using 
the  single  administrative  document  (SAD).  The  SAD  contains'  boxes 
designed  for  amounts  which,  at  the  present  time,  are  systematically 
expressed  in local currency.  The document  does  not therefore  contain  any 
reference to the currency  used. A legislative  measures will  be introduced to 
enable the euro to be used for this purpose. 

4.  Article  132 of Council  Regulation (EEC)  No 918/83  also  lays  down  rules  on 
conversion  and  rounding.  For  the  reasons  give  above,  the  conversion 
rules will  no  longer  be  relevant  with  regard to  participating  Member States, 
while the  rounding  rules will  continue to apply  in their  respect  until  the  end 
of  the  transitional  period.  Once  the  transitional  period  has  ended,  the 
various  euro  amounts  contained  in the  Regulation  will  be the  only  amounts 
referred to by participating  Member States. 

the  basis  of  economic  and  monetary 

5.  The  Annex  to  Council  Regulation  (EEC)  No 3911/92  contains  monetary 
references  combined with  a rule that  conversion  is  based  on the  exchange 
rate  applicable  on  a  specific  date  (1 January  1993),  with  no  provision  for 
rounding  off  amounts.  However,  this  Regulation  lays  down  that,  every 
three  years,  the  Council,  acting  on  a  proposal  from  the  Commission,  will 
examine  and,  where  appropriate,  update  the  amounts  indicated  in  the 
Annex,  on 
the 
Community.  If no measures are taken to update these amounts  and  amend 
the  date  of  conversion,  participating  Member  States  will,  after  1.1.2002, 
apply  amounts  which  might  be  significantly  different  to  those  previously 
applied  in national  currency.  For evident  reasons  of  legislative  coherence, 
this situation should be remedied by amending  Regulation  3911/92  ("Export 
of  cultural  goods")  in  the  same  manner  as  Directive  93/7  on  the  return  of 
cultural  objects  unlawfully  removed  from  the  territory  of  a  Member  State, 
the  provisions  of  which  will  be  re-examined  in  a  report  to  be  produced  in 
1999  (the  envisaged  approach  is explained  in the  fiche  "Return  of  cultural 
objects"). 

indicators 

in 

C.  ACTION AND  TIMETABLE 

6.  No  action  is  required  at  Community  level  concerning  the  conversion  and 
rounding  rules  laid  down  by  Article  18  of  the  Customs  Code  and  by 
Regulation  (EEC)  No 918/83. 

7.  As 

far  as 

introducing 

is  concerned, 
Regulation  (EEC)  No 2454/93 
implementing 
Regulation  (EEC)  No 2913/92)  will  have  to  be  amended  in  order  to  give 

(laying  down  provisions 

the  SAD 

the  euro 

into 

36 

Member  States  the  legal framework  they  require  to  make  this  change.  -An 
initial  draft  has  already  been  discussed  by  the  Customs  Code  Committee. 
It is expected to be adopted by the Committee by the end of 1997. 

37 

POLICY AREA: 

CHANGEOVER  TO THE EURO 
Community legislation 
COMMON AGRICULTURAL  POLICY 

MEASURES  CONCERNED:  Agrimonetary  regime 

A.  DESCRIPTION 

1. 

Introduction  of  the  euro  on  1 January  1999  will  have  various  specific 
repercussions  for  agriculture.  For  example,  in  the  case  of  participating 
Member  States,  the  Community  budget  will  refund  expenses  previously 
incurred  in  euros,  and  no  additional  adjustment  or  conversion  will  be 
necessary.  For the other Member States, an exchange  rate will  in  principle 
still  be  required,  although that  does  not  necessarily  mean that  the  existing 
system will have to be kept as it is. 

B.  COMMENTS 

2.  With  regard  to  payments  to  recipients,  CAP  legislation  is  based  on  Article 
43  of  the  Treaty  and  is  in  general  subject  to  the  agrimonetary  regime 
In  the  light  of  the  two 
established  by  Regulation (EEC) No 3813/92. 
Council  Regulations which form the legal framework far the use of the euro, 
the main difficulties which might arise'in this area relate to: 

the  conversion  rate  to  be  applied  in  respect  of  non-participating 
Member  States (future agrimonetary  regime); 
measures 
for  dismantling  monetary  gaps 
participating  Member States; 

the  currencies  of 

for 

All  of  these  problems  could  be  legally  resolved  by  means  of  a  single 
proposal for a Council regulation based on Article 43 of the Treaty. 

3.  As for the matter  of meeting the Member States'  expenses,  each month the 
EAGGF  Guarantee  Section  refunds  CAP  expenditure  in  national  currency. 
For  participating  Member States,  this  will  be  done  in  euros  from  1.1.1999. 
For non-participating  Member States, the Commission takes the view that  it 
would  be  appropriate  to  envisage  a  generalized  use  of  the  euro  in  this 
area,  while  the  underlying  financial  commitments  would  continue  to  be 
expressed  in  national  currency  (the  Community  budget  would  therefore 
continue to bear the exchange risk). 

C.  ACTION AND TIMING 

4.  A  Commission  proposal  on the future  agrimonetary  regime  and  transitional 
measures  should  not  be  presented  until  after 
is  known  which 
Member  States  will  participate  in  EMU  and  reliable  indications  have  been 
obtained  on  the  likely  monetary  gaps  to  be  dismantled  on  1.1.1999. 
In 
principle,  it  should  be  possible  to  transmit  a  proposal  of  this  nature  to  the 

it 

38 

Council  at the  end of the first  half of  1998 with  a view to  its  entry  into-force 
It should  deal with  all  the  difficulties  linked  to  the  legislation 
on  1.1.1999. 
based on Article 43 of the Treaty. 

General  use  of  the  euro  for  the  purpose  of  meeting  the  expenditure  of 
non-participating  Member  States  would 
of 
Regulation  (EEC)  No 729/70.  Any proposal to this end will  be presented  at 
the same time as the revision of the agrimonetary  regime. 

amendment 

require 

39 

CHANGEOVER  TO THE EURO 
Community legislation 

POLICY AREA 

FREEDOM OF MOVEMENT OF WORKERS 

MEASURES  CONCERNED: 

Social security of migrant workers 

A.  DESCRIPTION 

1.  Council  Regulation (EEC)  No 574/72 of 21 March  1972 fixing the  procedure 
for  implementing  Regulation (EEC)  No 1408/71  on the  application  of  social 
security  schemes  to  employed  persons,  to  self-employed  persons  and  to 
members of  their families  moving within the Community. 

B.  COMMENTS 

lays  down 

2.  Article  107  of  Regulation  (EEC)  No 574/72 

the  practical 
arrangements  for  converting  amounts  from  one  national  currency 
to 
another.  The  conversion  rate  is based on  a monthly  average  of  exchange 
rates for the currencies  in question  during a reference  period  of one month. 
The  system  involves  fixing  four  times  a  year  an  average  monthly  rate 
applicable for three consecutive  months.  Thus, the average January  rate  is 
applied  for  all  of  the  second  quarter,  the  April  rate  for  all  of  the  third 
quarter,  and so on. 

3.  The  method  of  adjusting  exchange  rates  described  in  Article  107  of  the 
Regulation will cease to be relevant from  1.1.1999 for  conversions  between 
the  currencies  of  participating  countries  and  will  be  replaced  by  the 
provisions  of  Article  4  of  Regulation  1103/97.  However,  it will  continue  to 
least  one  non-
apply 
participating Member State. 

the  currency  of  at 

for  conversions 

involving 

However, 

The  purpose  of  the  conversion  rule  is to  determine  as  precise  a  value  as 
possible  on  the  basis  of  exchange  rates  recorded  over  the  reference 
period. 
fluctuations  between 
from  1.1.1999  exchange 
participating  currencies  will  no  longer  occur.  Beyond  that  date,  applying 
the  conversion  clause  would  run  counter  to  its  very  purpose.  The  clause 
will 
involving 
non-participating  currencies. 

fully  applicable,  however, 

to  conversions 

remain 

4.  For  conversions  between  a  participating  and  a  non-participating 
Member  State,  the  euro  will  be  the  central  currency  from  1.1.1999.  For 
payments  between  non-participating  Member  States,  the  existing  system 
will remain  in force. 

40 

CHANGEOVER  TO THE EURO 
Community legislation 

POLICY AREA: 

INTERNAL  MARKET 

MEASURES  CONCERNED: 

Return of Cultural Objects  Directive 

A.  DESCRIPTION 

1.  Directive  93/7  on the  return  of cultural  objects  is  directly  affected,  together 
with  Regulation 93/  on  the  exportation  of  cultural  objects.  The  relevant 
provisions  are  those  specifying  the  application  thresholds  (Annex  Point  B) 
as  well  as  the  clause  setting  out  the  modalities  for  the  conversion  of  the 
thresholds  into  national  currency.  Every  3  years  (starting  February  1996) 
the  Council  is  to  examine  and  if  .appropriate  bring  up  to  date,  the 
thresholds.  Moreover  it is foreseen that the Council may on a proposal from 
the  Commission  (normally  made  in  its  report  to  be  carried  out  every  3 
years) amend the directive. 

B. 

IMPACT OF THE  CHANGEOVER 

2.  Unless  action  is taken  to  amend the  directive  (i.e.  the fixed  exchange  rate 
of  1.1.1993)  the  "ins"  will  continue  to  apply  different  amounts  from  each 
other  (different  because  based on  1993 exchange  rates,  rather  than  on the 
irrevocably  fixed  euro  conversion  rates  of  1999).  Moreover  this  situation 
will continue  so long as the directive retains the clause  in question. 

C.  ACTION AND TIMING 

3. 

It is suggested  that  the  Commission  propose  amending  the  directive  to  the 
effect  that from  1.1.2002 the participating  Member  States  will  apply  uniform 
thresholds  in  euros  directly  from  the  directive.  Non-participating  Member 
States  will  continue  to  convert  into  their  national  currencies,  with  the 
conversion  being  based  on  the  value  of  national  currencies  against  the 
euro  on a convenient  date  (to  be decided)  in advance  of the  date for  entry 
into  force  of  the  new  thresholds,  i.e. 1.2002  (the  new  date  will  replace  the 
1993  conversion  date  against  the  ECU).  The  Commission  is  due  to  make 
its  next triennial  report  on the  directive  in  1999.  This would  be the  suitable 
occasion  to  propose  such  a change  and would  give  ample  time for  it to  be 
implemented  nationally  by 1.1.2002 (at the latest). 

41 

CHANGEOVER  TO THE EURO 
Community legislation 

POLICY AREA: 

INTERNAL  MARKET 

MEASURES: 

Procurement Directives 

A.  DESCRIPTION 

1.  The  Directives  93/36  (Supplies),  93/37  (Works),  92/50  (Services),  all  three 
of which  have  been  amended  by  Directive  97/...  adopted  on  13.10.97,  and 
Directive  93/38  (Utilities)  constitute the  EC's  public  procurement  legislation 
affected  by  the  changeover  to  the  euro.  The  relevant  provisions  are  the 
ones  specifying  the  application  thresholds20,  as  well  as  the  clauses  setting 
out the modalities for the revision of the thresholds2'. 

B.  SUMMARY OF THE  EFFECTS  OF THE  CHANGEOVER 

the  Regulation  1103/97  on  certain  provisions 

2.  The thresholds  will  be expressed  in euros  as from  1.1.1999  in  accordance 
with 
the 
introduction  of  the  euro.  The  national  amounts,  converted  in  accordance 
with  the  directive  at  the  rate  of  exchange  against  the  ECU  under  the 
conversion  mechanism  currently  in force,  will  not  be  affected  until the  next 
review date. 

relating 

to 

3.  All  four  Procurement  Directives  provide  for  a  revision  of  the  value  of  the 
thresholds  in national  currencies  every two years.  In addition, they  specify 
that  the  value  in  national  currencies  shall  be  based  on  the  average  daily 
values of the currencies expressed in ECUs over the 24 months  terminating 
on the last day of August  immediately  preceding the  1 January revision. 

The  method  of  adapting  the  values  of  thresholds  in  national  currencies  to 
accommodate  changes  in  exchange  rates  will  have  ceased  to  be  relevant 
and  therefore  cease  to  be  applicable  to  "ins"  by  the  date  of  the  review 
following  the  introduction  of  the  euro  on  1.1.1999  (next  review  1.1.2000) 
but will  continue  to  be  relevant  and  valid for  "pre-ins".  This  is  because  the 
purpose  of the  clause  is to fix the expression  of the  value  of the  thresholds 
in  terms  of  Member  States'  currencies  as  accurately  as  possible,  on  the 
basis  of  past  performance  i.e.  average  figures  over  the  past  two  years. 
Given  that  by  the  revision  date  the  "ins"  will  not  have  separate  national 
currencies  the  possibility  of  currency  fluctuation  against  the  euro  amounts 
in  the  directive  will  have  ceased  to  exist.  Therefore  it  would  clearly  be 
contrary  to  the  sense  of  the  clause  to  apply  it  to  "ins".  For  "pre-ins"  the 
calculation  continues  as  before.  The  figures  for  "ins"  will  be  expressed  in 

Article  5(1 )(a)  of  Directive  93/36,  Article  6(1)  of  Directive  93/37.  Article  7(1)  of  Directive  92/50,  Article 
14  of  Directive  93/38. 

Article  5(1 )(c)  of  Directive  93/36,  Article  6(2)(a)  of  Directive  93/37,  Article  7(8)  of  Directive  92/50, 
Article  38  of  Directive  93/38. 

42 

national  currency  units  at  the  conversion  rate  applied  to  the  threshold 
amounts  in euros as appearing  in the directive. The results  of the  reference 
value  calculations  (and,  for  "ins"  of  the  conversion  rates  in  national 
currency  units  from  the  euro  amounts)  will  continue  to  be  published  in  the 
Official  Journal for the use of Member States. 

4.  The  first  revision  subsequent  to  the  introduction  of  the  euro  will  occur  on 
1.1.2000.  By  virtue  of  the  principle  of  legal  continuity,  all  Member  States 
will  implement  the public  procurement  Directives  during  the  preceding  two-
year  period  (between  1.1.1998 and  1.1.2000) on the  basis  of the  threshold 
values  expressed  in  national  currency  units  resulting  from  the  previous 
revision dated  1.1.1998.  At the  1.1.2000 revision the method prescribed  by 
the directives Will not apply to participating  Member  States  but will  continue 
to  be  applied  to  non  participating  Member  States  to  calculate  the  value  in 
national  currencies  of  the  directive  thresholds,  as  follows:  The  calculation 
will  be  based  on  the  average  daily  values  of  their  currencies  against  the 
ECU  for  the  16  months  before  1  January  1999  (1 September  1997  -
31 December  1998)  together  with  their  average  daily  values  against  the 
euro  for  the  remaining  8  months  (1 January  1999  -31 August  1999)  of  the 
24 month review  period. For participating  Member  States  the  euro  amounts 
of the thresholds will apply  directly. 

C.  ACTION AND TIMING 

5.  Member  States'  representatives  discussed  the  issue  on  the  basis  of  a 
clarification  note on 30 September.  Member  States  could  in general  agree 
with the interpretation.  Legislative  action  is not  required  (assuming that  the 
interpretation will be accepted by all Member  States). 

43 

CHANGEOVER  TO THE EURO 
Community legislation 

POLICY AREA: 

INTERNAL  MARKET 

MEASURES: 

Banking  Legislation 

A.  DESCRIPTION 

1.  The  Directives  77/780/EEC  &  89/646/EEE;  92/30/EEC;  92/121/EEC; 
94/19/EEC;  91/308/EEC;  93/6/EEC  93/6/EEC,  93/6/EEC,  89/647/EEC  & 
96/10/EC,  89/647/EEC;  92/121/EEC;  93/22/EEC;  77/780/EEC;  92/30/EEC; 
95/26/EC;  86/635/EEC  constitute  the  Community's  banking 
legislation 
which  is affected  by the changeover to the euro. 

B.  SUMMARY  OF THE  EFFECTS  OF THE  CHANGEOVER 

ECU  references 

2.  An  examination  of  all  references  to  the  ECU  in  banking  supervision 
directives  together  with  other  possible  implications  for  those  directives  of 
the  introduction  of  the  single  currency  has  been  carried  out.  The  main 
conclusion  of  this  work  is  that  the  two  euro  regulations ^themselves  will 
resolve  the  very  large  majority  of potential ^issues without further  action.  In 
particular  it  is  clear  under  article  2  of  Council  Regulation  1103/97  that  all 
references to the  ECU automatically  become references to the euro. 

3.  The  fact  that  all  of  the  banking  thresholds  are  simple  thresholds  i.e.  they 
have  to  be  respected  in  national  currency  equivalents  at  all  times  means 
that  the  problems  associated  with  revision  periods,  rounding  provisions, 
currency  fluctuation  clauses  are  absent  from  banking.  As  a  result  there  is 
no difficulty  involved  in the transition  and both "ins" and  "pre-ins" will  apply 
in  exactly  the  same  way  and  for  the  same  amounts. 
the  directives 
Accordingly  no  further  clarification  is  needed  with  regard  to  thresholds, 
ceilings  and other  simple  ECU references  contained  in Community  banking 
supervision  legislation.22 

For certain  other questions  some explanation  is felt to be helpful as follows: 

Foreign  exchange  risk 

4.  The  single  currency  will  be  introduced  into  participating  Member  States  by 
the  euro  regulations  in  accordance  with  the  Treaty  and  will  replace  their 
national  currencies  from  1 January  1999.  Thus  no  foreign  exchange  risk 
will exist  between the euro and the participating  national  currency  units  and 
between  participating  national  currency  units themselves from that  date.2' 

77/780/EEC  as  amended  by  89/646/EEC  Art.  4(1)  & 2(a);  92/30/EEC  Art  3(3);  92/121/EEC  Art.  6(6); 
94/19/EEC  Art.  7(1);  91/308/EEC  Art.  3(2)  &  (3);  93/6/EEC  Art.  3(1),  (2),  (3),  (4)  &  4(6)(ii)  and  (iii). 
93/6/EEC  (Annex  III  (3.1) 

44 

Traded debt position  risk 

5.  The  single  currency  will  be  introduced  into  participating  Member  States  by 
the  euro  regulations  in  accordance  with  the  Treaty  and  will  replace  their 
national  currencies  from  1  January  1999.  Thus  traded  debt  positions  in 
euros  and  participating  currency  units  will  be  positions  in  the  same 
currency for the calculation of capital requirements for market risk.24 

Derivative  contracts 

6.  Derivative  foreign  exchange  contracts  in  ECUs  and  participating  national 
currencies  will  cease  to  behave  like  derivatives  after  the  single  currency  is 
introduced  into  participating  Member  States  and  replaces  their  national 
currencies.  A  similar  feature  may  also  occur  for  certain  interest  rate 
derivative  contracts  with  reference  rates  derived  from  the  ECU  and 
In  principle  such  contracts  should  be 
participating  national  currencies. 
treated  as  cash  claims  or  obligations  from  1  January  1999.  However 
certain 
the 
competent  authorities  should  decide  how  to  address  according  to  the 
individual  circumstances  of the particular case.25 

transitional  problems  may  arise  which 

is  considered 

it 

European  Central  Bank (ECB) 

7.  When  the  ECB  is  established  in  1998  it  should  be  considered  to  be  a 
'central  bank'/'zone  A  central  bank'  with  respect  to  all  aspects  of  the  EU 
banking and related directives.26 

C.  ACTION AND  TIMING 

8.  Monitor  any transitional  problems  (see paragraph 6). 

93/6/EEC  (Annex  I (3)  (9.1)  & (13) 
89/647/EEC  as amended  by 96/10/EEC  (Annex  II); 93/6/EEC  (Annex  III, 3.1) 
89/647/EEC(  Arts  2.1  and 6.1);  92/121/EEC  (Art. 4.7);  93/22/EEC  (Art.  2.4);  77/780/EEC  (Art.  2.2) 
92/30/EEC;  95/26/EC  (Art.  4);  86/635/EEC  (Art.  8.2 & 14.1 and  14.2) 

16 

45 

CHANGEOVER  TO THE EURO 
Community legislation 

POLICY AREA: 

INTERNAL  MARKET 

MEASURES  CONCERNED: 

Insurance 

A.  DESCRIPTION 

the  Community's 

1.  The  Directives  73/239/EEC,  76/580/EEC,  88/357/EEC,  84/5/EEC, 
79/267/EEC,  92/96/EEC,  91/674/EEC  and  91/370/EEC  (Swiss  Agreement) 
constitute 
the 
insurance 
changeover  to the  euro.  The  provisions  most  frequently  affected  are  those 
related  provisions  converting 
specifying  application 
thresholds  from  ECU/euro  into  national  currency  amounts.  The  remaining 
provisions  relate  to  currency  matching,  revision  of  the  amounts  of  the 
thresholds  and  definition  of  the  ECU  and/or  unit  of  account.  In addition, 
there  is  a  provision  on  interest  rate  guarantee  and  three  provisions  on  the 
relationship  between the  ECU and the Swiss franc. 

legislation  affected  by 

thresholds  and 

B.  SUMMARY  OF THE  EFFECTS  OF THE  CHANGEOVER 

ECU references  and conversion  clauses 

2.  Ail  thresholds  in  the  EC  legislation  will  be  expressed  in  euros  as  from 

1.1.1999 in accordance with the Regulation  1103/97. 

3.  The  provisions  on  conversion  of  ECU  (euro)  threshold  amounts 

into 
national  currencies  will  continue  to  apply  to  non  participating  Member 
States  from  1.1.1999,  the  applicable  rate  being  that  of  the  last  day  of  the 
preceding  month  of  October.  These  provisions  will  no  longer  apply  to 
participating  Member  States with effect from the revision  due to  occur  as of 
1.1.1999,  as  the  clause  will  have  lost  its  rationale  on  that  date  and 
therefore  be  inapplicable  following  the  ending  of  the  "in"  Member  States' 
national  currencies.  On  1.1.1999  the  amounts  expressed  in  ECUs  will  be 
expressed  in  euros,  their  equivalent  in  the  national  currency  units  during 
the  transitional  period  being  that  resulting  from  the  application  of  the 
irrevocably  fixed  conversion  rates.  Regarding  the  transitional  measure 
provided  for  in Article  2  of  Directive  76/580/EEC,  since  the  amounts  of  the 
thresholds  in Directive  73/239/EEC  have  not  been  amended, this  provision 
will  continue  to  apply  during  the  transitional  period  and  beyond  if  not 
amended.  Community  legislative  action  will  be  required  if  the  amounts  of 
the  thresholds  are  to  be  identical  throughout  the  euro  area  e.g.  from 
1.1.2002 onwards. 

46 

Currency  matching  provisions 

4.  As from  1.1.1999 and during the transitional  period  national  currency  units 
of  participating  Member  States are one and the  same currency  as the  euro 
and each other, for the purpose of matching rules. 

Interest rate guarantee  provisions 

5.  Regarding  life  insurance  contracts  with  an  interest  rate  guarantee  Article 
17(1 )B(a)(i)  of  Directive  79/267/EEC,  as  amended,  shall  continue  as  at 
present  for  contracts  denominated  in  non  participating  Member  States' 
currencies.  Where  the  contract  is  denominated  in  participating  Member 
States'  currencies  or  in euros the home  member  State shall  use  one  of  the 
following  rates:  (i)  the  rate  on  bond  issues  in  euros  by  the  home  Member 
State  when  this  is  a  participating  Member  State  or  (ii)  the  rate  on  bond 
issues  in euros  by any other participating  Member  State or  (iii)  the  average 
of  the  rates  on  the  bond  issues  in  euros  by  all  the  participating  Member 
States (provided that such information  is supplied by an official  body) or  (iv) 
the  rate  of  the  euro  denominated  issues  by  Community  institutions.  All  of 
these possibilities will be compatible with the interest  rate guarantee  clause 
as  a  consequence  of  replacing  participating  Member  States'  national 
currencies  by the  euro  and  replacing  the  ECU  by the  euro.  The  reading  of 
this  provision  in  the  light  of  the  Council  regulations  does  not  allow  the 
exclusion  of any of the above-mentioned  possibilities.  However,  in order  to 
achieve  a more  harmonised  application  of this  clause,  the  Commission  will 
suggest  that  Member  States  may choose to  restrict  themselves  to  applying 
option  (iii), or option  (i) when the  information  supplied  by an official  body  is 
not  available.  This  does  not  preclude  a  later  decision  on  a  legislative 
amendment  in  the  light  of  the  experience  of  the  application  of  this  clause 
after the changeover to the euro. 

The Swiss  Agreement 

6.  From  1.1.1999 the  principle of continuity will  mean that the conversion  rate 
for  ECU to Swiss francs will remain as written  into the agreement  - i.e.  a set 
rate  subject  to  the  review  under  the  terms  of  Article  3.1  of  Protocol  No  3, 
which  provides  for  alteration  only  if  the  set  rate  differs  by  more  than  10% 
against  the  rate  fixed  by  the  Swiss  National  Bank  as  on  the  last  day  of 
October  of  each  year.  This  provision  will  continue  to  apply  after  1.1.1999 
with the only change being the replacement  of the  ECU with the euro. 

Other affected  provisions 

7.  The  remainder  of  affected  provisions,  revision  of  thresholds  and  definition 
of the  ECU, are affected only by the replacement  of the  ECU by the euro. 

47 

C.  ACTION AND TIMING 

-  -

8.  A 

legislative  amendment 

to  Directive  73/239/EEC  and  Directive 
76/580/EEC  will  be  necessary,  to  take  effect  from  not  later  than  1.1.2002. 
(See  point  2,  above).  An  amendment  might  also  be  desirable  to  Directive 
79/267/EEC  (see point 5 above); this requires further  study. 

48 

POLICY  AREA: 

CHANGEOVER  TO  THE  EURO 

Community 

legislation 

INTERNAL  MARKET 

MEASURES  CONCERNED: 

Securities  Markets  Directives 

A.  DESCRIPTION 

1.  The  Directives  79/279  (Admission  to  official  Stock  Exchanges);  Directive 
89/298  (Public  Offer  Prospectus)  93/6  (Capital  Adequacy  Directive  (CAD)); 
94/18 
the  EC's 
securities  legislation  directly  affected  by  the  changeover  to  the  euro.  The 
relevant  provisions  are  those  specifying  the  application  thresholds  as  well 
as  the  clauses  setting  out  the  modalities  for  the  revision  of  the  thresholds 

(Investor  Compensation)  constitute 

(Eurolist);  97/9 

B. 

IMPACT  OF  THE  CHANGEOVER 

2.  The  thresholds  will  be  expressed  in  euros  as  from  1.1.1999  in  accordance 

with  Council  Regulation  1103/97. 

3.  Directive  79/279  (Admission 

to  official  Stock  Exchanges)  provides 

in 
Schedule  A  paragraph  1.2 that  the  equivalent  in  national  currency  of  the 
(ECU)  threshold  "shall  initially  be  that  applicable  on  the  date  on  which  the 
directive 
is  adopted."  The  Directive  was  adopted  on  5  March  1979. 
However,  there follows  a  revision  clause  the  effect  of which  is to  require  the 
MS  to  adjust  their  national  figures  (back  to  the  ECU  figure)  if  they  diverge 
by  more  than  10%  from  the  directive. 

4.  Given  that  the  purpose  of  this  clause  is  to  keep  the  national  figures  as 
close  as  practicable  to  the  figure  of  ECU/euro  1 million  in the  directive  (and 
not  to  simplify  the  transposition 
law  of  ECU  ceilings  by 
allowing  rounding  of  inconvenient  figures)  the  clause  becomes  redundant 
for  "ins" with  effect  from  01.01.1999.  The  directive  should  be  interpreted  as 
requiring  the  MS  to  adjust  their  national  figures  on  01.01.1999  to  the 
national  currency  unit  equivalent  of  ECU  1 million,  at  the  conversion  rate. 
For  "pre-ins"  the  clause  continues  to  operate,  unaffected. 

into  national 

The  same  adjustment  mechanism  is  also  found  in  Schedule  B  paragraph 
III.  1  of  Directive  79/279  and  the  same  result  should  be  applied  as  for 
Schedule  A. 

5.  Directive  89/298  (Public  Offer  Prospectus)  Directive  96/6  (CAD)  and 
fixed  ECU 
Directive  97/9  on 
references  (thresholds  and  one  ceiling)  with  no  fluctuation  margins  or  other 
revision  mechanisms.  The  directives  as  modified  by  the  euro  regulations 

Investor  Compensation  each  contains 

49 

in  conformity  with the  directives  at the  end  of  1998  then  no  action  is-likely 
to  be  required  of them. The  national  amounts  could  of  course  be  higher  if 
the  MS  so wishes.  The  same  logic will  apply  pari passu  in the  case  of  the 
ceiling (which could be lower than the euro figure  in the directive). 

C.  ACTION AND TIMING 

6.  No action  is required provided under the interpretations  set out above. 

50 

CHANGEOVER  TO THE EURO 
Community legislation 

POLICY AREA: 

INTERNAL  MARKET 

MEASURES  CONCERNED: 

Company Law 

A.  DESCRIPTION 

1.  Directive  77/91/EEC 

is  the  only  piece  of  Community  company 

law 
legislation  which  is  affected  by the  changeover  to  the  euro.  This  directive 
lays  down  coordinating  rules  in  respect  of  the  formation  of  public  limited 
liability companies and the maintenance  and alteration  of their  capital.  The 
only  provisions  of  the  directive  directly  affected  by  the  changeover  to  the 
euro  relate  to  a  minimum  threshold  of  ECU 25 000  for  subscribed  capital 
necessary  for  incorporation  of  a  company  and  the  alteration  of  the 
equivalent of this threshold  in national currencies, where  necessary. 

Apart  from  these  directly  affected  provisions,  there  are  some  other 
to 
implications 
redenomination 
in  euros  of  company  share  capital,  which  should  be 
clarified  in point 4. 

from  the  Directive,  particularly  with  regard 

following 

B.  SUMMARY  OF THE EFFECTS  OF THE  CHANGEOVER 

ECU threshold  and equivalents  in national  currencies 

2.  The  threshold  set  in  ECUs  in Article  6(1)  of the  Directive  will  automatically 
be  expressed  in  euros  as  from  1.1.1999  in  accordance  with  Council 
Regulation  1103/97. 

Amendment  of  the  Directive  will  not  be  necessary  as  a  result  of  the 
introduction  of the euro. 

3.  For  non  participating  Member  States  the  provisions  of  the  Directive  shall 
continue  to  apply,  with  the  threshold  set  in  euros.  If  the  equivalent  of  this 
threshold  in  national  currency  units  is  more  than  10%  below  the  threshold 
now  set  in  euros,  which  is  the  margin  allowed  by  Article  6(2)  of  the 
Directive, the  Commission,  in accordance with the provisions  of this Article, 
shall  inform  the  Member  State  that  it  must  amend  its  legislation  to  comply 
with the minimum amount expressed in euros. 

51 

Redenomination  of share  capital 

4.  Rounding rules may be required to apply to company  share capital  after  the 
automatic conversion to euro. This  is to avoid having  shares with a nominal 
value  with  one  or  more  decimal  places,  which  is  not  practicable  for  the 
market.  Therefore,  Member  States  may  need  to  provide  national  rules  to 
enable  companies  to  adopt  cost  effective  rounding  procedures.  For 
instance,  Member  states can provide simplified  procedures for the  increase 
or  decrease  of  capital  if  this  is  necessary  for  rounding  purposes,  or 
introduce shares without  nominal value. The second company  law  Directive 
should  not  be  interpreted  as  preventing  the  adoption  of  such  simplified 
procedures  exclusively  for  the  purpose  of  the  changeover.  Shares  without 
nominal value are already  possible under Article 3 (c) of the  Directive. 

C.  ACTION AND TIMING 

5.  No need for  legislative  action at Community level. 

CHANGEOVER TO THE EURO 
Community legislation 

POLICY AREA: 

INTERNAL  MARKET 

MEASURES  CONCERNED:  Accounting 

A.  DESCRIPTION 

to  the  euro.  These  directives 

1.  Directives  78/660/EEC,  as  amended,  and  83/349/EEC,  as  amended, 
constitute  the  Community's  accounting  legislation  which  is  affected  by  the 
changeover 
lay  down  the  accounting 
provisions  for  the  preparation  and presentation  of annual  and  consolidated 
accounts,  respectively.  The  provisions  of these  directives  most  affected  by 
the  changeover  to  the  euro  relate  to  thresholds  for  the  preparation  and 
presentation  of  certain  accounts,  the  conversion  rates  to  be  applied  in 
converting  these  thresholds  into  national  currencies  and  the  possibility  to 
round the result of the conversion  into national currencies  by up to 10%. 

With  the  exception  of  this  last  provision,  which  is  described  in  more  detail 
in  section  B  paragraph  4  below,  amendment  to  the  Directives  will  not  be 
necessary  as a result  of the changeover  to the  euro. This  amendment  can, 
in any  event,  be dealt with  in the context of the normal  revision  amendment 
which  must take  place  every  5 years. The  provisions  which  allow  accounts 
to be presented additionally  in ECUs are also affected. 

2.  Apart  from  these  most  directly  affected  provisions, 

there  are  many 
provisions  which,  requiring  clarification  or  explanation,  are  the  subject  of a 
policy  document  published  by  the  Commission  services  -  XV/7002/97, 
"Accounting  for  the  introduction  of  the  euro."  This  document,  elaborated 
within  the  Contact  Committee  on  the  Accounting  Directives,  provides 
explanatory  information  and  guidelines  on  how the  changeover  to the  euro 
can  be  treated  within  the  existing  framework  of  European  accounting 
legislation. 

B.  SUMMARY  OF THE  EFFECTS OF THE  CHANGEOVER 

ECU thresholds,  conversion  rates and rounding  provisions 

3. 

review,  which 

In  any  event,  the  current  provisions  on  conversion  of  threshold  amounts 
into  national  currencies,  which  apply from  21  March  1994,  are  subject  to a 
5-yearly 
legislative 
is  normally  achieved 
amendment.  The next review will take  place (at the  Commission's  initiative) 
in  1999,  which  will  set  the  new  threshold  amounts  into  the  national 
currencies  of  non  participating  Member  States.  The  new  threshold  due  to 
be set  in  1999 would apply  directly  in euros  to participating  Member  States 
(the  euro  amount  can  be  transposed  into  national  law  expressed  in  the 
national  currency  unit at the  1.1.1999 conversion rate). 

through  a 

53 

4.  After  the  transitional  period  the  national  currency  units  of  the  participating 
Member  States  can  no  longer  be  used. There  will  no  longer  be  a  need  to 
translate  the  euro  thresholds  of  the  Fourth  Directive  into  the  national 
currency  units  of  the  participating  Member  States.  The  non  participating 
Member  States  can  continue  to  use  the  10%  rounding  rule.  To  ensure 
equal  treatment  of  Member  States,  it  must  be  ensured  that  at  the  5-yearly 
adjustment  of  the  thresholds  in  1999  a  system  will  be  introduced  into  the 
Directive  which  guarantees  an  equivalent  treatment  of  SMEs  in  both 
participating  and non participating  Member States. 

C.  ACTION AND  TIMING 

5.  A  legislative  amendment  to  Directive  78/660/EEC,  within  the  context  of  the 
normal  5-yearly  revision,  will  be  necessary,  to  take  effect  from  1999.  This 
amendment  will  be  made  part  of  a  package  of  modifications  that  the 
Commission will announce  in the spring of 1998. 

54 

CHANGEOVER  TO THE EURO 
Community legislation 

POLICY AREA: 

INTERNAL  MARKET 

MEASURES  CONCERNED: 

Directive on liability for defective  products 

A.  DESCRIPTION 

1.  Directive  85/374  is  affected  by  the  changeover  to  the  euro.  Due  to  its 
threshold  of  ECU 500  (franchise)  and  ceiling  of 
historic  application 
ECU 70 million  (overall  ceiling), the effect  of the  introduction  of the  euro  on 
this  directive  is  delayed. The  amounts  which  Member  States  apply  in  their 
national  laws  will  continue  to  be  those  set  under  the  historic  conversion 
rate  of 25  July  1985  (i.e.  date  of  adoption  of  the  directive).  These  national 
amounts  will  not  change  until  the  amounts  of  the  threshold/ceiling  in  the 
directive change, following a Commission proposal to that  effect. 

B.  SUMMARY  OF THE EFFECTS  OF THE  CHANGEOVER 

ECU thresholds, conversion rates and rounding  provisions 

2.  All thresholds  in the  EC legislation will automatically  be expressed  in  euros 
as from  1.1.1999  in accordance  with  Council  Regulation  1103/97.  National 
currency  amounts  applying the directive  in national  law will  not  be affected, 
until a Commission proposal  is put forward  (and adopted)  for the  revision  of 
the amounts  in the directive. 

3.  The  current  provisions  on  conversion  of  threshold  amounts  into  national 
currencies,  applicable  since  25  July  1985  are  subject  to  a  5 yearly  review, 
implemented  through  legislative  amendment.  The  next  review  will  set  the 
new  threshold  amounts  in  euros  and  determine  the  applicable  date  for 
converting  these  amounts  into  the  national  currencies  of  non  participating 
Member  states and  into the national  currency  units  of participating  Member 
States (at the  irrevocable  conversion rates fixed on 1.1.1999). 

4.  After  the  transitional  period  the  national  currency  units  of  the  participating 
Member  States  can  no  longer  be  used. There  will  no  longer  be  a  need  to 
translate  the  euro figures  from the directive  into the  national  currency  units 
of participating  Member States. 

C.  ACTION AND TIMING 

5.  A  legislative  amendment  to  Directive  85/374/EEC,  within  the  context  of  the 
normal  revision,  is  suggested.  This  should  be  timed  to  take  effect  at  the 
first  opportunity  after  1.1.1999,  following  which  the  participating  Member 
States  will  apply  national  currency  unit  equivalents  of  the  new  euro 
amounts  (at the conversion  rate) while the non participating  Member  States 

55 

will translate  the  new euro  amounts  into their  national  currency,- at the  rate 
prevailing on the date of revision, for a new 5 year period. 

56 

CHANGEOVER  TO THE EURO 
Community legislation 

POLICY AREA: 

INTERNAL  MARKET 

MEASURES  CONCERNED: 

Intellectual  property  legislation 

A.  DESCRIPTION 

1.  Regulation 2869/95  on  the  fees  payable  to  the  Community  Trade  Mark 

Office  is directly affected. 

B.  SUMMARY  OF THE  EFFECTS  OF THE  CHANGEOVER 

ECU  references 

2.  Under  article  2  of  Council  Regulation  1103/97,  all  references  to  the  ECU 
automatically  become  references  to the euro. These  references  do not  give 
rise on any problems of interpretation. 

3.  There  is a somewhat  unusual  clause  in Article 6(2) of this  regulation, which 
refers  to  the  conversion  rate  between  the  Peseta  and  the  ECU,  as  fixed 
daily  by the  Commission.  This  clause will  of  course  cease  to  be  applicable 
if  Spain  adopts  the  euro,  given  that  there  will  be  nothing  to  fix  on  a  daily 
basis,  as  the  irrevocable  fixing  of  the  conversion  rate  will  take  place  on 
1.1.1999 for all time.  If Spain does not adopt the euro on 1.1.1999 there  will 
still  be  a  purpose  for  this  cash  conversion  clause;  which  will  establish  an 
official  rate  between  the  euro  amounts  in  the  Regulation  and  the  amounts 
required  to  be  paid  in  Peseta  to  satisfy  the  requirements  under  the 
regulation. 

C.  ACTION AND TIMING 

4.  No action  necessary. 

57 

CHANGEOVER  TO  THE  EURO 

Community 

legislation 

POLICY  AREA: 

INDIRECT  TAXATION 

MEASURES  CONCERNED: 

Legislation  on VAT  and  excise  duties 

A.  DESCRIPTION 

1.  The  Sixth  Directive  77/388/EEC  (as  amended  by  Directives  91/680/EEC, 

92/111/EEC  et  95/7/EC)  establishes  the  common  system  of  VAT. 

Directive  69/169/EEC  (as  last  amended  by  Directive  94/4/EC)  lays  down 
the  rules  governing  travellers'  allowances. 

Directive  78/1035/EEC 
last  amended  by  Directive  85/576/EEC), 
establishes  the  tax  exemptions  applicable  to  small  consignments,  while 
lays 
Directive  83/181/EEC  (as  last  amended  by  Directive  88/331/EEC) 
down  the  rules  governing  exemption  from  VAT  on  importation. 

(as 

Directive  79/1072/EEC  establishes  arrangements  for  the  refund  of  VAT  to 
taxable  persons  not  established  in the  territory  of  the  country. 

Directives  92/80/EEC,  92/82/EEC  and  92/84EEC 
governing 
beverages. 

taxes  on  manufactured 

the  rules 
tobacco,  mineral  oils  and  alcoholic 

lays  down 

B.  COMMENTS 

into 

indicated 

the  amounts 

the  Directive 

2.  Article  31  of  Directive  77/388/EEC  gives  Member  States  the  option,  when 
converting 
their  national 
in 
currency,  of  rounding  the  amounts  resulting  from  this  conversion  either 
upwards  or  downwards  by  up  to  10%.  Given  that  its  underlying  logic  (i.e. 
the  need  to  obtain  round  figures  in  national  currency)  will  still  be  relevant 
during  the  transitional  period,  this  rule  will  continue  to  apply  during  that 
time.  At  the  end  of  the  transitional  period,  participating  Member  States  will 
have  to  incorporate  into  their  national  legislation  the  amounts  in  euros 
indicated  in the  Directive  since  their  national  currencies  will  have  ceased  to 
exist  as  monetary  units  and  the  rounding-off  rule  will  therefore  no  longer 
serve  any  purpose. 

On  the  other  hand,  Article  28m  of  the  same  Directive  stipulates  that  the 
conversion  of  some  amounts  should  be  based  on  the  rate  of  exchange 
applicable  on  a  specified  date  (16  December  1991).  The  amounts  in 
taxation 
question  are  minimum  amounts 
of 
(for 
recapitulative  statements)  or 
intra-Community  acquisitions,  simplified 
Community  amounts  (taxation  of  distance  selling).  Given  that  Article  28m 
does  not  provide  for  any  possibility  of  revision,  the  amounts  in  national 

at  destination 

currency  will  continue  to  apply  during  the  transitional  period. 
In  the 
absence  of  specific  legislative  measures,  this  will  also  continue  to  be  the 
case  for  participating  Member  States  after  they  have  completely  changed 
over to the euro on  1.1.2002.  This would  give  rise to different  amounts  (all 
expressed  in euros)  in the  various  countries  forming  part  of the  euro zone. 
Measures will therefore  have to be adopted  to  remedy  this  situation  and to 
ensure that participating countries adopt the euro amounts  laid down by the 
Directives.  This  opportunity  should  also  be  used  to  revise  the  conversion 
clause  of  Article  28m,  which  will  still  be  applicable  to  non-participating 
countries,  in  order  to  restore  a  degree  of  uniformity  in  applying  these 
thresholds within the  Community.. 

3.  Article  7  of  Directive  69/169/EEC  and  Article  4  of  Directive  78/1035/EEC 
lay down conversion  and rounding  rules.  The applicable  conversion  rate  is 
that  of  the  first  working  day  of  October,  taking  effect  on  1 January  of  the 
following  year;  amounts  in  national  currency  may  be  rounded  off  by  no 
more than  ECU 2; the amount of the previous  year  may  continue  to apply  if 
the  conversion  leads  to  a change  of  less  than  5%  or  to  a  reduction  in  the 
tax  exemption.  These  conversion  rules  will  no  longer  be  relevant  from 
1.1.1999  for  participating  countries  because  fixed  parities  will  have  been 
established  and  they  will  consequently  cease  to  apply  to  them.  They  will, 
however,  remain  fully  applicable  to  the  currencies  of  non-participating 
countries. 
logic  as  for  Article  31  of  Directive 
77/388/EEC, the rounding  rules will continue to apply during the  transitional 
period  as  far  as  participating  countries  are  concerned.  However,  they  will 
become obsolete for those countries after that period. 

the  same 

Following 

4.  Article  7  of  Directive  79/1072/EEC  contains  a  conversion  rule  (the  rate 
being  that  of  1 January  of  the  year  in  question)  and  a  rounding-off  rule 
identical  to  that  of  Article  31  of  Directive  77/388/EEC.  The  action  to  be 
taken  is therefore comparable to that described above. 

5.  The  same  applies  to  the  conversion  rules 

laid  down  by  Directives 
92/80/EEC,  92/82/EEC,  et  92/84/EEC,  which  will  therefore  be  dealt  with  in 
the same way. 

C.  ACTION AND TIMING 

6. 

It  should  be  examined  during  the  transitional  period  whether  a  legislative 
measure  will  be  needed  to  ensure  that,  from  1 January  2002,  participating 
countries  adopt  the  euro  amounts  of  Directive  77/388/EEC  to  which 
Article 28m applies.  No Community  action will  be  needed  in  respect  of  the 
rounding  option  provided  for  in Article  31  of  Directive  77/388/EEC  and  in 
the  other  tax  directives.  At  national  level,  provisions  will  have  to  be 
in  the 
adopted  to  ensure  that  the  various  euro  amounts  contained 
Directives  on VAT and excise-duties  are  in force from  1.1.2002. 

59 

7.  No action  is  envisaged with  regard to the  other  conversion  rules  laid-down 
by  the  tax  directives  which  will  remain  applicable  to  non-participating 
countries. 

60 

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Community legislation 

POLICY AREA: 

COMMON COMMERCIAL  POLICY 

MEASURES  CONCERNED: 

Export Credits 

A.  DESCRIPTION 

1. 

In order to create a level playing field  in the area of export  credits  extended 
with public  support,  all OECD member countries  comply with the  provisions 
of  the  "Arrangement  on  guidelines  for  officially  supported  export  credit" 
(also  called  the  "Consensus").  The  first  version  of  this  arrangement  was 
agreed  in  1978.  Since  then,  the  text  has  been  regularly  renegotiated  in 
order  to  strengthen  the  terms.  Following  each  round  of  negotiations,  the 
newly  agreed  text  becomes  part  of  Community  legislation  through  the 
enactment  of  a  Council  Decision  (last  revision:  Decision  97/530/EC;  OJ 
L216  of  8.8.97;  the  full  text  of  the  arrangement  was  annexed  to  Council 
Decision 93/112/EC; OJ L44 of 22.2.93). 

2.  One  of  the  key  features  of  the  Consensus  is  a  fairly  elaborate  system  of 
minimum  interest  rates.  These  Commercial  Interest  Reference  Rates 
(CIRRs)  are  supposed  to  approximate  market  rates  for  comparable 
operations.  They  are  calculated  per  currency  and  are  adjusted  once  per 
month  to  prevailing  market  conditions  (twice  a  month  for  aircraft  financing 
rates), following  notification  by each country for  its own currency.  For  most 
currencies,  CIRRs  are  calculated  on the  basis  of  the  yields  of  government 
bonds  issued  in  the  country  concerned,  supplemented  with  a  100  basis 
points margin. 

Presently,  CIRR  rates  are  notified  to the  OECD  Secretariat  for  20  different 
currencies.  As far  as the  Community  is  concerned,  12  national  currencies 
are  involved  (no  CIRR  rates  exist  for  the  Greek  drachma,  the  Portuguese 
escudo  and the  Luxembourg  franc),  while  the  Commission  notifies  a  CIRR 
rate for the ECU. 

3.  Governments  are  allowed  to  extend  export  credits,  expressed  either  in  the 
domestic  currency  or  any  other  currency,  provided  the  terms  of  the 
Arrangement,  notably  as regards  minimum  interest  rates, are respected. 

B.  COMMENTS 

4. 

In  the  absence  of  any  specific  action  in  relation  to  the  start  of  EMU, 
participating  Member  States  could  in theory  continue to notify  their  national 
rates,  based  on  the  yields  of  their  domestic  government  bonds.  This 
approach would  lead to the creation  of a complex  system  of "national"  euro 
rates,  which  would  not  only  vary  in  level  (depending  on  the  yields  of  the 
corresponding  government  bonds)  but  also  in  structure  (a  single-tier 

61 

system  applies  to  most  Community  currencies,  while  a few  countries- have 
opted for a three-tier one). 

The  logic of such a system would  be difficult  to grasp  and  it  is unclear  how 
the Arrangement  should then  be interpreted  and applied  as far  as the  euro 
is concerned.  For example, exporters from countries  outside the euro zone 
would  be  confronted  with  a  multitude  of  euro  rates  whenever  they  offer 
export  credit  finance  in  euros. 
In  principle,  they  should  be  entitled  to 
choose  the  CIRR  rate,  and  would  probably  opt  for  the  lowest  one.  The 
same  logic  would  in  all  likelihood  apply  to  exporters  from  countries 
belonging  to  the  euro  zone,  who  might  expect  to  get  finance  at  the  same 
rates  as  their  competitors  outside  the  euro  zone  i.e.  at  a  euro  rate  which 
would differ form the euro rate applying to their  national  government. 

5.  The  approach  based  on  different  "national"  euro  CIRRs  negates  the  euro 
as  a  single  currency  and  lead  to  numerous  difficulties  and  inconsistencies 
in implementation.  It also goes against  the basic  logic of the  CIRR system, 
which  is currency-based, as opposed to country-linked. 

At  the  start  of  stage  3  (1.1.1999),  the  CIRR  rates  for  the  currencies  of  the 
participating  Member  States,  as  well  as  the  ECU  CIRR,  should  thus  be 
replaced  by  a  single  euro  CIRR.  This  rate  should  comply  with  the 
provisions  of Annex VIII of the Arrangement  and thus  closely  correspond  to 
a rate for a first-class domestic  borrower. 

C.  ACTION AND TIMING 

6.  The  Community's  main  interest  is  to  ensure  a  smooth  transition  to  a  new 
system,  avoiding  disturbances  and  discontinuities  which  could  be  harmful 
to  Community  exporters/importers  or adversely  affect  the  image  of the  euro 
on the  international  stage.  Preparation  will  have  to  go  through  several 
stages  (discussions  at  OECD  level,  Council  Decision,  ...)  and  therefore 
needs to start on a timely basis. 

Informal  discussions  in the  Council  Working  Group  on. Export  Credits  have 
already  started  in  order  to  secure  a  Community  position  on  this  question 
with a view to initiate discussions  at the OECD. 

62 

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Community legislation 

POLICY AREA: 

EXTERNAL  RELATIONS 

MEASURES  CONCERNED: 

International  agreements 

A.  DESCRIPTION 

1.  The  Community  has  concluded  numerous  international  agreements  which 

include references to national currencies or to the ECU. 

B.  COMMENTS 

2.  The  principle  of  "/ex  monetae",  which  is  applicable  to  contracts  under 
private  law  also  holds  for  international  agreements:  jurisdictions  of  third 
countries  will  recognise  the  euro  as  the  successor  to  the  respective 
national currency.  That means references  in agreements to a currency  of a 
participating  Member  State  have  to  be  interpreted  with  reference  to 
European  monetary  law  which  has  changed  and  has  become  an  integral 
part of the monetary  law of the participating Member States'. 

3.  The  same  holds  for  references  in  agreements  to  the  ECU  as  defined  in 
Community  law.  According to Article  109 I (4) of the Treaty  and Article  2 of 
Council  Regulation  1103/97,  references  to  the  ECU  will  be  replaced  by 
references to the euro at a rate of 1:1. 

4. 

follows 

that  any 

renegotiation  of 

It 
international 
agreements  - whether  referring to national  currencies  or to the  ECU - is not 
necessary.  Neither  is  it  indispensable  to  change  the  respective  currency 
references  physically  since  such  references  will  have  to  be  read  as 
references to the euro. 

the  Community's 

C.  ACTION AND  TIMING 

5.  No  specific  legislative  action  is  envisaged  in  relation  to  the  Community's 

international  agreements. 

6.  EC  delegations 

in  third  countries  will  be  provided  with  appropriate 
information  for  external  use  in  relation  to  the  above.  Specific  demarches 
regarding  this  specific  issue  are  not  called  for,  but  delegations  will  be 
instructed  to  raise  the  issue  in  the  context  of  regular  contacts  regarding 
EMU  and  the  changeover  to  the  euro.  The  issue  regarding  references  in 
international  agreements  to  national  currencies  or  to  the  ECU  should  also 
be raised  in the context of bilateral discussions with partner  countries. 

63 

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Community legislation 

POLICY AREA: 

CONSUMER  PROTECTION 

MEASURES  CONCERNED: 

Consumer credit and certain other  contracts 

A.  DESCRIPTION 

1.  Council  Directive  85/577  deals  with  consumer  protection  in  respect  of 
contracts  negotiated  away  from  business  premises,  for  example  contracts 
concluded  during  an  excursion  organized  by  the  trader  away  from  his 
business  premises or during a visit by the trader to the consumer's  home. 

Council  Directive  87/102  (as  last  amended  by  Council  Directive  90/88)  is 
laws,  regulations  and  administrative 
aiming  at  the  approximation  of 
provisions  of  the  Member  States  concerning  consumer  credit. 
The 
Directive  is applied to credit agreements. 

B.  COMMENTS 

2.  Directive  85/577  specifies  that  it  will  only  apply  to  contracts  exceeding  a 

specified amount  (presently 60 ECU; "current value" clause). 

Directive  87/102  does  not  apply  to  credit  agreements  involving  amounts 
less  than  200  ECU  or  more  than  20.000  ECU  (Art.  2.1).  The  Directive 
contains  a  clause  for  conversion  into  national  currencies.  The  initial 
exchange  rate to be used is the one of the date of adoption of the  Directive, 
while  rounding  is allowed  up to  10  ECU  (Art.  13.1).  As  this  is  a fixed  date 
in  national 
clause,  it  will  perpetuate  differences  between  the  values 
implementing  legislation.  Article  13.2  foresees  5-yearly  revisions  from 
1995 onwards.  These  revisions  however  only  deal with the  amounts  in the 
directive, as opposed to their translation  into national currencies. 

Both  directives  include  a  minimum  clause  which  offers  the  possibility  to 
Member  States  to  take  more  protective  measures.  For  example,  in  some 
countries, the minimum has been reduced to 0 ECU. 

C.  ACTION AND TIMING 

3.  The  Commission  has  already  announced  that  both  directives  will  be 
revised.  In the case of directive  87/102, this  revision  will  moreover  ensure 
that  the  ceilings  and  thresholds  applying  to  "ins"  will  correspond  to  the 
amounts  specified  in the  Directive as from  1.1.2002 at the  latest  (except  for 
Member  States desiring to take more restictive  measures). 

64 

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Community legislation 

POLICY AREA: 

BUDGETS 

MEASURES  CONCERNED 

Financial  Regulation 

A.  DESCRIPTION 

1.  The  Financial  Regulation  of  21  December  1977  applicable  to  the  general 
budget  of  the  European  Communities27  is  the  basic  text  governing  the 
drawing-up  and  implementation  of  the  Communities'  budget,  and  as  such 
implements  Article  209  of  the  EC  Treaty. 
It  is  complemented  by  a 
Commission  Regulation containing  implementing  provisions28. 

B.  COMMENTS 

2.  Article  11 of the Financial  Regulation  requires the budget  to be drawn up in 
ECUs  and  refers,  for  the  purposes  of  defining  the  ECU,  to  Council 
Regulation  (EC)  No 3320/94 of 22 December  1994.  It determines the  value 
of  the  ECU  and  lays  down  rules  for  conversion  between  the  ECU  and 
national  currencies.  Other  references  to  the  ECU  are  widespread  in  the 
Financial  Regulation (book-keeping, etc.). 

3.  Although Article  11 makes  any change  in the  definition  of the  ECU  decided 
on  by the  Council  automatically  applicable  to the  Financial  Regulation,  this 
Article  should  be  amended  in  order  to  take  account  of  the  introduction  of 
the  euro  and,  in  particular,  to  establish  the  principle  that  not  only  is  the 
budget  drawn  up  in  euros,  but  the  Community's  rights  and  obligations  are 
also  expressed  and  executed  in euros  (notwithstanding  specific  provisions 
concerning  revenues  or expenditure).  The other  references  to the  ECU will 
also have to be replaced by references to the euro. 

C.  ACTION AND TIMING 

4.  A proposal for  an amendment  of the  Financial  Regulation will  be  presented 
by  the  Commission,  in  accordance  with  Article  209  of  the  Treaty,  towards 
April  1998.  Once  this  has  been  adopted  by  the  Council,  the  Commission 
will  amend  its  Regulation  3418/93/EEC  laying  down  detailed  rules  for  the 
implementation  of certain provisions  of the Financial  Regulation. 

OJ  L  356  of  31.12.1977,  p.1.  Regulation  last  amended  by  Council  Regulation  (EC,  Euratom,  ECSC) 
No  2335  of  18  September  1995  (OJ  L  240  of  7.10.1995,  p.12). 
Commission  Regulation  (Euratom,  ECSC,  EC)  NO  3418/93  of  9  December  1993 
detailed 
21  December  1977  (JO  L315  du  16.12.1993,  p.1). 

laying  down 
the  Financial  Regulation  of 

implementation  of  certain  provisions  of 

rules 

the 

for 

65 

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Community legislation 

POLICY AREA: 

ADMINISTRATIVE  EXPENDITURE 

MEASURES  CONCERNED: 

Remunerations  and  pensions 

A.  DESCRIPTION 

1.  The  Staff  Regulations,  the  rules  applicable  to  other  servants  of  the 
Communities  and the  tax  regulation  are the  legislative  basis  governing  the 
laying-down  and  payment  of  the  remunerations,  pensions  and  other 
pecuniary  rights of officials  and other servants. 

The  amounts  making  up  the  remuneration  (pay  scales,  allowances, 
contributions,  taxes,  etc.)  are  at  present  expressed  in  BEF.  The  net 
amount  is  converted  into the  national  currency  of the  place  of  employment 
(the  country  of  residence  in  the  case  of  retired  officials)  on  the  basis  of  a 
fixed exchange  rate which, combined with a weighting, takes  account  of the 
differences  in the cost of living compared to Brussels. 

2.  From  1.1.1999,  Article  8(3)  of  Council  Regulation  .../9829  on 

the 
introduction  of  the  euro  will  enable  payment  to  be  ma"de  in  euros  in  those 
countries  which will  have  adopted  the  euro  as  their  national  currency,  and 
this  will  not  require  any  amendment  of  the  Staff  Regulations  To  this  end, 
the  remuneration  currently fixed  in national  monetary  units will  merely  have 
to be converted  into euros at the fixed conversions rate. 

At  the  end  of  the  transitional  period  (31.12.2001),  in  accordance  with 
Article  14  of  Council  Regulation..798  on  the  introduction  of  the  euro,  and 
assuming  that  Belgium  adopts  the  euro,  all  the  amounts  making  up  the 
remuneration  (currently  expressed  in BEF) and all the associated  exchange 
rates  and  weightings  will  be  replaced  by  their  equivalents  in  euros  at  the 
fixed conversion rate. 

B.  PROPOSED  MODIFICATION 

3.  Aware  as  it  is  of  the  political  significance  and  symbolic  value  of  these 
remunerations,  the  Commission  proposes,  on the  assumption  that  Belgium 
adopts the euro, that they should be expressed  in euros. 

Consequently,  from  1.1.1999,  all  references  to  BEF  and  all  amounts 
expressed  in BEF will  be replaced  in the Staff  Regulations  by  references  to 
the euro and by amounts  expressed  in euros. Amounts  appearing  on  salary 
statements  (basic  salary,  allowances,  contributions,  taxes,  etc.)  will  be 

See  the  Resolution  of  the  Council  of  7.7.1997  on  the  legal  framework  for  the  introduction  of  the  euro 
(OJ  C  236  of  2.8.1997,  p.  7  -  12). 

66 

expressed  in  euros  and  the  euro  will  become  the  central  currency -for 
determining  remunerations  and pensions  in all countries. 

4.  From  1.1.1999,  remunerations  and  pensions  will  be  paid  in  euros  in  all 
countries  having  adopted  the  euro  as  their  national  currency. 
In  non-
participating countries, remunerations  and pensions will continue to be  paid 
in national  currency. 

5.  Given  that  the  rate  of  conversion  between  the  national  monetary  unit  and 
the euro will be fixed, the level of net remunerations  or pensions  paid to the 
official  will  remain  unchanged,  irrespective  of  his  place  of  employment. 
The  solution  will  therefore  require  only  a  formal  amendment  of  the  Staff 
for  adapting 
Regulations 
remunerations.  In substance, this approach anticipates  the full  changeover 
to the euro which would otherwise  not occur until  1.1.2002. 

the  method  applied 

compatible  with 

C.  ACTION AND TIMING 

6.  The  legislation  which  the  Commission  will  propose  will  have  the  effect  of 
replacing  the  term  "Belgian  franc"  with  "euro"  and  amounts  in  BEF  with 
their  equivalent  in euros  in the  Staff  regulations  and  other  rules  affected  at 
the relevant  rate of conversion with effect from  1.1.1999.  The following  will 
be proposed: 

a  proposal  for  a  regulation  amending  the  Staff  Regulations  and  the 
rules  applicable  to  other  servants  with  regard  to  the  determination  of 
remunerations,  pensions and other pecuniary  rights  in euros; 

a  proposal  for  a  Council  regulation  amending  Regulation  No 260/68 
laying  down  the  conditions  and  procedure  for  applying  the  tax  for  the 
benefit  of the European  Communities; 

a  proposal  for  a  Council  regulation  amending  Regulation  No  122/66 
(laying  down  the  list  of  places  for  which  a transport  allowance  may  be 
granted,  the  maximum  amount  of  that  allowance  and  the  rules  for 
granting  it)  and  Regulation  No  300/76  determining  the  categories  of 
officials  entitled  to  allowances  for  shiftwork,  and  the  rates  and 
conditions  thereof. 

7.  A  qualified  majority  within  the  Council  will  be  required  in  all  cases. 

It 
should  take  about  14  months  for  these  decisions  to  be  adopted  given  that 
the  opinion  of the  Staff  Regulations  Committee  and the  other  institutions  is 
required for any amendment to the Staff  Regulations. 

Close  cooperation  at  inter-institutional  level will  enable  the  regulations  and 
"pay"  component  to  be  amended  in  the  best  possible  conditions  and  the 
staff to be informed in co-operation with their  representatives. 

67 

The  draft  Commission  proposals  will  be  ready  by  the  beginning  of-1998. 
The  Commission  is  currently  carrying  out  the  preliminary  consultations. 
They will  in principle have to be adopted by  1 January  1999. 

ISSN 0254-1475 

COM(97) 560  final 

DOCUMENTS 

EN 

09  01  06 

Catalogue  number  :  CB-CO-97-596-EN-C 

ISBN  92-78-27352-X 

Office  for  Official  Publications  of the European  Communities 

L-2985  Luxembourg 

V£  I