Opinion of the Economic and Social Committee on the "Assessment of the state of preparedness for the introduction of the euro to highlight the main gaps and the necessary remedial action"
Date: 2001-09-12
Institutions: European Economic and Social Committee
Subjects: euro, issuing of currency

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stopped short of fully harmonising and unifying all rules and
procedures. While it accepts that the imminence of a major
revision in 2004 would militate against making drastic changes

at this juncture, it hopes that on that occasion full prominence
will be given to the need to simplify, harmonise, streamline,
codify, reduce and unify the entire system.

Brussels, 12 September 2001.

The President

of the Economic and Social Committee

Göke FRERICHS

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

(2001/C 311/11)

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

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

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

1.

Introduction

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

1.2. With these points in mind, the Committee held a
hearing with the relevant social actors on 14 May 2001,

(1) OJ C 155 of 29.5.2001, p. 57.
(2) COM(2000) 443 final.

attended by representatives of
the Commission and the
European Central Bank, who provided valuable comments and
information. The views expressed by the participants provided
an overall picture of the situation: the brief notes below are
intended to contribute further to discussion on possible further
action. The Committee points out that the comments and
proposals made in its earlier opinion, referred to in point 1.1
above, remain fully valid.

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

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2. Communication

Representatives of

2.1.
the general public (consumers,
families, ‘weak’ sectors of society, people living in remote rural
and upland areas) have confirmed the point made by the
Committee in its earlier opinion (1): in autumn 2000, only a
small proportion of people in the Eurozone were fully
acquainted with how the transition will be effected. Matters had
improved by January 2001 — according to the Eurobarometer
survey quoted in the Commission’s communication (2) — but
were still, in the Committee’s view, far from satisfactory. In
view of the human and financial resources committed by the
European and national authorities, sectoral associations and
private businesses, the only possible conclusion is that the
effects of the information campaign, which was launched in
1996 and ran until the end of 2000, have fallen far short of
expectations. The ‘cost per contact’ (the cost for each person
effectively remembering the message, not all recipients)
is
extremely high, and far in excess of the Commission’s estimate
of 2 euros per citizen. This cost is borne by the public
authorities and private organisations.

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

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

2.4.
economically disadvantaged,

The issue of the most vulnerable sectors of society (the
the illiterate etc.)

the blind,

(1) OJ C 155 of 29.5.2001, p. 57.
(2) COM(2001) 190 final of 3 April 2001.

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

3. Availability of notes and coins

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

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

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

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

4. Rounding-off of prices

As long ago as 1995, in its Opinion on the Green
4.1.
Paper on the practical arrangements for the introduction of
the single currency (1), the Committee warned against the
danger involved in rounding-off of prices: when a national
currency, very often not divided into sub-units of a hundred
(‘cents’), is converted into another currency with a higher unit
value — and therefore necessarily divided into hundredths —
the temptation to round up to the nearest five or zero (e.g.
from 32 to 35, or from 77 to 80) may be strong. This is
particularly true of relatively low-price goods. Consumer
organisations will need to be extremely vigilant in order to
ensure that public opinion is on the alert, encouraging healthy
competition between commercial operators. National and
local authorities must do the same, while bearing in mind that
under free pricing arrangements, coercive action is to be ruled
out.

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

Conversion calculations are quite a different matter:
4.3.
the occasional error is acceptable, but cases of
fraud at
consumers’ expense are certainly not, especially if they affect
the weakest or least-informed sectors of society — the latter
including foreign tourists. In the above-mentioned opinion on
the green paper, the Committee suggested that the Member

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

States consider legislation to introduce criminal sanctions for
deliberate and systematic errors in conversion (fraud); the
proposal is repeated here.

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

5. The financial system

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

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

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

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6. Businesses

As pointed out in its earlier opinion (1), some SMEs —
6.1.
particularly very small, individual ones — may not be able to
convert their own administrative and accounting procedures
to the euro by the deadline of 31 December 2001. The
question is not whether these businesses will become ‘outlaws’:
those who do not comply clearly will. Rather, the question is
how the national authorities, particularly the tax authorities,
will react to a situation in which a substantial proportion of
operators are in an irregular position. The temptation to take
punitive action may be strong, but it is to be hoped that all the
governments have planned assistance and support arrange-
ments for those in real difficulties on account of insufficient
resources or operational capacity.

Governments too will have to show good will

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

7. Logistical problems and fraud

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

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

7.3.
Today, under ‘normal’ conditions, armed and often
bloody attacks take place. It is reasonable to assume that an

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

Brussels, 12 September 2001.

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

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

7.5.
In addition to the factors described in the earlier
opinion (1), which remain valid, the Committee would draw
attention to the fact that from the physical point of view, euro
coins do not form ‘a single currency’: not only does the
presence of eleven different national versions (reverse side) do
nothing to boost recognition in the various countries, but it
could encourage the circulation of forged coins in countries
other than that in which they are produced, where there would
be little or no familiarity with them.

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

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

The President

of the Economic and Social Committee

Göke FRERICHS