Proposal for a Council Regulation amending Regulation (EC) No 974/98 on the introduction of the euro
Date: 2005-08-02
Institutions: European Commission
Subjects: EU Member State, EU financial instrument, European Monetary System, euro, euro area, exchange rate, national currency

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 02.08.2005 
COM(2005) 357 final 

2005/0145 (CNS) 

Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) No 974/98 on the introduction of the euro 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

1.1. 

General context 

Currently, three Council Regulations govern the introduction of the euro and its use 
in  the  current  participating  Member  States.  Firstly,  Council  Regulation  (EC)  No 
974/98 on the introduction of the euro1, which governs the initial introduction of the 
euro in the first wave euro-area Member States and Greece. This Regulation is based 
on the approach approved by the European Council in Madrid in 1996. Since future 
entrants  into  the  euro-area  will  be  in  a  situation  different  from  the  one  under  the 
Madrid scenario, these rules can no longer apply in their current format. Therefore, 
this initiative proposes amendments to this Regulation. 

Furthermore,  the  introduction  and  the  use  of  the  euro  are  governed  by  Council 
Regulation  (EC)  No  2866/98  on  the  conversion  rates  between  the  euro  and  the 
currencies of the Member States adopting the euro2 and Council Regulation (EC) No 
1103/97 on certain provisions relating to the introduction of the euro3. While the first 
one will need to be adapted in order to cover conversion rates for the currencies of 
Member States entering the euro area, the second one can remain unchanged. 

Some  non-participating  Member  States  have  already  started  their  domestic 
preparations for the introduction of the euro and are notably preparing amendments 
to their national legislation. Since the competence to adopt monetary law exclusively 
belongs to the Community as far as participating Member States are concerned, the 
Member  States  need  a  sound  and  reliable  Community  law  framework  for  their 
national preparations. 

1.2. 

Objective 

While the Treaty, and notably Articles 122 and 123 thereof, allow for the extension 
of  the  euro  area  to  current  non-participating  Member  States,  secondary  law  does 
currently not foresee rules for the introduction of the euro in such Member States and 
for  the  implementation  of  these  Treaty  provisions.  Therefore,  secondary  law  is 
necessary in order to allow for this introduction. 

In this respect, the rules which had been applied to the current participating Member 
States, and in particular Council Regulation (EC) No 974/98 on the introduction of 
the  euro  as  well  as  Council  Regulation  (EC)  No  2866/98  on  the  conversion  rates 
between  the  euro  and  the  currencies  of  the  Member  States  adopting  the  euro  and 
Council  Regulation  (EC)  No  1103/97  on  certain  provisions  relating  to  the 
introduction  of  the  euro  have  been  successfully  applied  to  the  introduction  of  the 

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OJ L 139, 11.5.1998, p. 1, regulation as amended by Council Regulation (EC) No 2596/2000 in order to 
provide for the adoption of the euro by Greece. 
OJ L 359, 31.12.1998, p. 1, regulation as amended by Council Regulation (EC) No 1478/2000 in order 
to provide for the adoption of the euro by Greece. 
OJ L 162, 19.6.1997, p. 1, regulation as amended by Council Regulation (EC) No 2595/2000 in order to 
allow for the adoption of the euro by Greece. 

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euro in the first twelve euro-area Member States. This framework appeared to be a 
robust and sound legal framework and should therefore be maintained and be applied 
to future entrants to the euro area as far as possible. 

Since  some  non-participating  Member  States  might  already  join  the  euro  area  in 
2007, the adapted legal framework for the enlargement of the euro area should be put 
in  place  on  a  timely  basis,  notably  to  provide  certainty  for  all  future  euro-area 
entrants  and  set  rules  which  can  easily  be  applied  to  any  future  entrant.  While 
Council  Regulation  (EC)  No  1103/97  on  certain  provisions  relating  to  the 
introduction  of  the  euro  can  remain  unchanged,  in  particular  Council  Regulation 
(EC) No 974/98 needs to be adapted. The need to amend this regulation stems inter 
alia  from  the  fact  that  this  Regulation  makes  reference  to  specific  fixed  dates.  The 
objective  that  Council  Regulation  (EC)  No  974/98  applies  to  all  current  and  future 
euro-area Member States makes it necessary to adapt this Regulation in a way that all 
these fixed dates are replaced with dates defined in the regulation for each individual 
Member State. Moreover, since euro banknotes and coins are already in circulation, 
the changeover scenario applied to the first twelve participating Member States will 
not be appropriate for all future euro-area entrants and some degree of flexibility will 
need to be introduced. 

Firstly,  Member  States  could  choose  a  transitional  period  in  the  “traditional” 
meaning  like  the  one  which  applied  to  those  Member  States  establishing  the  euro 
area  in  1999  (Belgium,  Germany,  Spain,  France,  Ireland,  Italy,  Luxembourg, 
Netherlands,  Austria,  Portugal  and  Finland)  or  joining  it  in  2001  (Greece).  This 
would  mean  that  first  the  euro  would  be  adopted  as  the  currency  of  the  respective 
Member State, although euro banknotes and coins would only be introduced after the 
lapse  of  the transitional period in that Member State. The length of  the  transitional 
period might vary among individual Member States. 

Secondly,  Member  States  could  opt  for  a  “big  bang”  scenario.  In  this  scenario,  the 
transitional period would only last for one “logical second”. As a consequence, the 
adoption  of  the  euro  as  the  currency  in  the  relevant  Member  State  and  the 
introduction of euro banknotes and coins would coincide. 

Finally,  Member  States  could  choose  a  “big  bang”  scenario  combined  with  a 
“phasing-out”  period,  whereby  the  “big  bang”  scenario  would  apply  and  certain 
scope for the usage of the national currency in specific legal instruments (invoices, 
company books, …) after the “big bang” date would be allowed for a limited period 
of time. 

While  the  Member  States  entering  the  euro  area  can  only  be  identified  once  their 
derogation  is  lifted,  Council  Regulation  (EC)  No  974/98  needs  to  be  adapted  in  a 
separate step prior to this point in time. 

1.3. 

Outlook 

Council Regulation (EC) No 974/98 which is based on Article 123(4) EC forms the 
basis for the introduction of the euro in the eleven “first wave” participating Member 
States – and continues to do so. This Regulation has been amended once, namely by 
Council  Regulation  (EC)  No  2596/2000  of  27  November  2000  based  on  Article 
123(5)  EC  to  allow  for  Greece  to  join  the  euro  area.  In  essence,  this  amendment 

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Regulation  simply  added  Greece  to  the  list  of  participating  Member  States  in 
Regulation (EC) No 974/98. 

The  approach  used  for  Greece  should  be  applied  to  all  further  enlargements  of  the 
euro  area.  For  each  individual  accession,  there  will  be  a  separate  regulation 
modifying Regulation (EC) No 974/98. This modifying regulation will be based on 
Article  123(5)  EC,  and  in  substance  it  will  extend  the  list  of  participating  Member 
States by each individual Member State entering the euro area and indicate the type 
of changeover scenario chosen by that Member State. 

In order to prepare Regulation (EC) No 974/98 for such subsequent amendments, this 
Regulation requires some prior technical adaptations. This technical modification of 
Regulation  974/98  would  be  based  on  Article  123(4),  third  sentence,  EC.  This 
adaptation  should  be  brought  about  as  soon  as  possible  to  provide  future  euro-area 
entrants with timely legal clarity and certainty. 

After  each  amendment,  the  Commission  will  as  a  rule  prepare  an  unofficial 
consolidated version of Regulation (EC) No 974/98 as amended. 

2. 

LEGAL ASPECTS 

2.1. 

Legal basis 

Legal  basis  for  the  present  proposal  is  Article  123(4),  third  sentence,  EC,  which 
allows for the  adoption  of  monetary  law  provisions. The Council  shall act with the 
qualified majority of the Member States without a derogation on a proposal from the 
Commission and after consulting the ECB. 

It should be noted that Article 123(5) EC stipulates that if it is decided to abrogate a 
Member  State’s  derogation,  the  Council  shall  inter  alia  take  the  other  measures 
necessary for the introduction of the euro as the single currency in the Member State 
concerned. The Council shall act with the unanimity of the Member States without a 
derogation and the Member State concerned, on a proposal from the Commission and 
after consulting the ECB. This provision will apply as legal basis for adding further 
Member States entering the euro area to those listed in Council Regulation (EC) No 
974/98. 

2.2. 

Subsidiarity and proportionality 

The  proposal  falls  under  the  exclusive  competence  of  the  Community.  The 
subsidiarity principle therefore does not apply. 

The present initiative does not go beyond what is necessary to achieve its objective 
and, therefore, complies with the proportionality principle. 

2.3. 

Choice of the legal instrument 

The Regulation instrument is the only appropriate legal instrument to amend Council 
Regulation (EC) No 974/98 on the introduction of the euro. 

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3. 

BUDGETARY IMPLICATIONS 

The proposal has no implication for the Community budget. 

4. 

COMMENTARY ON INDIVIDUAL ARTICLES 

4.1. 

Article 1(1) 

These provisions remove the effect that Council Regulation (EC) No 974/98 refers to 
specific dates. Instead, the dates are replaced by definitions and the resulting specific 
dates may differ for different Member States. 

4.2. 

Article 1(2) 

This Article specifies that for each individual Member State the dates specified and 
listed in Article 1 are laid down in a new table in the annex to Council Regulation 
(EC) No 974/98. 

4.3. 

Article 1(3) 

This provision simplifies Article 2 by using dates as defined in the regulation instead 
of a fixed date for each individual Member State. 

4.4. 

Article 1(4) 

This provision, which modifies Article 9, replaces fixed dates by dates as defined in 
the regulation. 

4.5. 

Article 1(5) 

This  provision  provides  for  the  “phasing-out”  period.  It  allows  for  the  continued 
creation  of  legal  instruments  (such  as  invoices  or  company  accounts)  in  making 
reference  to  the  national  currency  unit  in  the  “phasing-out”  period  of  one  year. 
Furthermore, this provision leaves it to Member States to limit its scope further and 
its duration. 

4.6. 

Article 1(6) 

This  provision  replaces  the  fixed  date  referred  to  in  Articles  10  and  11  by  a  date 
defined elsewhere in the regulation. Moreover, the second sentence of Article 11 of 
Council  Regulation  (EC)  No  974/98  is  amended  in  order  to  acknowledge  the  legal 
tender  status  of  euro  coins  issued  by  third  states  (such  as  currently  Monaco,  San 
Marino and the Vatican City State) under monetary agreements with the Community. 

4.7. 

Article 1(7) 

In this provision, a fixed date is replaced idem. 

4.8. 

Article 1(8) 

In  this  provision,  a  fixed  date  is  replaced  idem.  Moreover,  this  provision  obliges 
banks  during  the  dual  circulation  period  to  exchange  banknotes  and  coins  in 

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denominated the national currency unit for euro banknotes and coins free of charge. 
National law may lay down ceilings for this obligation. 

4.9. 

Article 1(9) 

This provision adds the annex referred to in point 4.2 above, which provides for the 
definitions  laid  down  in  Article  1  of  Council  Regulation  (EC)  No  974/98  and  their 
individual meanings for each Member State. 

In further legislative steps, individual Member States would be added to the list now 
attached  to  Council  Regulation  (EC)  No  974/98.  In  order  to  prepare  such 
amendments, before the decision of the Council under Article 122(2) of the Treaty to 
lift a derogation in respect of an individual Member State is taken, the Member State 
concerned  should  notify  the  Council  and  the  Commission  in  writing  whether  it 
considers  a  transitional  period  necessary  and,  in  case  it  opts  for  a  “big  bang” 
scenario, whether it wants to apply a “phasing-out” period. 

For  a  Member  State  A  applying  the  “Madrid-style”  transitional  period,  a  Member 
State B applying a “big bang” approach and a Member State C applying a “big bang” 
approach with “phasing-out” period, the respective rows in the table would look as 
follows. These would be inserted into the table according to the established order of 
the Member States: 

Member State A 

1 January 20XX 

1 January 20XX+1 

Member State B 

1 January 20YY 

1 January 20YY 

n/a 

No 

n/a 

n/a 

Member State C 

1 January 20ZZ 

1 January 20ZZ 

Yes 

31 December 20ZZ 

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2005/0145 (CNS) 

Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) No 974/98 on the introduction of the euro 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
123(4) thereof, 

Having regard to the proposal from the Commission4, 

Having regard to the opinion of the European Parliament5, 

Having regard to the opinion of the European Central Bank6, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

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Council Regulation (EC) No  974/98 of 3 May 1998 on the introduction  of the euro7 
provides for the substitution of the euro for the currencies of the Member States which 
fulfilled  the  necessary  conditions  for  the  adoption  of  the  single  currency  at  the  time 
when  the  Community  entered  the  third  stage  of  economic  and  monetary  union.  That 
Regulation  also  includes  rules  which  apply  to  the  national  currency  units  of  these 
Member States during the transitional period ending on 31 December 2001, and rules 
on banknotes and coins. 

Council  Regulation  (EC)  No  2596/2000  amended  Regulation  (EC)  No  974/98  to 
provide for the substitution of the euro for the currency of Greece. 

Regulation  (EC)  No  974/98  sets  out  a  timetable  for  transition  to  the  euro  in  the 
Member  States  currently  participating.  In  order  to  provide  clarity  and  certainty  with 
regard to the rules governing the introduction of the euro in other Member States, it is 
necessary  to  lay  down  general  provisions  specifying  how  the  various  periods  in  the 
transition to the euro are to be determined in the future. 

In  order  to  prepare  a  smooth  changeover  to  the  euro,  Regulation  (EC)  No  974/98 
provides for an obligatory transitional period between the substitution of the euro for 
the  currencies  of  the  participating  Member  States  and  the  introduction  of  euro 
banknotes and coins. 

OJ C , , p. . 
OJ C , , p. . 
OJ C , , p. . 
OJ  L  139,  11.5.1998,  p.  1.  Regulation  as  amended  by  Council  Regulation  (EC)  No  2596/2000 
(OJ L 300, 29.11.2000, p. 2). 

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(5) 

If a Member State considers that a transitional period is not necessary, euro banknotes 
and coins will become legal tender in that Member State on the date of the adoption of 
the euro. However, it should be possible for such Member States to apply a “phasing-
out”  period  of  one  year,  during  which  it  would  be  possible  to  continue  to  make 
reference  to  the  national  currency  unit  in  new  legal  instruments.  This  would  give 
economic actors in such Member States more time for to prepare for the introduction 
of the euro and therefore ease the transition. 

(6) 

Banks  should  be  required  to  exchange  banknotes  and  coins  denominated  in  the 
national  currency  unit  for  euro  banknotes  and  coins  free  of  charge  during  the  dual 
circulation period, subject to certain ceilings. 

(7) 

Regulation (EC) No 974/98 should therefore be amended accordingly, 

HAS ADOPTED THIS REGULATION: 

Article 1 

Regulation (EC) No 974/98 is amended as follows: 

(1) 

Article 1 is replaced by the following: 

For the purpose of this Regulation: 

“Article 1 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

“participating Member States” shall mean the Member States listed in the table 
in the Annex; 

“legal  instruments”  shall  mean  legislative  and  statutory  provisions,  acts  of 
administration,  judicial  decisions,  contracts,  unilateral  legal  acts,  payment 
instruments  other  than  banknotes  and  coins,  and  other  instruments  with  legal 
effect 

“conversion rate” shall mean the irrevocably fixed conversion rate adopted for 
the  currency  of  each  participating  Member  State  by  the  Council  according  to 
the  first  sentence  of  Article  123(4)  of  the  Treaty  or  in  accordance  with 
paragraph 5 of that Article;  

“euro  adoption  date”  shall  mean  the  date  on  which  a  participating  Member 
State adopts the euro; 

“cash changeover date” shall mean the date on which euro banknotes and coins 
acquire the status of legal tender in a given participating Member State; 

“euro unit” shall mean the currency unit as referred to in the second sentence of 
Article 2; 

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(g) 

(h) 

(i) 

(j) 

“national currency units” shall mean the units of the currency of a participating 
Member State, as those units are defined on the day before the adoption of the 
euro in that Member State; 

“transitional  period”  shall  mean  the  period  beginning  at  00.00  on  the  euro 
adoption date and ending at 00.00 on the cash changeover date;  

“phasing-out period” shall mean a period beginning on the euro adoption date 
during which reference may continue to be made to the national currency unit 
in new legal instruments; 

“redenominate”  shall  mean  changing  the  unit  in  which  the  amount  of 
outstanding  debt  is  stated  from  a  national  currency  unit  to  the  euro  unit,  but 
which  does  not  have  through  the  act  of  redenomination  the  effect  of  altering 
any other term of the debt, this being a matter subject to relevant national law.” 

(2) 

The following Article 1a is inserted: 

“Article 1a 

The  euro  adoption  date,  the  cash  changeover  date,  and  the  phasing-out  period,  if 
applicable, for each participating Member State shall be as set out in the Annex.” 

(3) 

Article 2 is replaced by the following: 

“Article 2 

With effect from the respective euro adoption dates, the currency of the participating 
Member States shall be the euro. The currency unit shall be one euro. One euro shall 
be divided into one hundred cent.” 

(4) 

Article 9 is replaced by the following: 

“Article 9 

Banknotes and coins denominated in a national currency unit shall retain their status 
as  legal  tender  within  their  territorial  limits  as  of  the  day  before  the  euro  adoption 
date in the participating Member State concerned.” 

(5) 

The following Article 9a is inserted: 

“Article 9a 

If  the  euro  adoption  date  and  the  cash  changeover  date  in  a  given  participating 
Member State are the same, that Member State may apply a phasing out period. In 
that case, references made in legal instruments to the national currency unit during a 
period of one year from the euro adoption date, shall be read as references to the euro 
unit  according  to  the  respective  conversion  rates.  The  acts  performed  under  these 
legal  instruments  shall  be  performed  only  in  the  euro  unit.  The  rounding  rules  laid 
down in Regulation (EC) No 1103/97 shall apply. 

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The  Member  State  concerned  may  limit  the  application  of  the  first  paragraph  to 
certain types of legal instrument, or to legal instruments adopted in certain fields.  

The  Member  State  concerned  may  shorten  the  period  provided  for  in  the  first 
paragraph”. 

(6) 

Articles 10 and 11 are replaced by the following: 

“Article 10 

With  effect  from  1  January  2002  the  ECB  shall  put  into  circulation  banknotes 
denominated in euro. The central banks of the participating Member States shall put 
into circulation banknotes denominated in euro from the respective cash changeover 
date. 

Without  prejudice  to  Article  15,  these  banknotes  denominated  in  euro  shall  be  the 
only banknotes which have the status of legal tender in participating Member States. 

Article 11 

With  effect  from  the  respective  cash  changeover  date,  the  participating  Member 
States  shall  issue  coins  denominated  in  euro  or  in  cent  and  complying  with  the 
denominations  and  technical  specifications  which  the  Council  may  lay  down  in 
accordance  with  the  second  sentence  of  Article  106(2)  of  the  Treaty.  Without 
prejudice to Article 15 and to the provisions of any agreement under Article 111 of 
the  Treaty  concerning  monetary  matters,  those  coins  shall  be  the  only  coins  which 
have the status of legal tender in participating Member States. Except for the issuing 
authority and for those persons specifically designated by the national legislation of 
the issuing Member State, no party shall be obliged to accept more than 50 coins in 
any single payment.” 

(7) 

Articles 13 and 14 are replaced by the following: 

“Article 13 

“Articles  10,  11,  14,  15  and  16  shall  apply  with  effect  from  the  respective  cash 
changeover date in each participating Member State. 

Article 14 

Where  in  legal  instruments  existing  on  the  day  before  the  cash  changeover  date, 
reference  is  made  to  the  national  currency  units,  these  references  shall  be  read  as 
references to the euro unit according to the respective conversion rates. The rounding 
rules laid down in Regulation (EC) No 1103/97 shall apply”. 

(8) 

Article 15 is amended as follows: 

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(a) 

In paragraphs 1 and 2, the words “after the end of the transitional period” are 
replaced by the words “from the respective cash changeover date”; 

(b) 

the following paragraph 3 is added: 

“During the period referred to in paragraph 1, banks in participating Member States 
adopting the euro after 1 January 2002 shall exchange their customers’ national notes 
and coins for notes and coins in euro, free of charge and without any limitation, up to 
a ceiling which may be set by national law. Banks may require that notice be given if 
the amount to be exchanged exceeds a ceiling set by the bank and corresponding to a 
household amount.  

The banks referred to in the first subparagraph shall exchange national banknotes and 
coins of persons other than their customers, free of charge up to a ceiling set by the 
bank or by national law.” 

(9) 

The text in the annex to this Regulation is added as an annex. 

This Regulation shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

Article 2 

This Regulation shall be binding in its entirety and directly applicable in all Member States, in 
accordance with the Treaty, subject to Protocols 11 and 12 and Article 122(1). 

Done at Brussels,  

For the Council 
The President 

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ANNEX  

Member State 

Euro adoption 
date 

Cash changeover 
date 

Member State with a 
“phasing-out” period 

End of “phasing-
out” period 

Belgium 

1 January 1999 

1 January 2002 

Germany 

1 January 1999 

1 January 2002 

Greece 

1 January 2001 

1 January 2002 

Spain 

1 January 1999 

1 January 2002 

France 

1 January 1999 

1 January 2002 

Ireland 

1 January 1999 

1 January 2002 

Italy 

1 January 1999 

1 January 2002 

Luxembourg 

1 January 1999 

1 January 2002 

Netherlands 

1 January 1999 

1 January 2002 

Austria 

1 January 1999 

1 January 2002 

Portugal 

1 January 1999 

1 January 2002 

Finland 

1 January 1999 

1 January 2002 

n/a  

n/a  

n/a  

n/a  

n/a  

n/a  

n/a  

n/a 

n/a 

n/a 

n/a 

n/a 

n/a  

n/a  

n/a  

n/a  

n/a  

n/a  

n/a  

n/a 

n/a 

n/a 

n/a 

n/a 

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