Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee, the Committee of the Regions and the European Central Bank - Five years of euro banknotes and coins {SEC(2006) 1786}
Date: 2006-12-22
Institutions: European Commission
Subjects: euro, euro area, issuing of currency, paper money, public awareness campaign, single monetary policy

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 22.12.2006 
COM(2006) 862 final 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE 
EUROPEAN PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN 
CENTRAL BANK 

Five years of euro banknotes and coins 

{SEC(2006) 1786} 

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1. 

INTRODUCTION 

The  euro  was  introduced  as  the  single  currency  of  eleven  EU  Member  States  on 
1 January 1999, followed by Greece on 1 January 2001. In daily life, this major event to some 
extent passed unnoticed since the consumers in the twelve countries concerned continued to 
use  national  banknotes  and  coins  in  payment  transactions.  Until  the  end  of  2001,  the  euro 
could only be used in its scriptural form, e.g. for cheques or bank transfers in euro, although 
few initially made use of this possibility.  

As from 1 January 2002, euro banknotes and coins were brought into circulation, and the euro 
became  a  tangible  reality  for  the  more  than  300  million  residents  of  the  euro  area,  which 
collectively carry out about 300 billion retail payment transactions each year, more than 80 % 
of  which  are  paid  in  cash.  Following  a  smooth  and  well-prepared  changeover,  the  total 
outstanding value  of banknotes has almost tripled (from euro 221  billon in January  2002 to 
euro 595 billion at the end of 2006), whereas for coins it has increased more moderately (from 
euro 13.0 billion on 1 January 2002 to euro 17.6 billion).1 

Citizens  in  neighbouring  countries  or  regions,  notably  where  the  euro  is  used  for  payment 
transactions and/or for savings purposes, as well as in many tourist destinations all over the 
world  have  also  become  familiar  with  the  single  currency.  Estimates  from  the  European 
Central Bank (ECB) indicate that between 10 and 20 % of the total value of euro banknotes in 
circulation is currently held outside the euro area. 

Euro cash has been well accepted in the twelve euro-area countries, taking account of the fact 
that the population not only had to adjust to the new set of euro banknotes and coins which 
typically had a different denominational structure than the former legacy currency, but also to 
the new scale of prices and values. 

The  present  Communication  is  accompanied  by  a  Staff  Working  Paper  of  the  Commission 
services,  which  provides  more  detailed  information  on  the  main  issues  raised  in  this 
Communication. 

2. 

THE ROLE OF INFORMATION REMAINS CRUCIAL 

According to survey information2 collected by the Commission there is still a lack of specific 
information  about  the  euro  in  certain  areas.  In  other  areas,  some  misperceptions  remain 
widespread. This points to the need for renewed efforts to inform the general public in the EU 
about the euro. 

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2 

Based on figures from the European Central Bank. The latest figures refer to October 2006. 
See Flash Eurobarometer 193, 'The euro zone, 5 years after the introduction of the common European 
currency', carried out in September 2006 and the Flash Eurobarometer 191, 'Introduction of the euro in 
the new Member States', carried out in September 2006. 

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Lack of awareness of certain benefits of the euro 

Some of the specific advantages of the euro are ignored by a majority of euro-area citizens. 
For example, only around a quarter or less of euro-area citizens (23 %) is aware that no extra 
costs or charges apply when withdrawing money with a bank card in another country of the 
euro area or when paying with a bank card (27 %) or executing a bank transfer (16 %) within 
the euro area. 

The need for information is even higher in the new Member States, which will all enter the 
euro  area  in  the  future  and  where  a  majority  of  the  people  consider  themselves  to  be  badly 
informed. At the same time, polling results consistently show that ill-informed citizens tend to 
be the most reluctant and fearsome about the future introduction of the euro. 

Persistent misperceptions 

In  other  areas,  certain  misperceptions  persist.  For  example,  a  large  majority  (93 %)  of 
respondents in the euro area believes that the euro has added to the increase  of prices.  This 
misbelief has spilled over to the future euro-area entrants, as on average 45 % of respondents 
in the ten recently acceded Member States believe that the future introduction of the euro in 
their country will lead to higher inflation. This stands at odds with the ECB's track record, as 
annual  inflation  in  the  euro  area  has  been  below  2.4 %  since  the  introduction  of  the  euro 
in 1999. 

Dual price displays can be counterproductive 

The same survey information shows a continuous, although rather slow, development towards 
thinking in euro. For common day-to-day purchases, a clear majority (57 %) of the population 
in  the  euro  area  calculates  in  euro,  whereas  one  in  five  still  counts  in  the  former  national 
currency.  For  high-value  exceptional  purchases,  such  as  a  car  or  a  house,  more  people  still 
count in the previous national currency (40 % on average) compared to just 29 % thinking in 
euro. 

After five years of mental adaptation to the euro, the Commission can only reiterate its earlier 
recommendation3  that  any  residual  dual  display  practices  in  the  euro-area  (except  for 
Slovenia) should be discontinued as soon as possible. Dual displays assist consumers in the 
early stages of the changeover, but become counterproductive at a certain stage as they allow 
consumers to continue to count in national currency, thereby delaying the mental changeover 
to the new scale of prices and values. 

3. 

EURO BANKNOTES AND COINS – FUTURE PERSPECTIVES 

3.1. 

The general framework 

Both euro banknotes and coins are legal tender in all euro-area countries. The responsibility 
for the production and issuance of euro banknotes exclusively belongs to the ECB. The EC 
Treaty has provided for a different framework with respect to euro coins since Member States, 
rather  than  the  ECB,  are  responsible  for  producing  and  issuing  euro  coins,  which  helps  to 

3 

See  COM(2002)  747  final  of  19.12.2002:  'The  introduction  of  euro  banknotes  and  coins  –  one  year 
after'. 

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understand why euro coins display national features. Both euro banknotes and coins are put in 
circulation by the euro-area national central banks.  

The production of euro coins is decided and organised on a national basis, and typically falls 
under the responsibility of each country's national mint, except for countries without a mint 
which commission coins from other producers. 

The  differences  between  euro  banknotes  and  coins  also  extend  to  the  monetary  income 
stemming  from  the  issuance  of  euro  cash  (see  3.5  below),  which  is  collected  by  the 
Eurosystem in the case of banknotes and by Member States in the case of coins. 

3.2. 

Future  euro  banknotes  and  coins  –  future  adjustments  and  possible 
improvements 

Euro banknotes and coins are the product of a search for continuous improvement, notably in 
terms  of  quality,  reliability  and  user-friendliness.  The  number  of  detected  counterfeit  euro 
banknotes and coins is extremely low compared to the numbers in circulation, and definitely 
lower than that of US-dollar banknotes. 

Euro banknotes 

As  regards  euro  banknotes,  the  ECB  started  preparing  the  next  series  of  banknotes  shortly 
after the introduction of the euro cash into circulation, notably in order to continuously ensure 
state-of-the-art  security  features  so  that  the  banknotes  always  offer  good  protection  against 
counterfeiting.  The  first  denomination  of  the  new  bank  note  series  is  expected  to  be  issued 
towards  the  end  of  the  present  decade  and  to  be  followed  by  subsequent  denominations  at 
certain intervals. 

Euro coins – the national sides 

the  end  of  2008.4  However,  Member  States  were  allowed 

In order to ensure the coherence of the euro coinage system, the Council decided in 2003 that 
the standard  national side of euro circulation coins should remain unchanged ('moratorium') 
issue  2-euro 
until 
commemorative  coins  in  order  to  celebrate  specific  events,  subject  to  applying  certain 
constraints  with  respect  to  quantity  and  frequency.  Such  commemorative  coins  are  regular 
circulation coins, except that they have a different national side celebrating a particular event. 
Member States may also issue euro collector coins, e.g. in precious metals, but these are legal 
tender only in the issuing country and are not intended for circulation. 

to 

The Council's future decision on the national sides of euro circulation coins, which should be 
taken before the moratorium's expiry at the end of 2008, is a very important one which should 
be carefully prepared. The Commission will launch a survey in the course of 2007 among the 
euro-area population in order to collect people's views and preferences in this respect. 

Euro coins – the common sides 

The  5  higher  denominations,  which  used  to  bear  maps  of  Europe  on  the  common  side 
depicting  the  countries  of  the  former  EU-15  have  been  amended.  Slovenia  will  be  the  first 
country to introduce coins with the new common sides as from 1 January 2007. The switch-

4 

Except in the case the Head of State depicted on a coin changes. 

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over of the twelve first-wave euro-area countries for new coin production is currently being 
prepared. Most of them will switch to the new common design already in the course of 2007, 
with a few others joining in 2008 at the latest. 

3.3. 

Banknote and coin production and storage – enhanced efficiency 

Euro  banknote  production  is  organised  on  a  decentralised  basis  with  pooling,  in  order  to 
increase  efficiency  by  achieving  economies  of  scale.  This  means  that  the  ECB  allocates 
production  on  an  annual  basis  to  the  euro-area  NCBs,  whereby  each  denomination  is 
produced  by  a  limited  number  of  printing  works  and  each  NCB  is  responsible  for  the 
procurement of only one or a few denominations. Logistical stocks and a common strategic 
stock of euro banknotes, the Eurosystem Strategic Stock (ESS), shall ensure the continuity of 
euro banknote supply. The stocks are, inter alia, used for supplying the initial quantity of euro 
banknotes necessary for the changeover in Member States joining the euro area, as is the case 
with Slovenia on 1 January 2007. The ECB has furthermore adopted a guideline on the setting 
up  of  a  single  Eurosystem  tender  procedure  (SETP)  for  procurement  of  banknotes  that  will 
start at the latest in 2012. 

Euro  coin  production  is  a  matter  of  national  competence.  Since  decisions  are  taken  on  a 
decentralised basis, some of the benefits and efficiency gains stemming from pooling, notably 
co-ordination of production and/or storage are foregone. For example, the current framework 
does  not  preclude  that  certain  countries  decide  to  produce  extra  coins  while  other  countries 
have excess stocks of the same denomination. Possibilities for improvement could therefore 
be  examined,  notably  with  respect  to  the  three  smallest  denominations  (1-,  2-  and  5-cent) 
which  collectively  represent  some  80 %  on  average  of  new  coin  production.  They  generate 
little monetary income and the production cost and related expenditure (transport, packaging, 
etc.) are high compared to their face value. Since the existence of different national sides to 
some  extent  constitutes  an  impediment  for  the  exchange  or  transfer  of  coin  stocks  among 
countries, and possibly also for improving the efficiency of mass production, some Member 
States may be prepared to envisage the possibility of using small coinage with a "standard" 
national  side  to  cover  part  of  their  needs  for  the  three  lowest  denominations.  Further 
possibilities  for  creating  and/or  exploiting  synergies  with  respect  to  coin  production  and 
storage should be explored, notably in co-operation with the ECB in order to benefit from its 
experience in this area. 

3.4. 

Common expenditure linked to the euro coinage system 

Certain elements of the euro coinage system require common and co-ordinated action by all 
euro-area Member States, notably in the field of research and development, the exchange of 
information,  etc.  For  purely  practical  reasons,  it  appears  more  convenient  and  efficient  to 
finance  such  common  activities  from  a  common  budget  (as  is  the  case  for  similar  activities 
pertaining  to  euro  banknotes  which  are  financed  by  the  ECB),  rather  than  having  to  collect 
different national contributions before joint measures can be implemented or even envisaged. 
The possibility of creating a specific EU budget line for euro coinage projects and activities of 
common interest should therefore be examined. 

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3.5.  Monetary income from euro banknotes and coins 

Cash  in  circulation  constitutes  a  source  of  income  (generally  called  monetary  income  or 
seigniorage) for the issuing authority. In the case of euro banknotes, this income is pooled and 
subsequently distributed among euro-area national central banks according to a specific key 
based on each country’s GDP and population. The situation differs with respect to euro coins, 
as  the  income  (which  roughly  corresponds  to  the  face  value  of  the  coin  minus  the  costs  for 
production  and  putting  into  circulation)  is  collected  by  the  country  issuing  the  coin.  This 
approach  should  be  equally  satisfactory  provided  that  there  are  no  strong  "net"  migratory 
flows  of  euro  coins  between  Member  States  (e.g.  systematic  inflows  to,  or  outflow  from, 
certain  countries),  in  which  case  certain  (specific  or  general)  adjustments  to  the  present 
system will need to be envisaged. 

3.6. 

Framework for the protection of the euro against counterfeiting 

The  introduction  of  euro  banknotes  and  coins,  circulating  in  twelve  member  states  and  in  a 
number  of  third  countries,  required  concerted  effort  to  protect  the  currency  against 
counterfeiting, going outside the national scope.  

While Member States continue to be primarily responsible for ensuring the protection of the 
euro,  trans-national  cooperation  has  been  put  in  place  to  support  anti-counterfeiting  efforts. 
Responsibilities  are  shared  between  the  European  Commission/European  Anti-Fraud  Office 
(OLAF,) the ECB, Europol, Eurojust and Interpol. 

As a basis, an efficient legal framework has been adopted at European level to increase the 
general  level  of  protection  and harmonise  national  legislation  in  this  area.  National  analysis 
centres  for  counterfeit  banknotes  (NAC)  and  coins  (CNAC)  work  closely  with  the  ECB’s 
Counterfeit  Analysis  Centre  (CAC)  and  Commission/OLAF’s  European  Technical  and 
Scientific  Centre  (ETSC)  to  identify,  analyse  and  withdraw  counterfeit  euro  banknotes  and 
coins  from  circulation,  while  measures  have  been  taken  to  complete  and  achieve  an 
appropriate level of harmonisation in criminal sanctions. 

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