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 - The introduction of the euro in Slovenia
Date: 2007-05-04
Institutions: European Commission
Subjects: European Monetary System, Slovenia, euro, national currency, report, transitional period (EU)

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 4.5.2007 
COM(2007) 233 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  

The introduction of the euro in Slovenia 

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1. 

INTRODUCTION 

Following Slovenia's request of 2 March 2006 for a convergence assessment based on Article 
122(2)  EC,  the  Commission  and  the  ECB  prepared  their  respective  Convergence  Reports1, 
examining  whether  the  country  had  achieved  a  high  degree  of  sustainable  convergence, 
notably  with  respect  to  the  "Maastricht"  convergence  criteria  laid  down  in  the  Treaty. 
Following the Commission's proposal of 16 May 2006, the Council decided on 11 July 2006 
to  abrogate  Slovenia's  derogation.  It  furthermore  decided  Slovenia's  euro  adoption  date 
(1 January  2007)  and  the  conversion  rate  of  its  national  currency  vis-à-vis  the  euro 
(239.640 tolars for one euro).  

Following this confirmation of Slovenia's entry into the euro area, the country intensified and 
finalised  its  practical  preparations  for  the  changeover  to  the  euro.  Slovenia's  Masterplan  for 
the euro changeover is based on the so-called "Big-bang" scenario,2 whereby euro banknotes 
and coins are introduced on the same day as the date of adoption of the euro (1 January 2007 
in the case of Slovenia). The period of dual circulation, during which both the Slovenian tolar 
and the euro were legal tender extended from 1 to 14 January 2007, after which date the euro 
became sole legal tender.  

While Slovenia benefited from a number of favourable conditions, its timely and meticulous 
preparatory work ensured a successful changeover. The present communication presents the 
salient aspects of the country's changeover, in particular with respect to the cash changeover, 
the conversion of administrative and financial systems in the public and private sector, price 
developments  (and  perceptions  thereof)  linked  to  the  changeover  and  the  citizens'  overall 
judgment of the changeover to the euro. Finally, this Communication draws the main lessons 
for future changeover experiences. 

2. 

THE EURO'S SWIFT ENTRY INTO SLOVENIANS' DAILY LIFE  

As  their  country  is  adjacent  to  two  euro-area  countries  (Italy  and  Austria),  most  Slovenian 
citizens  were  already  familiar  with  the  euro  well  before  it  became  their  national  currency. 
Survey results in the new Member States3 indicated that the Slovenes were the ones who were 
most familiar with euro cash, since 95% had already seen euro banknotes (against an average 
of  77%  for  the  ten  new  Member  States)  and  93%  had  already  seen  euro  coins  (against  an 
average  of  70%).  Similarly,  many  had  already  used  euro  banknotes  (80%)  or  euro  coins 
(77%).  Well  before  1  January  2007,  many  Slovenian  citizens  and  enterprises  owned  certain 
amounts of euro cash, or had opened a euro bank account. 

1 
2 

3 

COM(2006)224 of 16 May 2006 and ECB May 2006 Convergence Report. 
The  current  euro-area  countries  introduced  the  euro  in  accordance  with  the  "Madrid"  scenario, which 
involved  a  transitional  period  of  three  years,  as  the  euro  became  their  currency  in  1999  (2001  for 
Greece), while euro banknotes and coins were only introduced in 2002. 
Commission Flash Eurobarometer survey 191, conducted in September 2006. 

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Once the euro became legal tender on 1 January 2007, its relative share in circulation quickly 
gathered  pace  as  illustrated  in  Graph  1  which  is  based  on  the  results  of  a  daily  telephone 
survey  organised  for  the  Commission  among  a  sample  of  the  Slovenian  population,  asking 
respondents  to  report  on  the  content  of  their  wallets  and  purses.  Already  on  5 January 
(evening), more than half of the respondents reported that they had only euro banknotes and 
coins in their wallets and purses.  

Graph 1 

Percentage of Slovenian citizens with euro cash
 in their wallets and purses

banknotes: only or mostly euro 

coins: only or mostly euro

banknotes: only euro 

coins: only euro

100
90
80
70
60
50
40
30
20
10
0

29/12

02/1

03/1

04/1

05/1

06/1

10/1

12/1

16/1

Respondents were also asked to report on their latest cash payment operations (see Graph 2). 
On 4 January 2007, more than half of all cash payments were conducted in euro. The share of 
euro payments continued to climb steeply in subsequent days. Graph 2 furthermore illustrates 
the similarity of the euro's progress with the evolution observed on average in the euro area 
during the first-wave experience in 2002. 

Percentage of cash payments in shops... 

...in tolar only (Slovenia in 2007)
...in euro only (Slovenia in 2007)
...in euro only (Euro-area average in 2002)

Graph 2 

100
90
80
70
60
50
40
30
20
10
0

29/12

02/1

03/1

04/1

05/1

06/1

10/1

12/1

16/1

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While  Slovenia  generally  benefited  from  favourable  circumstances,  the  successful  transition 
from tolar to euro should definitely be attributed to the quality and timeliness of the country's 
practical  preparations  for  the  introduction  of  the  euro,  which  had  already  started  in  earnest 
before January 2005, when the country's national changeover plan was adopted.4 The different 
elements which have contributed to this success are further analysed in this communication. 

The  Slovenian  changeover  to  the  euro  clearly  confirms  the  first-wave  experience  that 
pro-active  and  timely  preparations  pay  off.  Well-prepared  countries  are  rewarded  in 
terms  of  the  speed  and  the  smoothness  of  their  national  changeover,  and  the  positive 
perception of their citizens. 

3. 

THE SLOVENIAN CASH CHANGEOVER 

The  cash  changeover  constitutes  the  most  visible  element  of  the  national  changeover. 
Virtually  all  citizens  and  enterprises  are  directly  concerned  by  this  operation.  Its  success  is 
largely  dependent  on  the  early  supply  by  the  national  central  bank,  i.e.  before  the  euro 
changeover date (€-day), of euro banknotes and coins to banks and other financial institutions 
("frontloading").  In  turn,  banks  try  to  ensure  that  enterprises  involved  in  cash-related 
operations,  and  retailers  in  particular,  are  supplied  with  euro  cash  before  €-day,  notably  to 
allow  them  to  be  able  to  give  change  exclusively  in  euro,  hence  avoiding  the  recycling  of 
legacy  currency.  While  bringing  euro  cash  into  circulation,  banks  and  retailers  at  the  same 
time need to cope with the rapid backflow of legacy cash.  

3.1. 

Frontloading and sub-frontloading operations before €-day 

The Bank of Slovenia received a total of 94.5 million banknotes with a face value of €2,175.0 
million  from  the  Eurosystem's  logistical  stocks5.  A  total  of  296.3  million  euro  coins  with  a 
face value of €104.0 million were supplied by the Mint of Finland6. 

The  frontloading  operations  of  credit  institutions  with  euro  coins  started  on  25 September 
2006,  and  on  29  November  2006  as  regards  euro  banknotes.  In  total,  the  Slovenian  banks 
received  euro  banknotes  worth  €772  million  and  250  million  coins  (representing  some  €84 
million) before the end of 2006.  

The sub-frontloading process of retailers and other enterprises by credit institutions started in 
the  course  of  December  2006.  Sub-frontloading  represented  0.9%  in  value  of  the  total 
frontloaded  amount  as  far  as  euro  banknotes  are  concerned,  and  7.4%  in  value  as  regards 
coins. This includes the supply of pre-packed starter kits for professional clients worth €201 
each as well as the 450.000 mini-kits (worth €12.52 each) containing one or more euro coins 
of each denomination which were made available by banks to the Slovenian public as from 15 
December  2006  and  were  almost  sold  out.  Sub-frontloading  played  a  relatively  modest  role 
compared to the cash changeover in 2002. However, many Slovenian enterprises and citizens 
had acquired, or already owned, euro cash collected through other channels.  

4 

5 
6 

See also the Commission's Fourth Report on the practical preparations for the future enlargement of the 
euro area (COM(2006)671 of 10 November 2006). 
Data relating to the cash changeover were provided by the Bank of Slovenia and the ECB. 
Slovenia has no national mint and selected the Finnish mint as coin supplier following a public tender 
procedure. 

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3.2. 

The period of dual circulation 

The Slovenian authorities decided to keep the period of dual circulation as short as possible. 
The original Master plan, adopted in January 2005, provided for a period limited to a single 
week,  although  this  was  subsequently  extended  to  two  weeks  in  a  later  version  of  the  plan. 
This  duration  was  considerably  shorter  than  the  dual-circulation  periods  applying  in  2002, 
which  differed  from  country  to  country  and  often  extended  over  a  period  of  up  to  two 
months7.  

While commercial banks only opened on 3 January 2007, some of them opened a few of their 
branches  (52  in  total  across  the  country)  on  1  and  2  January  for  cash  exchange  operations 
only. In addition, the Bank of Slovenia opened its own counter. 

The conversion of automated teller machines (ATMs) proceeded at a rapid pace as two thirds 
of the country's 1,500 ATMs were ready to dispense euro notes on 1 January 2007 at 4 a.m., 
while more than 93% were fully euro-operational by the end of that same day. The conversion 
of the ATM machine park was completed by 3 January. The speed of the ATM conversion is 
broadly similar to what was observed in 2002. 

However, the low number of ATM transactions in the early days of January 2007, well below 
the  average  daily  transaction  volume,  differs  markedly  from  the  first-wave  experience  in 
2002,  when  peak  loads  were  registered  in  terms  of  the  number  of  daily  operations  and  the 
value  of  withdrawn  cash  as  citizens  massively  turned  to  cash  dispensers  in  order  to  acquire 
their first euro notes. People's eagerness can be partly explained by their curiosity to discover 
the new euro notes. This curiosity effect was virtually inexistent in Slovenia, as the population 
was largely familiar with euro cash well before the country adopted the euro. Furthermore, the 
data  collected  via  telephone  survey  on  29  December  2006  (see  Graph 1)  confirmed  that  a 
meaningful part of the population already owned euro cash before €-day. In general, citizens 
and enterprises had no difficulty at all to acquire euro cash, even well before €-day.  

The conversion of the Point-of-Sale (POS)  payment terminal network was completed in the 
early hours of 1 January 2007. The number of POS operations from 3 January, when shops 
opened again, to 6 January quickly reverted to normal levels. 

The  wide  availability  of  euro  cash,  both  before  and  after  €-day,  made  an  important 
contribution  to  the  smoothness  of  the  cash  changeover.  While  the  speed  of  the  cash 
changeover  was  very  similar  to  the  first-wave  experience  in  2002,  citizens  and 
enterprises  had  more  time  and  opportunity  to  acquire  the  necessary  amounts  of  euro 
cash. 

The Slovenian cash changeover furthermore confirms the technical feasibility of a short 
(2-week)  period  of  dual  circulation,  which  contributes  to  minimise  the  burden  on 
retailers and other businesses. 

7 

The period of dual circulation lasted from 1 January to 28 February 2002 in nine countries (BE, GR, 
ES, IT, LX, NL, AU, PT, FI). It ended on 9 February 2002 in IR and on 17 February 2002 in FR. The 
period was reduced to nil in DE, although DEM cash could be used until 28 February 2002 on the basis 
of a joint declaration of retail and banking associations. 

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3.3. 

The speedy return of legacy cash 

The  backflow  of  tolar  cash  started  in  November  and  December  2006  (some  banks  offered 
their  customers  the  deposit  of  euro  cash  on  their  bank  account  at  the  conversion  rate  and 
without  charges  as  from  1  December  2006).  On  1  January,  close  to  28%8  of  the  total 
outstanding value of tolar banknotes had been returned; the value of returned tolar coins was 
still negligible compared to total circulation.9 

The backflow of legacy cash continued at a sustained pace (see Graph 1): more than half of 
the  outstanding  value  of  tolar  banknotes  had  already  been  returned  on  4  January  2007  and 
more than 80% on 11 January 2007. At the end of January, only 8.5% of tolar banknotes was 
still in circulation. This compares very favourably with the euro area situation in 2002, since 
only 40% of legacy notes were returned by mid-January and 70% by the end of January. The 
return of tolar coins was much more gradual (see Graph 1), as 71.5% was still outstanding at 
the end of January. 

Graph 3 

Evolution of tolar cash in circulation (as a % of average 
outstanding amount in October 2006)

tolar banknotes  

tolar coins

100
90
80
70
60
50
40
30
20
10
0

01/1 03/1 04/1 05/1 08/1 09/1 10/1 11/1 12/1 15/1 16/1 17/1 18/1

The rapid return of legacy currency, which caused severe bottlenecks during the first-
wave transition in 2002, was remarkably swift, particularly regarding tolar banknotes.  

Cash exchange free of charge was still possible at banks until 1 March 2007. Thereafter, the 
Bank of Slovenia still exchanges tolar banknotes free of charge for an unlimited period, and 
tolar coins until the end of 2016.  

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9 

The  total  value  of  tolar  banknotes  in  circulation  on  31.12.2006  amounted  to  SIT  149,631  billion 
(€622.7 million), representing 72.1% of the average value of tolar banknotes in circulation in the course 
of October 2006 (SIT 207,039 billion corresponding to €864.0 million). 
The  total  value  of  tolar  coins  in  circulation  on  31.12.2006  amounted  to  SIT  3,602  billion 
(€15.0 million),  representing 96.0%  of  the  average  value of  tolar  coins  in  circulation  in  the  course  of 
October 2006 (SIT 3,752 billion corresponding to €15.7 million). 

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As  a  direct  service  to  the  general  public,  and  pursuant  to  Art.  52  ESCB/ECB,  the  national 
central banks of the Eurosystem have taken measures to ensure during the first two months of 
2007 that tolar banknotes, up to a counter value of €1,000 for any given party/transaction on 
any one day, will be exchanged into euro at par value in at least one location in their national 
territory (similar arrangements were in place during the 2002 cash changeover).  

4. 

THE CONVERSION OF FINANCIAL ADMINISTRATIVE SYSTEMS 

The  some  2.3  million  bank  accounts  held  by  private  persons  and  legal  entities  were 
successfully converted in euro. During the first days of January, much more people than usual 
turned to ATMs to verify the balance of their account in euro.  

Regarding the conversion of administrative, financial, accounting and other related systems, 
the "Big-bang" scenario is much more demanding than the "Madrid" scenario applied during 
the first wave. Indeed, the majority of public administrations and private enterprises benefited 
at the time from a three-year transitional period extending from 1999 to 2001 (one year in the 
case  of  Greece)  to  convert  these  systems  to  the  euro.  As  the  "Big-bang"  scenario  does  not 
allow  for  such  a  transitional  period,  all  Slovenian  administrations  and  enterprises  were 
expected to operate exclusively in tolar up to 31 December 2006, and switch all their systems 
to the euro as from 1 January 2007.  

The Slovenian enterprises and public administrations have successfully met the challenge by 
preparing themselves adequately and in good time. According to information collected by the 
Flash  Eurobarometer  201a  conducted  in  February  2007,10  31%  of  Slovenian  enterprises 
started their preparations in the first half of 2006 or earlier, while 64% started after June 2006. 
More  than  94%  of  Slovenian  businesses  confirmed  that  their  accounting,  invoicing  and 
payroll systems were fully ready for switching to the euro on 1 January 2007. No particular 
problems were experienced or reported. 

The  changeover  in  Slovenia  confirms  the  relevance  of  the  "Big-bang"  approach  for 
future  entrants,  in  particular  for  smaller  countries.  Since  euro  cash  is  available  since 
2002, this scenario appears to be the most appealing one for future euro-area entrants, 
notably because of its simplicity in terms of communication and information.  

5. 

PRICE DEVELOPMENTS 

5.1. 

Price monitoring during the changeover 

The  dual  display  of  prices  started  in  March  2006  and  will  continue  by  law  until  mid-2007. 
The  Slovenian  Consumers'  Association  has  been  monitoring  prices  (PriceWatch)  while  also 
benefiting from consumer input, since it invited the public to report significant price rises, as 
evidenced for example by a comparison of old receipts and invoices (in tolars) and new bills 
(in  euro).  Any  major  price  rises  which  are  confirmed  after  verification  are  reported  to  the 
public  on  a  regular  basis.  This  reporting  policy  helps  consumers  to  immediately  spot  price 
rises and thereby contributes to limit possible abuses.  

10 

See http://ec.europa.eu/public_opinion/euro_en.htm for all Eurobarometers on the euro. 

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The  Slovenian  Consumers'  Association  furthermore  emphasised  that  the  costs  of  banking 
services  have  significantly  increased  in  the  course  of  2006.  The  Consumers'  Association 
claims that banks started as from early 2006 to increase the cost of some of their services (e.g. 
fees  for  ATM  cash  withdrawals).  As  regards  payment  services  for  consumers  (account 
management,  online  banking  etc.),  significant  price  increases  were  noticed  between  March 
and December 2006 at certain banks, while small businesses complained about high fees for 
cash deposits.  

5.2. 

Price evolutions from December 2006 to February 2007 

The annual HICP rate for January 2007 in Slovenia was 2.8%, down from 3.0% in December 
2006.  It  showed  a  declining  month-on  month  rate  (-0.5%),  as  has  been  the  case  for  the  last 
few  years  in  January,  due  to  the  impact  of  seasonal sales. The decline in January 2007 was 
slightly larger than the one observed in the same month of previous years, mainly as a result 
of  changes  in  energy  prices,  the  Statistical  Office  of  the  Republic  of  Slovenia  (SORS) 
reported. The annual HICP inflation rate fell further to 2.3% in February 2007. 

In January 2007 SORS released its first analysis of the impact of the changeover on prices in 
December  2006.  Some  unusual  price  rises  in  restaurants,  bars  and  coffee  shops  have  been 
observed,  as  were  price  increases  in  some  other  expenditure  groups  (personal  services, 
footwear services, repair of household appliances, repair services, and transport services). In 
December  2006,  the  impact  of  unusual  price  increases  in  restaurants,  bars  and  coffee  shops 
was estimated at up to 0.12 percentage points, with an additional impact of 0.12 percentage 
points  from  the  other  expenditure  groups.  For  January  2007,  SORS  has  highlighted  some 
further  unusual  price  increases  for  the  same  purchases  and  additionally  for  recreational  and 
sports services.  

Based  on  the  preliminary  information  reported  by  SORS,  Eurostat  considers  that  the  likely 
total  impact  of  the  changeover  on  consumer  price  inflation  during  and  after  the  changeover 
period  could  reach  the  order  of  0.3  percentage  points.  Taking  account  of  the  fall  in  the  all-
items  annual  HICP  inflation  rate  in  January  2007  to  2.8%,  and  the  further  fall  in 
February 2007, this result also shows that the changeover effects, although noticeable, do not 
seem to be of such a magnitude as to drive consumer price inflation as measured by the all-
items  HICP.  These  observations  appear  very  much  in  line  with  the  experience  of  the  first-
wave changeover.11 The Institute of Macroeconomic Analysis and Development of Slovenia 
has  also  carried  out  an  analysis  of  the  effect  of  the  changeover  on  inflation.  Its  preliminary 
conclusion is that the total effect on the CPI amounted to 0.24 percentage points. 

Eurostat will update its conclusions concerning the impact of the changeover if necessary, as 
further information becomes available. 

5.3. 

Price perceptions 

The similarity with the first-wave experience also applies to price perceptions, since perceived 
inflation  in  Slovenia  markedly  increased  in  January  2007,  and  rose  slightly  further  in 
February (see Graph 4), despite the fact that prices declined overall during these two months. 
However, inflation perceptions declined slightly in March. Even though it is too early to draw 
conclusions,  this  decline  would  suggest  that  the  intensified  communications  efforts  of  the 
Slovenian authorities are being effective. 

11 

Eurostat News Release 69/2003 of 18/06/2003. 

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Graph 4 

Actual and perceived inflation in Slovenia 

actual HICP (lhs)

perceptions (hs)

 y-o-y % 
change 

10
9
8
7
6
5
4
3
2
1
0

percentage 
balance

70

60

50

40

30

20

10

0

2000

2001

2002

2003

2004

2005

2006

2007

Source: Eurostat 
If the results for March were confirmed by further data, the pattern in Slovenia may end up 
being  quite  different  from  the  one  observed  in  the  euro  area,  where  perceived  inflation 
climbed steeply and consistently for almost a full year after the introduction of euro banknotes 
and coins in 2002 (see Graph 5). Five years after this event, the gap between the two series is 
gradually closing but has not been eliminated yet. 

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Graph 5 

Actual and perceived inflation in the euro area 

actual HICP (lhs)

perceptions (rhs)

y-o-y  % 
change

percentage 
balance

5

4

3

2

1

0

70

60

50

40

30

20

10

0

2000

2001

2002

2003

2004

2005

2006

2007

The Slovenian changeover experience illustrates once more that perception, expectation 
and  reality  with  respect  to  price  evolutions  do  not  necessary  go  together.  A  change  of 
currency  affects  people's  scales  of  values  and  triggers  a  gradual  mental  adjustment 
process,  all  of  which  plays  a  role  in  this  process.  Price  perception  definitely  remains  a 
key concern for future changeovers. 

Source: Eurostat 

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6. 

THE PUBLIC'S REACTION TO THE EURO CHANGEOVER  

The  Commission's  Flash  Eurobarometer  205,  which  was  conducted  towards  the  end  of 
January  2007,  confirms  the  satisfaction  of  the  large  majority  (95%)12  of  Slovenian  citizens 
about  the  smoothness  and  efficiency  of  the  changeover.  This  constitutes  an  excellent  result 
compared to the first-wave experience, as only a few countries reached the 90% level, while 
the average was close to 80%.  

With respect to the cash changeover, 97% experienced no problems at all when exchanging 
tolar cash into euro cash or withdrawing euro cash in the first week of January. Respondents 
were  also  positive  about  the  usefulness  of  dual  displays  of  prices  (84%)  and  about  their 
correct implementation (94%).  

The picture is more mitigated with respect to price conversions, which are generally believed 
to  be  fair  by  a  small  majority  (56%)  of  respondents,  with  44%  holding  the  opposite  view. 
Only  a  minority  of  38%  is  prepared  to  believe  in  the  fairness  of  the  "rounding"  of  prices 
during and after the changeover, with 62% believing the opposite. 

Finally,  92%  of  Slovenian  citizens  feel  well  informed  about  the  euro  (36%  consider 
themselves even very well informed), and 91% are either rather satisfied or very satisfied with 
the  information  provided  by  the  national  authorities.  These  very  high  approval  rates 
corroborate the high degree of satisfaction on the degree of information (99.2%) measured by 
a similar Eurobarometer survey conducted in February 2006 among Slovenian enterprises.  

The  state  of  public  opinion  in  Slovenia  confirms  once  more  the  crucial  role  of 
information and communication in ensuring a successful changeover process.  

Citizens and enterprises who are fully informed about the practical consequences of the 
euro  systematically  feel  more  confident  about  the  introduction  of  the  single  currency 
and appear to have minimal difficulties. Inversely, lack of information typically instills 
apprehension and misunderstanding.  

12 

The percentage shares in this section are based on respondents providing a specific answer, and do not 
take account of those without an opinion on the matter. 

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