Source: EURLEX
Language: en
Format: md

**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, 4

B. IMPACTS OF THE CHANGEOVER IN CERTAIN 4

SECTORAL AREAS

B.1 Community budget 4
B.2 Agricultural policy 6
B.3 Administrative expenditure 8

C. THE CHANGEOVER OF COMMUNITY LEGISLATION 10

C. 1 The legal framework for the euro 10
C.2 The main implications of the euro for EU 10
legislation

D. OPERATIONAL ASPECTS OF THE CHANGEOVER 15

D.1 Treasury and financial management 15
D.2 Statistics 16

D.3 Informatics 18

D.4 Other 18

E. CONCLUSIONS 20

Annexes: 21

1. Execution of payments from the 1996 budget 21

2. Impact of the changeover on policy areas managed 23
separately from the Community budget

3. Estimated agri-monetary gaps for 1997 based on the 25
situation on 01/10/1997

4. Changeover of remunerations: related issues 26

5. The introduction of the euro in Community secondary 27
legislation

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 35

COMMON AGRICULTURAL POLICY

Agrimonetary regime 38
FREEDOM OF MOVEMENT FOR WORKERS

Social security of migrant workers 40
INTERNAL MARKET

Cultural objects 41
Public procurement 42
Banking 44
Insurance 46

Securities 49

Company Law 51
Accounting 53
Defective products 55
Intellectual property 57
INDIRECT TAXATION

VAT legislation 58
COMMON COMMERCIAL POLICY

Export Credits 61
EXTERNAL RELATIONS

International agreements 63
CONSUMER PROTECTION

Consumer credits and certain other contracts 64

BUDGETS

Financial Regulation 65
ADMINISTRATIVE EXPENDITURE

Remunerations and pensions 66

**THE IMPACT OF THE CHANGEOVER TO THE EURO**

**ON COMMUNITY POLICIES, INSTITUTIONS AND LEGISLATION**

A. INTRODUCTION

1. The present communication intends to provide a comprehensive
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 impact in the technical and operational sphere (information
technology, administrative changes, information and training of staff,
etc.).

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
example whenever specific legislation needs to be enacted. In addition,
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 Guarantee section of the EAGGF as well as the
administrative budget (of which staff remunerations and pensions form
a major part). In relative terms however, CAP expenditure represents
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.

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 unit [2] .

5. The immediate benefits resulting 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 for the
introduction of the euro (OJ C236 of 2.8.97, pp. 7 - 12).

exchange risk would thus continue to be borne by the budget [3] . 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 event [4] 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 rate [5] . 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 10 [th] 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
correspond to about 3.5 % of the overall budget (1996 payment
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.

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 established [7] ;
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 of the officials established 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.

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 lives in Belgium or Luxembourg. 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.

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*.

Because of the symbolic value and political significance of the
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
these remunerations and pensions are actually being paid out). It should
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 Regulations [9] (see summary description in annex 5). 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.

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
that each of these texts would be fully "euro-compatible" on 1.1.1999. It
appears that the large majority of these 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.

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.

In the case of simple references where the agreed Community figure for,
say the minimum capital of a credit institution, is expressed as
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:

under the principle of legislative continuity the amounts which have
already been fixed under a directive at national level for a
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 to convert at any different rates than the
irrevocable conversion rates.

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
legislation. In certain policy areas, this approach has already been
discussed with Member States in order to verify its practical implications.

In those cases where amounts in Community legislation give rise to
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).

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

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",
even after 1.1.2002. In those cases, specific legal steps (e.g.
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 for currency fluctuations), and the conversion rates
consequently become directly applicable. The revision process
however remains unaffected as far as the "pre-ins" are concerned,
in the case of revisions with variable frequency (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.

**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 Insurance Committee (XV/2049/97), Banking Advisory Committee (XV/1057/97), Consultative
Committee on Public Procurement (CC/97/11 and CC/97/26), Consultative Group on Accounting
Legislation (XV/7002/97).

**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

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 is paid out in ECUs, the Commission's 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 State [11] .
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.

On the lending side, the debtors might be willing to accept the
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.

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:

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 in the currencies of the "pre-in" countries 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 pre1999 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.

As far as the Commission is concerned, a specific working group
"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 in the following areas: statistical data bases, 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.

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 for circulation outside the 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.

A special series of euro-related publications, entitled EURO PAPERS [12], 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)](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 issues) and the
"Comité Interinstitutionnel de l'Informatique".

**19**

E. CONCLUSIONS

39. The Commission's overall assessment of the 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 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 in relation to the benefits. For example, specific
changeover legislation will be extremely limited, while the operational
changeover is not expected to cause any disruptions provided ongoing
preparations continue as scheduled.

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** **ANNEX** **1A**

Description Payments in

ECUs

Payments in

National Currencies

Total

% ECU
million

% ECU
million

Sub
Sections

Part A

PartB

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, industry and transEuropean networks
Research and technological development

External actions

Common foreign and security policy

Total Part B

Total Parts A + B

ECU
million

%

Administrative appropriations 639.80 **24.03** **%** **2023.10** **75*97%** **2662.90** **100.00** %
Operating appropriations

1O0.00 %

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00 %

100.00%

936.40

40.10

24142.30

654.30

163.80

538.20

2615.90

3642.20

51.40

32784.60

33424.40

**21**

100.00%

0.10 %

98.00 %

95,55 %

94.35 %

96,68 %

90.27 %

97.07 %

100.00 %

45.05 %

**44.31** **%**

0

39041.80

493.60

30.50

9.80

18.50

281.90

110.10

0

39986.20

**42009.30**

0 %

99,90 %

2,00 %

-'4,45%

S.65 %

3.32 %

9.73 %

2.93 %

0 %

54.95 %

**55.69** **%**

936.40

39081.90

24635.90

684.80

173.60

556.70

2897.80

3752.30

51.40

72770.80

75433.70

EXECUTION OF PAYMENTS FROM PART A OF THE 1996 BUDGET ANNEX 1B

Description Payments in
ECUs

Payments in

National Currencies

Total

SubSections

A1

A2

A3

A4

A5

A6

Expenditure relating to persons working with the institution
Buildings, equipment and miscellaneous operating
expenditure
Expenditure resulting from special functions carried out by
the institution

Inter-institutional cooperation, inter-institutional services and
activities
Data processing
Staff and administrative expenditure of European
Community delegations
Publications Office

% ECU
# million [iiiiiij ] million [ECU ]

5.54 %

47>S0 %

97.05 %

64.53 %

97.64 %

8.59 _%_

38.17 %

ECU

million

94.20

165.80

193.80

50.40

95.20

14.60

25.80

%

100.00 %

100.00 %

k 100,00%

100.00 %

100.00%
1OÛ.00 %

100.00%

1606.90

183.20

5.90

27.70

2.30

155.30

41.80

### ililiiliiip

; | | | | | | | | | | | l l i

ii:lll!til&9§I%l:

_mmmmmmm_

111I11ÉIIÉ1
iiii§&ii$i;%i

_mmmmmmm_

1701.10

349.00

199.70

78.10

97.50

169.90

67.60

Total Part A 639.80 **24.03** % **2023.10** l l l t l S M M **2662.90** **100.00** **%**

**22**

**ANNEX 2**

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

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 activities [13] specifies that the
levies on ECSC products are expressed in European units of account
(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**

ANNEX 3

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

#### mm mmm mm mmm msm mm mmm mm iRtl LIT OS PTA SKR UKL

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

0.77

-0.90

-0.90

22.84

30.88

6.61

1.09

15.03

14.38

11.41

16.20

7.11

0.79

3.25

3.25

6.83

6.11

0.64

0.37

0.37

0.37

19.21

5.44

1.07

1.19

1.19

1.19

32.59

46.47

11.53

2.54

2.54

2.54

1.16

2.12

2.05

2.67

11.23

5.37

27.83

18.28

5.06

1) for market prices and amounts

2) for per ha aid for arable crops

3) for aid per head of livestock and structural aid

B. Annual cost for a 1 % gap [14] (ECU million / %)

1) for market prices and amounts

2) for per ha aid for arable crops

3) for aid per head of livestock and structural aid

C. Total annual cost [15] (ECU million)

for agrimonetary gaps

Total EU-15 (ECU million)

0.82

0.58

0.58

11.33

1.56

1.34

0.10

0.10

0.10

3.00

1.86

2.20

0.78

-0.85

-0.85

14.98

1.39

0.38

0.09

8.56

8.56

10.05

1.09

7.25

0.75

-0.91

-0.91

1.74

3.35

3.61

0.67

0.67

0.67

19.07

16.65

6.45

5.25

8.91

15.02

1.26

4.31

1.61

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

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 scenario [16] 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 regulations [17] 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 coordinated procedure involving a common timetable, apart from certain
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).

**28**

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

Timescale: PRE -EMU
ECU & national currency equivalents

**1.** **Current value clauses**
(e.g. Banking)

2. Fixed date clauses [18 ]

Date: 01.01.99

ECU = euro
National currency into euro

Timescale: CHANGEOVER PERIOD
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"

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.

(e.g. Insurance 76/580
Objects)

and Cultural

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

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

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

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

These clauses require Member
States to take action to adjust
their threshold/ceiling if their
currency has fluctuated beyond
a tolerance margin

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.

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.

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.

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**

ANNEX 7

**Guidelines on the legal changeover of monetary references**

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
interpreted in a robust and legally consistent manner. Individual
interpretations of such clauses are provided in annex 8, while the present
annex provides a more general presentation of the guidelines.

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;

In other instances, conversion into national currencies, even 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 to ECU amounts, with associated provisions on
conversion in national currencies

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 be used for the conversion from ECUs to national
currencies;

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
Community budget under the agrimonetary rules). In such cases, strong
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.

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
countries, thereby replacing the specific method described in the
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.

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**

**ANNEX 8**

**OVERVIEW OF THE IMPACT OF THE CHANGEOVER**

**ON COMMUNITY 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 credit and certain other contracts

**BUDGETS**

Financial Regulation

**ADMINISTRATIVE EXPENDITURE**

Remunerations and pensions

**34**

**CHANGEOVER TO THE EURO**

_Community legislation_

POLICY AREA: **CUSTOMS**

MEASURES CONCERNED: **Customs Code**

A. DESCRIPTION

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

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 (EEC) No 3911/92, as last amended by Regulation
(EC) No 2469/96, lays down rules concerning the export of cultural goods.

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 States [19] . 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.

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 basis of economic and monetary indicators in 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").

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 the euro into the SAD is concerned,
Regulation (EEC) No 2454/93 (laying down provisions implementing
Regulation (EEC) No 2913/92) will have to be amended in order to give

**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**

**CHANGEOVER TO THE EURO**

_Community legislation_

POLICY AREA: **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
established by Regulation (EEC) No 3813/92. In the light of the two
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 for the currencies of
participating Member States;

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 it 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

**38**

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

**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

2. Article 107 of Regulation (EEC) No 574/72 lays down 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
apply for conversions involving the currency of at least one nonparticipating Member State.

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. However, from 1.1.1999 exchange fluctuations between
participating currencies will no longer occur. Beyond that date, applying
the conversion clause would run counter to its very purpose. The clause
will remain fully applicable, however, to conversions involving
non-participating currencies.

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 thresholds [20], as well as the clauses setting
out the modalities for the revision of the thresholds [2] '.

B. SUMMARY OF THE EFFECTS OF THE CHANGEOVER

2. The thresholds will be expressed in euros as from 1.1.1999 in accordance
with the Regulation 1103/97 on certain provisions relating to 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._

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 twoyear 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
the directives in exactly the same way and for the same amounts.
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
participating national currencies. In principle such contracts should be
treated as cash claims or obligations from 1 January 1999. However
certain transitional problems may arise which it is considered the
competent authorities should decide how to address according to the
individual circumstances of the particular case. [25 ]

**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).

_**16**_

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)

**45**

**CHANGEOVER TO THE EURO**

_Community legislation_

POLICY AREA: **INTERNAL MARKET**

MEASURES CONCERNED: **Insurance**

A. DESCRIPTION

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 Community's insurance legislation affected by the
changeover to the euro. The provisions most frequently affected are those
specifying application thresholds and related provisions converting
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.

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**

**CHANGEOVER TO THE EURO**

_Community_ _legislation_

POLICY AREA: **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 (Eurolist); 97/9 (Investor Compensation) constitute 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

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 into national 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.

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
Directive 97/9 on Investor Compensation each contains fixed ECU
references (thresholds and one ceiling) with no fluctuation margins or other
revision mechanisms. The directives as modified by the euro regulations

**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
implications following from the Directive, particularly with regard to
redenomination in euros of company share capital, which should be
clarified in point 4.

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

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 to the euro. These directives 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. 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 review, which is normally achieved through a legislative
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).

**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
historic application threshold of ECU _500_ (franchise) and ceiling of
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 (as last amended by Directive 85/576/EEC),
establishes the tax exemptions applicable to small consignments, while
Directive 83/181/EEC (as last amended by Directive 88/331/EEC) lays
down the rules governing exemption from VAT on importation.

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 lays down the rules
governing taxes on manufactured tobacco, mineral oils and alcoholic
beverages.

B. COMMENTS

2. Article 31 of Directive 77/388/EEC gives Member States the option, when
converting the amounts indicated in the Directive into their national
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
question are minimum amounts (for taxation at destination of
intra-Community acquisitions, simplified recapitulative statements) or
Community amounts (taxation of distance selling). Given that Article 28m
does not provide for any possibility of revision, the amounts in national

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. Following the same 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.

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
adopted to ensure that the various euro amounts contained in the
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**

**CHANGEOVER TO THE EURO**

_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**

**CHANGEOVER TO THE EURO**

_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. It follows that any renegotiation of the Community's 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.

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**

**CHANGEOVER TO THE EURO**

_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
aiming at the approximation of laws, regulations and administrative
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
clause, it will perpetuate differences between the values in national
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**

**CHANGEOVER TO THE EURO**

_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 Communities [27] 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 provisions [28] .

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 laying down
detailed rules for the implementation of certain provisions of the Financial Regulation of
21 December 1977 (JO L315 du 16.12.1993, p.1).

**65**

**CHANGEOVER TO THE** EURO

_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 .../98 [29] 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 nonparticipating 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
Regulations compatible with the method applied for adapting
remunerations. In substance, this approach anticipates the full changeover
to the euro which would otherwise not occur until 1.1.2002.

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

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