maurice o'connell : the euro changeover in the irish context statement by mr maurice o'connell, governor of the central bank of ireland, to the irish parliamentary joint committee on finance and the public service, in dublin on 18 july 2001. * * * chairman we are now less than six months away from the launch of euro banknotes and coin, three years after the introduction of the euro as a currency. the period of transition has been very long but this has been unavoidable because of the complex production and distribution process that is required. the st euro will at last become a fully fledged currency on 1 january. for the first time the public in general will be able to relate to it as their own currency. this should have a very positive impact in terms of gaining acceptance of the new currency. the changeover is a big undertaking for all countries of the euro area. the individual national central banks have worked closely together through the european system of central banks. there has been regular monitoring of production to ensure uniform quality of banknotes across the euro area. the overall production requirement for launch of the new currency is 15 billion banknotes and 50 billion coins. these figures are so large as to be almost incomprehensible. each national central bank is charged with the responsibility of meeting requirements in its own country. in our case this means that we will provide more than 200 million banknotes and more than 1, 000 million coins. members of this committee will be familiar already with the banknote and coin denominations and the conversion rate against the irish pound. may i remind you that the smallest coin ( one cent ) will have a value of less than a penny and the largest banknote ( 500 euro ) will have a value close to £400. traditionally the demand for high value banknotes in this country has been quite small. the central bank of ireland has three main functions in relation to the changeover : · it must provide sufficient quantities of the new currency to meet the launch requirement and ongoing demand · it must provide sufficient quantities of irish currency right up to the end of this year and meet the peak christmas demand · it must withdraw the old currency after 1 january in an orderly manner. st the central bank is on course in the production of new banknotes and coin. frontloading of coin to bank branches and major retailers will begin in september and frontloading of banknotes will begin in november. contracts for distribution are being negotiated. for security reasons i would not wish to go into

further detail on distribution arrangements at this time. in order to give the public the opportunity to familiarise themselves with the new coinage, starter packs of euro coins may be purchased from th 17 december from banks and post offices. these packs will cost £5 and they will contain a selection of coins equal to 6. 35 euro in value. it is understood that all member states in the euro area are taking a similar initiative. there will be no frontloading of banknotes to the public as this might effectively amount to bringing forward the launch date and it could generate undue confusion for both consumers st and retailers at the busiest shopping time of the year. while the banks will be closed on 1 january, supplies of euro banknotes will be available from most atm facilities. the second leg of our responsibility is to maintain an adequate supply of irish currency up to the end of this year. from the point of view of the central bank the timing of the changeover is by no means ideal as it comes immediately after the christmas peak and in the middle of the winter sales. the traditional pattern here is that demand for currency rises by 15 - 20 per cent between mid - november and christmas. in recent times the bank has tapered off production of irish banknotes and coin because of the changeover. the bank has, however, stocks of irish banknotes and, particularly, irish coin to ensure that the supply of cash to the system is adequate. the bank has appealed to the public to release hoarded coin. in addition, a number of charities, with the full support of the bank, will mount appeals for irish coin in the autumn. it is hoped that these initiatives will secure a very positive response. the bank is satisfied that there will be adequate supplies of currency in circulation to meet the requirements of the public over the christmas period. st the euro will become legal tender on 1 january. the irish currency will remain legal tender until th 9 february. so there will be a period of 5 - 6 weeks during which the two currencies may circulate as legal tender. after that date the banks will accept irish banknotes and coin for a period and, of course, the central bank will honour irish banknotes and coin indefinitely. the intention is to withdraw irish st currency as quickly as possible after 1 january and retailers will be encouraged not to issue irish currency in change. in this manner it is hoped that dual currency circulation will quickly be very limited and this should help to minimise any confusion that may arise