Accessibility links

Europe: Euro-Zone's Citizens Bracing For E-Day (Part 2)

  • Mark Baker

For the more than 250 million people living in the European Union's euro-zone, "e-day" is just six months away. That's the day when citizens are due to stop using their national currencies -- their francs, marks, and lira, among others -- and begin using euro notes and coins. Preparations for introducing the euro have been elaborate, but some say the switchover may not go smoothly. In this second part of a three-part series on the EU's common currency, RFE/RL correspondent Mark Baker looks at will happen on January 1.

Prague, 13 June 2001 (RFE/RL) -- They're calling it "e-day" -- January 1, 2002. On that date, more than 250 million people living in 12 European Union countries will stop using their national currencies and start using a common currency, the euro.

The euro has existed for more than two years as a virtual currency -- a currency of account for financial transactions that do not involve cash -- but not yet in physical form as notes and bills.

The European Central Bank (ECB), which is coordinating the switchover, faces an enormous task. In all, some $320 billion (380 billion euros) worth of old francs, marks, lira, pesetas, and other currencies are to be withdrawn from circulation and replaced with euros. The ECB has minted and printed some $550 billion worth of euros in case the demand is higher than expected. The weight of the coins to be introduced in France alone is said to equal more than three times the weight of Paris's Eiffel tower.

Ordinary citizens will not have access to new notes until the launch date, but beginning in September some 15 billion euro banknotes and 56 billion coins will start moving to high-security depots across Western Europe.

Experts say the closest example of a currency reform approaching the scope of the euro was the replacement of the old Ost-mark in East Germany by the West German mark in the 1990s. But that involved just one country and 20 million people. E-day will be much bigger.

Already newspapers and magazines are filled with doomsday scenarios, drawing comparisons between e-day and the millennium bug scare at the start of 2000.

Consumer groups say that retailers could take advantage of the switchover to quietly raise prices by rounding them up to the nearest euro. Others point out that many people, especially the elderly, will be puzzled by the new denominations and could be the targets of fraud. Still others say simply fitting out the thousands of bank machines, cash registers, public telephones and ticketing machines for buses, metros, and trains will take weeks, if not months, to complete.

Antti Heinonen, the director of banknotes at the ECB, dismisses the chaos scenarios. He says all 12 countries are actively engaged in the switchover and that in spite of the size of the undertaking, everything should go according to plan.

"Naturally, I mean, it's clear [that] when you are exchanging the whole banknote and coin stock in circulation -- naturally, it can't happen 'just like that.' I mean, there can be some small nuisances and queues, but in principle, I mean with good planning, you can take it very smoothly."

Heinonen says that on January 1, anyone wanting euros can simply go to his local automated teller machine, or ATM, submit a bank card, and withdraw euros. Although there are some questions about whether all ATMs will be able to handle the euros immediately, Heinonen says that the banks will have already received their euros and will have frontloaded the ATMs.

"Well, that's the way [using ATMs] [euro-zone citizens] normally receive their money. I mean in some countries, it's almost even 90 percent of the money that is taken from deposits is taken by ATMs, so that's the way how people normally receive their money."

People will still be able to use their old notes and coins for about two months -- the period is shorter in France and Ireland -- before they are fully withdrawn on February 28. Although the rules are different in each country, most commercial banks will exchange national notes for about six months, and central banks will continue to accept the old notes for several years.

National currencies held in checking and savings accounts will automatically be converted to euros on the first of the year.

Professor Hans-Werner Sinn of the German economic research institute IFO has just finished a research report on all aspects of the introduction of the euro. He, like Heinonen, dismisses warnings of chaos:

"Well, the physical conversion of the old European currencies into the euro will not be a major problem. This will all run very smoothly and there will not be an exchange risk. All of the exchange risks have already been determined."

He says the two-month intermediate phase, where citizens can use either currency, ensures that no one will be caught without money.

Heinonen says there will be no limits on the amount of money people can exchange at one time. And he says that ordinarily people won't have to show a passport or declare the origin of their cash, except in cases where relatively large amounts of money -- more than about $10,000 -- are involved.

"There are no limits [to what can be exchanged], but naturally, normal money-laundering regulations are there. Let's say if you exchange money over a certain limit [more than 10,000 to 15,000 euros] -- like today if you go to the bank and have money above a certain limit -- you should, so to say, report what's the origin of the money."

Some economists say that the fear of having to declare the origin of the money has encouraged some people to sell their European currencies ahead of the change-over to euros and buy dollars. This in turn has pushed the value of the euro down on international currency markets.

The euro has declined in value by almost one-third with respect to the U.S. dollar since it was launched two years ago.

In spite of the optimistic view of the ECB, surveys say many people in the euro-zone, particularly in rural areas, are still poorly informed about the switchover.

Later this year, the ECB plans to launch a publicity campaign, "The Euro, Our Money," using television commercials and billboard and magazine ads to inform the public about the different denominations of the euro as well as about ways to identify counterfeit notes. The bank has also launched a special website -- www.euro.ecb.int -- where one can get info about the euro.

XS
SM
MD
LG