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Monday, November 30, 1998 Published at 16:37 GMT

EMU fast facts

On the face of it, not much will change on 1 January 1999 when the new single currency, the euro, is launched. Portuguese will still spend escudos, Germans will have Deutschmarks in their wallets and the French will use francs to pay for dinner.
What most people do not know is that they will already be using a form of euros: All currencies in the 'eurozone' will only be units of the euro - in some way like the cent to the dollar and the penny to the pound. And from day one, European Economic and Monetary Union (EMU) will have an impact on their lives.

Get the EMU fast facts with BBC News Online.
Select an issue:
Euroland ¦ The euro ¦ Timetable ¦ Impact ¦ Rules for joining ¦ European Central Bank

Euroland

The eurozone, or 'Euroland' as some call it, is huge. Its 11 members are Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Spain and Portugal.

Population
With 290 million inhabitants the eurozone is larger than the United States.
Economy
Together the EMU countries boast a gross domestic product (GDP) of $6,480bn (5,550bn euros); a bit smaller than the US GDP of $7,610bn.
Exports
In international trading the eurozone comes out on top. Its members export more than $652bn (560bn euros), and have an additional $1,110bn (950bn euros) of trade within the European Union. The US economy exports goods and services worth $585bn.

Only four EU countries are not joining EMU: Denmark, Sweden and the United Kingdom opted for going it alone, while Greece wanted to join but did not qualify.

Euroland ¦ The euro ¦ Timetable ¦ Impact ¦ Rules for joining ¦ European Central Bank ¦ Back to top

Calculating the euro

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There are 100 cents to one euro, but calculating the euro's value on the financial markets is much more difficult.

On 31 December 1998, at 1130 Central European Time, the central banks of all countries joining monetary union will determine the US dollar rate for their national currency, "taking the mid-point of the bid-ask spread ... to six significant digits" - to quote the official communiqué.

These dollar rates will then be used to calculate the value of the European Currency Unit (Ecu), which is a currency basket and artificial currency already used to calculate EU budgets.

By treaty one Ecu equals one euro, and therefore the dollar-Ecu rate can then be used as a cross reference to determine the exchange rate of national currencies to the euro.

The conversion rates between the national currencies participating in EMU have already been fixed.

To help you doing all the maths, BBC News Online has created a euro currency converter. The link in the right hand navigation of this page takes you there.

Euroland ¦ The euro ¦ Timetable ¦ Impact ¦ Rules for joining ¦ European Central Bank ¦ Back to top

Timetable

Fixing the conversion rates between the EMU currencies is the third stage of the single currency project, crowning eight years of preparation. This are the next steps:

1 January 1999
The exchange rates of all EMU currencies are irrevocably fixed and the euro becomes a currency in its own right. 'Euroland' citizens and companies can do their accounts in euros, but are not obliged to do so.
January 2002
Euro coins and bank notes will be introduced. The details are still being worked out, but some countries could do the switch-over in a 'big bang' on one day, while others like Germany plan a two-months transition period. Both euros and old national currencies will remain legal tender.
1 July 2002
National coins and bank notes will be withdrawn and only euros and cents (there are 100 cents to a euro) will be valid currency.

Euroland ¦ The euro ¦ Timetable ¦ Impact ¦ Rules for joining ¦ European Central Bank ¦ Back to top

The euro impact

[ image: Euro coins won't fill the tills before 2002]
Euro coins won't fill the tills before 2002
The single currency's impact will be immediate, even though euro notes and coins will not be issued before January 2002.

Bankers and accountants are the first to see the difference. From January 1999 most banks, all stock markets and many companies will do their accounting and transactions in euros.

Governments, meanwhile, will issue debt papers (like gilts, treasuries and bunds) in euros.

The rest of society will feel the euro's impact too.

Going shopping?
Soon two prices will be on the label - one in euros, one in your national currency; in several countries this already happens. And as competition increases, the prices of many products are expected to come down.
Own a business?
Before long an invoice or an order will be on your desk quoting a price in euros.
Work for a company buying or selling abroad?
If you live in the eurozone or do business with companies there, you must understand how the euro works or you may not be able to do your job.
Shareholder in the eurozone?
On stock markets in EMU countries, your shares will be quoted in euros from 1 January 1999.

For many the introduction of the euro will be no worse than going on holiday abroad or moving to another country: They will have to learn to juggle the numbers of a new currency.

For businesses it could mean more: Changing business strategy, overhauling financial systems, moving into new markets or coping with tough competitors from abroad.

Employees will find that the euro affects them too: They may have to learn new ways of working, find new job opportunities or they could even see their workplace disappear.

Euroland ¦ The euro ¦ Timetable ¦ Impact ¦ Rules for joining ¦ European Central Bank ¦ Back to top

Rules for joining

Eleven of the 15 EU countries have joined monetary union. If the remaining four want to adopt the single currency at a later stage, they will have to meet certain requirements, the "Maastricht" criteria, named after the treaty that set out the timetable for monetary union.

Their inflation rate should be within 1.5% of that of the eurozone.
Their exchange rate should be stable in relation to the euro.
Their annual budget deficit should be below 3% of their gross domestic product (GDP - the total output of their economy).
The total amount of money owed by the state, known as public debt, has to be less than 60% of GDP.

Euroland ¦ The euro ¦ Timetable ¦ Impact ¦ Rules for joining ¦ European Central Bank ¦ Back to top

European Central Bank

The European Central Bank (ECB) sets monetary policy for all EU countries that have introduced the single currency.

The new bank is modeled on Germany's Bundesbank. Its statute gives it independence from political influence, and financial experts expect that the euro bankers will go to great length to prove the point.

The ECB will co-ordinate a network of national central banks, the European System of Central Banks.

The ECB's key tasks are:

Define and implement monetary policy, such as setting interest rates;
Maintain price stability;
Support economic policies of member states as long as they do not affect price stability;
Conduct foreign exchange operations and look after the official foreign reserves of the member states;
Promote smooth operation of payment systems that link banks.

National central banks will continue to be in charge of banking supervision.

The day-to-day running of the ECB is in the hands of the executive council. Its members are the ECB president, Wim Duisenberg, and five political appointees who are all bankers or stock market professionals.

ECB policy is set by a governing council that meets every fortnight. Here the six members of the ECB's executive council are joined by the 11 heads of the national central banks participating in the euro.

Euroland ¦ The euro ¦ Timetable ¦ Impact ¦ Rules for joining ¦ European Central Bank ¦ Back to top