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Monday, 12 February, 2001, 09:30 GMT
Euro cash tough to launch
The euro may lead to bread queues in EU countries.
In January 2002, the single currency becomes a reality for consumers, as euro notes and coins come into circulation. However, as BBC News Online's Jorn Madslien finds out, there are worries that chaos at the changeover could damage the electoral fortunes of Europe's entire mainstream political elite.

With only a few months to go before Europe's shoppers have euros in their pockets, politicians and civil servants are being kept awake at night by a logistical nightmare.

At the time that the changeover happens, clearly the people who are affected feel the cost very particularly, and that is the phase we're about to enter

Alison Cottrell
European policy analyst
"At the time that the changeover happens, clearly the people who are affected feel the cost very particularly, and that is the phase we're about to enter," says European policy analyst Alison Cottrell, adding that this may overshadow the envisaged future benefits of the single currency.

"The distribution of fifteen billion notes and fifty billion coins to over 300 million people in 12 countries accustomed to 11 different currencies is an unprecedented logistical challenge," the European Union's monetary affairs commissioner Pedro Solbes Mira said in a speech earlier this year.

High political stakes

Speaking to officials and experts, one can almost sense how Mr Solbes must be biting his nails, along with fellow politicians and civil servants in all the EU member states.

Tony Blair, British prime minister
Tony Blair may face growing opposition to the euro if chaos breaks out
Getting it right is crucial.

"If things actually did go badly wrong - in the sense of business confidence being affected, consumer confidence being affected, general chaos [breaking out] - then the credibility of both the government and the central banks would be somewhat damaged," says Ms Cottrell.

The success - or failure - of the introduction of the euro notes and coins could be the factor that decides whether the UK will join the monetary union, since Prime Minister Tony Blair has vowed to make a decission within the next two to three years.

"This particular timing of the changeover of notes and coins and its effect on confidence and on credibility over here is clearly a bit awkward if things were to go wrong," warns Ms Cottrell.

Bread queues

And there are plenty of ways things can go wrong.

Monetary affairs commissioner Pedro Solbes Mira
The dual-circulation period causes many problems, says commissioner Solbes.
The European Commission knows that even a best case scenario allows for extra stressful January sales, confusion at ticket offices, and longer shopping queues.

This is because most countries in Euroland will allow both their old currency and the euro to be used until the end of February 2002.

So if a baker is handed a 10 euro note and a 500 Belgian franc note to pay for a bread and buns worth 17.28 euros, it will take him longer than normal to complete the sale.

Euro facts
Large firms are prepared
Small firms are not
Accounts and book keeping in euros should start this year
Banks will only pay out euros after 1.1.2002
Swapping national currencies into euros will be free
Public knowledge of the euro is improving

Source: European Commission
"The baker will have to calculate quickly what change to give in euros," says Mr Solbes.

The example may sound trivial, but the European Commission is concerned that "an increase in transaction time can lead to a reduction in turnover".

A simulation at Amsterdam Central Station showed that, because of the extra time required to give change, the queue for tickets would grow from 100 people at 0900 to 1,200 people at 1000, according to Mr Solbes.

Other practical difficulties include dealing with the sheer weight of the money that will be distributed to banks, post offices and major retailers ahead of the euro launch.

Putting old and new money into storage, says Mr Solbes, could cause the floors of bank vaults to collapse.

Mr Solbes' spokesman Thomas Gerassimos insists that the Commission will find ways to prevent such problems occurring.

Besides, "by the end of February, all the currencies will have gone out of circulation" and problems such as these should no longer occur.

The black economy

Europe's gangsters pose another threat to a successful launch of euro notes and coins, and not only as fraudsters produce counterfeit euro money.

Euro notes
Masses of money will be distributed.
Criminals and tax dodgers will queue up alongside those people who keep their cash under their mattresses. They all will want to change their cash into euros - and nobody knows how much cash has been have stashed away.

There will be an "unpredictable appetite of organised crime for new, high denomination banknotes" as black marketeers, money smugglers and drug dealers develop an appetite for 500 euros notes (about $470, 320), Ms Cottrell says.

Not least because "what used to fit in a suitcase if you used dollars, you could probably fit in a wallet if you used euros," she added, noting that the top dollar note is the $100 bill.

Statistical stew

Economic statistics is likely to be distorted by the demand for euros from the black market, along with equally unpredictable demand for the currency from outside the eurozone, where in some areas the euro could replace the dollar as the favoured currency.

Central Audiovisual Library, European Commission
Calculating change will be tricky and slow.
"Careful interpretation, if not scepticism, will be called for of money supply, consumption, confidence, investment, public-sector revenue, savings and inflation data," Ms Cottrell said.

Consequently, it will be almost impossible for politicians and central bankers to argue that the project has been successful until a long time after the notes and coins have been introduced.

This seems to make the public perception of the enterprise more important than the actual impact. And in a sense, the two are linked. Nothing can bolster the new currency the way confidence can.

So one of the major challenges for the Commission is to intensify the information campaign, says Mr Gerassimos.

European policy analyst Alison Cottrell
The credibility of governments and central banks could be damaged
Alison Cottrell
The benefits of the euro are long term, but the costs are felt now
European policy analyst Alison Cottrell
Disgruntled voters and businesses would look for a scapegoat
EC's Thomas Gerassimos
By the end of February, the the currencies will be gone
European policy analyst Alison Cottrell
What used to fit in a suitcase when criminals used dollars will fit in a wallet when they use euros
European policy analyst Alison Cottrell
This timing of the changeover of notes and coins is awkward
EC's Thomas Gerassimos
The challenge ahead is the information campaign
Click below for background and analysis on Europe's single currency

Key Issues


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