BRUSSELS – It has been variously described as history’s most daring monetary experiment, the biggest currency conversion that the world has witnessed and Europe’s largest logistical operation since the Second World War.
The European Central Bank today begins a huge campaign to prepare the Continent for the day, four months from now, when the euro becomes the official currency of 300 million European citizens in 12 countries.
On “E-Day” — January 1, 2002 — 14.5 billion bank notes and 50 billion coins will pour into the streets of Europe from Lisbon to Leipzig and from Athens to Amsterdam. Within two months after that, traditional European currencies such as the franc, mark, peseta and drachma will cease to be legal tender.
If successful, it will bind the Continent together as never before, give European businesses unprecedented exchange rate stability and make life vastly simpler for travelers and tourists.
But it is also an enterprise fraught with perils. Should the predictions of chaos prove well-founded, the backlash will be all the greater because none of the “eurozone” countries have put the issue to a vote and public support is at best lukewarm. The cause of European integration would be set back and the determination of British, Danish and Swedish Euroskeptics to retain their national currencies would be redoubled.
The moment of maximum danger will be those first few days of January, which happen to coincide with the new year sales.
Almost overnight approximately 200,000 cash machines across the Continent will have to be switched to dispense euros instead of national currencies.
Millions of cash registers, vending machines, telephone boxes, ticket dispensers, parking meters and toll booths will require conversion. Hundreds of thousands of banks, shops and businesses will have to gather in old money and give out new working with awkward exchange rates of, for example, 0.787564 Irish punts to the euro or 1,936 Italian lire. Some consumers will doubtless try to pay for goods or services with a mixture of new cash and old.
A Dutch think-tank has said that if each transaction takes just 30sec longer the result at ticket offices and checkout counters could be a “bottleneck that boggles the imagination” . Yet while national governments will be dispensing “starter kits” of euro coins from December 15 so that the public can get used to them, the forgery conscious ECB has refused to allow any early dispersal of the notes, whose seven denominations will range from five euros to 500.
In most Eurozone countries public awareness of the euro and its implications remains low. Surveys show a third of small businesses have yet to make the necessary preparations and 43 per cent of consumers feel ill-informed.
From this weekend the eurozone’s national banks will begin transporting billions of freshly minted euros from secret warehouses to commercial banks and other financial institutions and there is a fear of armed attacks on the trains and security vans. Some countries are using troops.
There is enormous potential for counterfeiting, given the lack of familiarity with the new notes, and money-launderers will have a field day. Sixty-one per cent of eurozone citizens believe that shops and businesses will round up prices while converting them; in some cases that appears to be happening already. Disposing of an estimated 350,000 metric tons of obsolete coins is another headache.
In Germany 54 per cent of the population do not want to swap the mark for the euro. In countries such as Spain the imminent arrival of the euro has spawned a building boom as criminals and tax-dodgers rush to dispose of black money.
The Portuguese and Italians are the least well-informed consumers. The Irish will be hampered by their particular attachment to cash over credit cards. Austria faces an almost impossible exchange rate of 13.7603 schillings to one euro and the Finnish are concerned that they will have to buy bigger wallets to accommodate the euro’s bigger notes.
Belgium has taken the precaution of delaying its January sales for two weeks. The Dutch Government, determined to phase out guilders within a single month, will be giving away coins worth £30 million in December. Fewest problems are expected in tiny Luxembourg, whose traders already accept French francs, Belgian francs and marks.