Euro cash for euroland

By C. R. L. Narasimhan

The countdown to a complete euro regime in the 12 countries of the European Monetary Union (EMU) - Greece joined the original 11 member countries this year - has begun in right earnest. Since its inception in 1999, the EMU has had a common currency, the euro. But whereas during the first three years of the EMU while the euro has remained the common currency it was more a ``book'' currency or a ``virtual'' currency. Euro cash - bank notes - as we understand them have not been in circulation all these three years, even as the euro became the dealing room currency, widely used in inter-bank transactions and commerce.

But for the common man in those countries and for travellers to the euro zone the individual currencies have continued to matter. In fact, euro currency notes were not intended to be circulated until three years later. Countries of the EMU continued to deal in their own currencies. Thus, in Germany cash transactions have been in deutschemark, in Italy the lira and so on. Each of these has had a fixed equation to the euro, which has been till date a book currency.

So there is more than ordinary excitement when the EMU decides to introduce euro bank notes as legal tender in all the 12 countries of about 300 million people and forming an extremely powerful economic group. The date will be January 1, 2002. Over the next two months thereafter euro notes and coins will be put into circulation. Simultaneously, individual currencies (deutschemark, French franc and the like) will be withdrawn. Sentiment aside, there are tremendous logistics problems. A recent Deutsche Bank research paper (July 26) gives some interesting insights into the euro preparations as they enter the last lap.

Companies which have already been exposed to the euro will now have to convert their accounting systems and their IT structures. From January 1, the euro will become the sole currency unit for contracts, all banking transactions and for practically everything else. In short, the system of dual currency that has been characteristic of the transition period will come to a close.

The euro bank notes will be identical in all EMU countries and will have seven denominations: 5, 10, 20, 50, 100, 200 and 500 euros. Their designs represent architectural features from seven different periods in European history: classical, romanesque, gothic, renaissance, boroque and rococo, iron and glass architecture and modern 20th century architecture. The denominations will differ in colour and size. The higher the denomination the larger the note size. There are special features being built into the notes in order to help the visually impaired to recognise them. One euro is divided into 100 cents. As far as euro coins are concerned there will be uniformity as far as their front side is concerned, while their back side will feature country specific symbols. Euro coins will be in eight denominations: 1, 2, 5, 10, 20 and 50 cents as well as one and two euros.

Enormous preparations are under way to make available the euro notes and coins to companies and households alike. Banks will first be able to obtain them from the national central banks. Households will start getting euro coins from mid-December and euro notes from January 1. To minimise the risk of counterfeiting the security characteristics of the euro, bank notes will be made public only when the launch preparations are nearing their culmination. Once the euro replaces the national currencies in both bank notes and in the book form, there will be many implications for the national economies, trade, banks and the financial markets. But, for the public at large, it will mean the end of perhaps the most visible symbol of monetary independence.

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