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On 31 May, the  Commission adopted  its Green Paper  on practical aspects  of
introducing  the single  currency[1]  .   This  is the  first time  that  the
Commission has  set  out its ideas  on how the transition  should take  place
and a  complete list of the  issues to be tackled.   President Jacques Santer
and Yves-Thibault de Silguy, Commissioner responsible  for Economic, Monetary
and Financial affairs  will present the Green  Paper first to the  Council of
Economic and  Finance Ministers on  19 June  and then to  Heads of  State and
Government at the European Council in Cannes on 26-27 June.  

The single Currency - a factor for stability and prosperity

By the end of this  century, Europe will have a  single currency.    This was
the wish of its  leaders and its people  in signing and ratifying  the Treaty
on  European Union.    The increasingly  closer  integration of  the European
economies calls  for greater monetary solidarity, against a background marked
by the  disappearance of fixed exchange  rate regimes,  and the globalisation
of the  world economy.   The establishment  of the  European Monetary  System
represented the first step  in this direction.   But the currency  turbulence
of recent years has underlined the need to go further.

The single currency will bring the citizens of Europe:

- a more efficient  single market.  For the  single market to work smoothly,
  exchange-rate  adjustments  must  not  be  allowed  to  disrupt  trade  or

- the  stimulation of  growth and employment.   The single  currency will be
  based  on sound  economic foundations.   In  addition the  price stability
  objective of the  independent European Central bank combined  with greater
  integration   of  financial   markets,   should  yield   better  borrowing

- the  end  of the  costs  of converting  between currencies.    For example
  someone  who leaves a member state  today with say 1,000  marks, pounds or
  francs and visits each of  the member states of the Union changing between
  each national currency would return  home with less than half the original
  sum without buying anything;

- greater  international  stability.   The  European  Union  is  the world's
  leading trading power.  Its currency will naturally become one of the main
  exchange and  reserve currencies, on  an equal footing with  the dollar or
  the yen.

- enhanced  monetary  sovereignty.    With  capital  moving  freely  between
  interdependent economies, an  autonomous national monetary possible is not
  a realistic option.  By collective management of a single monetary policy,
  Europe's central  banks will have  a shared  but effective  responsibility
  over one of the best and strongest currencies in the world.

Why the Green paper?

The Green paper has three main aims:

* to  reduce  the uncertainties  surrounding the  changeover  to  the single
  currency by presenting a reference scenario;

* to identify a  comprehensive list the problems, indicating an  approach to
  tackling them;

* to define a communication strategy to ensure public support for the single
  currency and to explain how it will be introduced.

Treaty already contains  clear procedures on how  and when decisions  will be
taken on the political questions  surrounding the transition process  such as
which  member states will  participate or  when the  final stage of  EMU will
begin.     These issues are  therefore not addressed  in detail  in the Green

The scenario - what happens when?

The core  of the Green  Paper is a  reference scenario  in three phases  (see
annex)  characterised by:

* phase A.  the European Council decides  to launch the single currency  and
  the countries which will participate.  

* phase  B.   Not  more than  12  months after  the  start of  phase  A, the
  effective start of Economic and Monetary Union with the irrevocable fixing
  of  parities.   During this  phase, there  would be  a "critical  mass" of
  financial activities in the single currency built around a single monetary
  policy and the emission of new public debt.

* phase C.  Not ,ore than 3 years after the start of phase B, the completion
  of the transition with the rapid introduction of new notes and coins (over
  a few weeks at the most) and the general changeover of means of payment.

The effective  start of  monetary union  (phase B)  could take  place at  the
earliest in late 1997 and at  the latest on automatically on 1 January  1999,
with those member  states which  meet the  necessary conditions  in terms  of
economic convergence.  The  Commission proposes that the periods given in the
reference scenario should  be viewed as  maximum periods and  that the  dates
fixed by the Council should be deadlines.

The advantages of this three-phase approach are:

* It is sensitive to the needs  of Europe citizens by  allowing   sufficient
  time for  the essential task  of a  comprehensive communications  strategy
  presenting the advantages of the single currency and reassuring the public
  on how the transition will affect their daily lives.

* It  is inspired by  pragmatism, practicality and minimising  costs for all
  economic operators.     The  sooner preparations  begin, the  lower  their
  ultimate costs.

* It is  economically robust.   The Commission has always  stressed the need
  for a high  degree of sustained  convergence before the start  of monetary
  union.  This will be measured by the strict application of the convergence
  criteria.   Ensuring a  critical  mass of  changes immediately  after  the
  fixing   of   exchange   rates   will   underline   the  credibility   and
  irreversibility of the process.

* It  responds to  the  needs  of the  banking community.  The  Commission's
  suggested  reference  scenario does  not  require  an  extended  period of
  parallel circulation of two sets of notes  and coins.  This means that the
  banks  would  not  face  the  costs  and  administrative  difficulties  of
  maintaining double accounts,  denominated in the new  and old  currencies.
  It also  means that  banks  have sufficient  time  to make  the  necessary
  changes  to their computing  and other systems before  the introduction of
  the new notes and coins.

* It  respects the  democratic decisions  of Member  States embodied  in the
  Treaty on European Union.  The Treaty requires the "rapid introduction" of
  the single currency after the start of stage 3 of monetary union.

Other Scenarios?

Other scenarios  have  been envisaged  for  the  introduction of  the  single
currency.   The  Commission  does not  consider that  they  present the  same
balance of  advantages as  the reference  scenario in  the Green  Paper.    A
"delayed  big bang"  for example  would be  less  consistent with  the Treaty
requirement  for the  ECU to be introduced  rapidly as a  currency in its own
right at  the start of stage  3 of  monetary union.   It would also  lack the
credibility and irreversibility of the  reference scenario.  A  more gradual,
purely demand-led scenario  would, on the  other hand,  involve higher  costs
for the banking sector and greater technical complexity.  

However,  the Commission does not exclude other  practicable scenarios out of
hand and is determined to  continue discussions with all the authorities  and
private  sector  operators  concerned in  the  interest  of  finding  optimal

Legal and Technical Issues

The  Green  Paper  also  contains  a  comprehensive  list of  the  legal  and
technical issues raised  by the introduction of  the single currency.   It is
essential for the major currency users make  an early start on the  necessary
changes.   Taking the reference scenario as its  starting point, this section
includes the implications for:

* banks and other financial institutions
* financial markets and payment systems
* companies
* public administrations
* consumers

This section also  identifies the need  for legislation  to ensure  certainty
for the  legal continuity  of contracts over  the changeover  and proposes  a
consultation process  which will  lead to  Commission proposals  for a  legal
framework at Community  level by March 1996.   Legislation will be  needed to
clarify how  national definitions  of legal  tender will  be affected  by the
changeover.  The Commission  is examining the  need for Community legislation
in other areas such as  legal protection against counterfeiting  and rounding
of prices.

Communication Strategy

The Commission and the Member States need  to take every effort to win hearts
and minds for the  single currency.  The Communications strategy  should have
two objectives:

* to convince people of the benefits of the single currency.  

* to explain how the changeover  will affect people directly so as to reduce
  their anxieties and ensure that they understand the process fully.

The Commission's approach is  decentralised - in  line with the principle  of
subsidiarity action at the level  of member states is able to take account of
national   cultural,   historical  and   linguistic   differences.     Public
authorities have  a leadership role, not  only in  their direct communication
policies including education in schools,  but also in promoting  awareness of
the single  currency through  tax and  social security  systems for  example.
The  private  sector  will   also  need  to  take  an  active  part   in  the
communications  strategy,  both  in  terms  of   educating  customers,  staff
training and by spreading  information through  trade associations and  other

To develop  this strategy further,  the Commission  proposes to hold  a round
table  in the  autumn of  1995 bringing  together  the the  European Monetary
Institute (EMI),  Member  States, and  the  European  Parliament as  well  as
relevant professionals from the private sector.  

Follow-up Action

The Commission  proposes that  national authorities  and trade  organisations
distribute  the  Green  Paper  as  widely  as  possible  so  as to  stimulate
reactions and comments  on it.  In the  light of the results,  the Commission
will present  a comprehensive action plan for the  introduction of the single
currency by the end of 1995.

[1]      Annexed  to  the  Green  Paper  is  a  progress  report  from   the
         independent Expert  Group on  introducing the single  currency that
         has  been working  under a  mandate from  the Commission  under the
         chairmanship of Cees Maas.


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