Member of the European Commission responsible for budgetary matters
A start in the euro : opportunities for citizens, businesses and local authorities
« The euro in enterprises and local authorities »
Gera, 5 May, 2001
Ladies and Gentlemen,
In exactly 240 days, Europe will experience the greatest currency conversion operation in its history: 15 billion € bank notes and 50 billion € coins will, within a few weeks, replace almost the same number of national bank notes and coins in the 12 Member States of the euro area. The scale of this operation is spectacular: at 239 000 tonnes, the euro coins weigh 24 times as much as the Eiffel tower. If we were to pile them up one on top of the other, they would reach a height of 78 870 km 1.4 million times higher than the Tower of Pisa. If we were to lay the bank notes end to end, they would stretch for a distance of 1.9 million kilometres five times the distance from the earth to the moon. All this shows that the introduction of the euro is not only a one-off event in historical terms, it is also an unparalleled strategic, logistical and practical challenge without parallel. And the people of Thuringia are right in the middle of it. All the same, they constitute 0.8333333% of the population of Euroland.
Since 1.1.1999 we have had the monetary union true, initially only as book money, but we are already benefiting from the positive effects. The euro has significantly strengthened the European economy in more intensive international competition and has given European integration a new dynamic:
In 2000 the euro area grew by about 3.4%, the highest GDP growth rate for 10 years. And in spite of a slowdown, the economy in the euro area will continue to grow strongly. This year we are expecting growth of 2.8% and next year 2.9%. An important factor in this favourable development is the removal of the exchange rate risks between the Member States of the monetary union. These are concrete cost savings, which hitherto had to be paid for by firms in insuring against these risks. The monetary union led to a stimulation in trade and direct investment in the euro area.
For the first time for many years, Ladies and Gentlemen, growth in the EU is also benefiting the labour market. The unemployment rate in the euro area fell from 10.0% on average in 1999 to 8.9% in 2000. We expect a further drop to 8.5% this year and 7.9% next year. Since the beginning of monetary union, around 2.5 million new jobs have been created. This is a success. We can also talk about success with regard to stability: last year the rate of inflation was 2.3%, this year we anticipate that it will be 2.2% and for 2002 there will be a further drop to 1.8%. These are figures which nobody would have dared dream of at the beginning of the 1980s. The euro is a stable currency. And it is precisely for those managing tight budgets that a stable currency is of decisive importance.
The criteria which the members of the monetary union have to keep were laid down in the stability and growth pact. An important element is the reduction of the indebtedness of the public authorities. Here too the results are striking: in the first half of the last decade, therefore at the beginning of the 90s, the annual new indebtedness of the public authorities was 5% of gross domestic product. Last year, on the other hand, on average in the EU, the public authorities were in the black.
The issue of the reduction in public indebtedness is not an abstract financial matter. No, it is a question of reducing the interest burden so that the money from the public authorities, whether in the Federal Government, in the Länder or in the local authorities, does not increasingly have to be spent on interest but is available for schools, training and social matters. And it is also a question of leaving our children not with mountains of debts but with healthy finances. This development too, which came about with the decision on monetary union, is fundamental for the future and the future capability of the European Union.
Ladies and Gentlemen,
In the meantime the euro has become very well established on the international financial markets and has become a cornerstone in the international currency system: next to the US Dollar it is the most traded currency on the foreign exchanges. Around 13% of the worldwide foreign exchange reserves are held in euros. Approx. 30% of bonds and short-term debt instruments are denominated in euros. The euro also functions as a currency policy anchor for around 50 states, in particular also for the EU accession candidates.
At this point let me say a word about the subject of expansion to the east and the euro. It is very clear: the decision to enlarge the European Union and the decision to include new members in the monetary union are two separate decisions. There can be no inclusion in the monetary union without meeting the stability criteria. There are no misunderstandings about this with the applicant countries. The applicant countries and who would know that better than the people here in the new Federal Länder - with the transformation of their economy and with the necessary reforms, in order to become members of the EU, have to meet great challenges. But we hope that in 2004 we can welcome new Member States into the EU. The question of membership of the monetary union, on the other hand, will only arise later. But of course it is gratifying that the applicant states are already setting up their economic and financial policy in line with the criteria for monetary union.
What stage have the preparations reached for the introduction of the new coins and notes, how well informed is the population?
This is a crucially important aspect, for only through information can doubts be removed and misunderstandings avoided. As the time of economic and monetary union in the course of reunification was only 11 years ago, the following has to be made absolutely clear in the new Federal Länder: on 1 January 2002 it is not a monetary reform that is taking place, but a changeover from the DM to the euro, for which the conversion rate is DM 1.95583 to one euro.
According to the last survey by the Commission, more than 40% of the population of Germany do not know that since 1.1.1999 the conversion rate of the DM against the euro has been finally and irrevocably fixed. Surprisingly it is in the three countries which have a conversion rate that is close to a round, easily remembered figure that knowledge of the conversion rate is worst; namely in Germany, Italy and Portugal.
Almost 80% of consumers are not aware of prices in euros, with women being less aware of this than men. In this respect, dual display of prices on goods is extremely important, so that consumers too can check that conversion is not being abused as a way of increasing prices, for, with the exception of Ireland, conversion in all other 11 states will result in the figures on the price labels being considerably lower.
How are the preparations going in the business world?
While the preparations by large companies and banks are proceeding in a satisfactory manner, small and medium-sized firms are lagging behind. Most want to leave the conversion of bookkeeping and accounts until the last minute. Here the work involved and also the stress which can be associated with inadequate preparation is under-estimated.
The demands which go with the changeover are particularly high in those areas where cash circulation is high: in the retail trade or in service areas such as, for example, the railways and the postal services. The two-month period in which the DM and the euro will circulate in parallel, when a bill can be paid with DM and euros together but when change is to be given in euros, requires preparation. How this can best be managed is not something for everyone to be puzzling over, but there are good examples here which can be adopted: there are very reasonably-priced currency converters available which are being distributed in some regions of Europe by business associations. For the retail trade, it makes sense to arrange that, at least in the first few weeks, staff are provided to pack at check-outs, to offset the longer time spent at the check-out because of the conversion. The Commission has assembled a whole collection of practical tips of this kind, which we hope will be heeded, for our appeal is:
Ladies and Gentlemen,
European integration has ensured peace, stability and prosperity in Europe. The efforts at integration carried out so far have borne fruit. Therefore the European Union continues to be attractive as a political and economic model.
With the completion of the internal market and the introduction of the single European currency, we have in the euro zone an economic area for 300 million people with a gross domestic product which is only slightly less than that of the USA. Economic and currency union constitutes an enormous improvement in the conditions for the European economy; the euro area has only just begun to make use of its economic potential.
From 1 January 2002 it will be easy to compare prices across borders. Within the euro area there will be no more changing into another currency at the border, in all countries the 7 euro bank notes and 8 euro coins will be legal tender. Monetary union will be something tangible. It is an important step towards further integration and I am certain that it will increase the sense of a common bond between the people of Europe.