Euro preparations - EMUbusiness - Issue 5

EMUbusiness top stories
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1. New EU guidelines to speed up euro preparation
2. French decide date for saying adieu to euro
3. Reaping euro's benefits in pensions
4. BEUC castigates banks for high charges, Commission for lack of ambition
5. Euro should not be judged on exchange rate

Publisher's Note
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With little more than four hundred days to go before euro notes and coins are introduced attention is increasingly turning to making sure the changeover to the new cash runs smoothly. This is an unprecedented logistical exercise. If there are hitches, then consumers' confidence in their new currency will be affected.

Getting it right is all the more important in that the changeover will come as a shock to many people. Initial predictions that the euro would gradually become part of the everyday environment during the three-year transitional period have proved unfounded. Surveys show that many people still do not realise that the exchange rates have been irrevocably locked, nor when the notes and coins will be introduced or how long they will circulate side by side with their national currency units. Many prices in the euro area are displayed in national currency units and euro, but few people pay much attention.

The European Commission is seeking, therefore, to give the euro a higher profile with business and consumers. Consumer organisations, however, think the Commission is not going far enough. The euro will get a bad name, they (quite rightly) warn when consumers discover in early 2002 that a single currency does not mean a single charging
structure for banks transfers in euro. It will still be
significantly more expensive to send small amounts of money, for example, from Aachen to Liege than it will be to send money from Aachen to Berlin. There are sound reasons in banking infrastructure for this, but these are difficult for the general public to understand. The issue is not just one for consumers, however. Failure to address this problem will limit the ability of business to reap the benefits of the euro since this differential charging (which often applies to credit cards as well) will hamper the development of cross-border business-to-consumer transactions.

Regards,
Marion Bywater
Publisher, EMUbusiness
mailto:mbywater@eubusiness.com

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1. New EU guidelines to speed up euro preparations
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With fewer than 15 months to go before the arrival of the euro in cash form on 1 January 2002, the Commission has published recommendations for governments and business to ensure the euro-area is ready for the cash changeover in the euro-zone. The Commission has put forward 20 proposals which it believes will help speed-up preparations for the euro cash-changeover.
Full story: http://www.eubusiness.com/item/29153

2. French decide date for saying adieu to euro
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The French franc will disappear for good at midnight on February 17, 2002. The date was set at the most recent meeting of France's National Euro Committee. Luxembourg has also just finalised its cash changeover timetable, opting for February 28, 2002, as the last day on which the Luxembourg franc will be legal tender. This is in line
with the date chosen by Austria, Belgium, Finland, Greece, Italy, Portugal and Spain. Ireland has chosen February 9, the Netherlands January 28 and Germany December 31, 2001 - though the deutschmark will circulate for two months after that.
Full story: http://www.eubusiness.com/item/29154

3. Reaping euro's benefits in pensions
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Institutional investors will be able to benefit from the greater depth and liquidity of the capital markets resulting from the introduction of the euro once new European Commission proposals on pensions legislation is adopted. The Commission's proposals are designed to combine a high level of protection for the rights of
future pensioners with less rigid rules on investment in order to maximise returns and therefore the level of future pensions.
Full story: http://www.eubusiness.com/item/29155

4. BEUC castigates banks for high charges, Commission for lack of ambition
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The Commission has not been ambitious enough in its efforts to bring down the cost of cross-border retail payments according to consumer organisation, BEUC. BEUC says that once the euro is introduced in cash form in 2002, consumers will not understand why there are still charges for a cross-border euro payment when there is no or little charge for transferring euros domestically. BEUC is particularly
worried that the Commission is not proposing binding measures and is waiting until January 1, 2002, to improve the system.
Full story: http://www.eubusiness.com/item/29156

5. Euro should not be judged on exchange rate
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It is "very short-sighted and even narrow-minded" to judge the success of the euro on the basis of the current euro exchange rate, particularly that against the US dollar, Sirkka Hamalainen, Member of the Executive Board of the European Central Bank told an audience in Dublin this month. While the Eurosystem is not necessarily content
with the development of the euro exchange rate, the purpose of the euro lies elsewhere, she stressed, and its benefits are structural and gradual.
Full story: http://www.eubusiness.com/item/29157

Other stories on EUbusiness in October
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Biarritz summit fails to get reform agreement
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The two-day summit in Biarritz, aimed at reaching agreement on vital EU reforms, including more majority voting on EMU-related issues, failed in its aims as leaders of the 15 nations clashed over key issues such as majority voting. It now looks uncertain whether a final institutional reform package - necessary to make the union ready for enlargement - can be agreed at December's Nice summit.
Full story: http://www.eubusiness.com/item/28873

Euro fails to pick up after ECB rate rise
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The euro failed to escape from its low levels after the surprise interest rate rise by the European Central Bank (ECB) on 6 October.
Full story: http://www.eubusiness.com/item/28263

"Enlargement is harming euro" says Bavarian PM
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Concern over the EU's policy of enlargement with countries from central and eastern Europe joining the bloc is harming the value of the euro, according to Bavarian prime minister Edmund Stoiber. Mr Stoiber told members of his Christian Social Union party during a meeting in Kloster Banz that the markets were fearful of how the newly enlarged EU would be financed.
Full story: http://www.eubusiness.com/item/28943

Less take up of euro-denominated bonds
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Issuance in euro-denominated bonds in the third quarter of 2000 declined relative to issuance in the previous quarters and in the third quarter last year, according to a new Commission report.
Full story: http://www.eubusiness.com/item/28812

Euro-zone July industrial production up 0.5%
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Industrial production increased by 0.5% in the euro-zone in July compared with the previous month, according to latest figures from Eurostat, the EU's statistical arm. Production across the whole of the EU also rose by 0.5% in July, after a fall of 1.1% in June and an increase of 1.1% in May.
Full story: http://www.eubusiness.com/item/28488

Internet Monitor
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Pensions Directive - frequently asked questions
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The Financial Services DG has issued a set of frequently asked questions on the Proposal for a Directive on Occupational Pensions.
http://europa.eu.int/comm/internal_market/en/finances/pensions/faqen.htm

Duisenberg statement
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Introductory statement by Wim Duisenberg, European Central Bank President, to the press conference on 5 October (+ transcript of questions and answers).
http://www.ecb.int/key/00/sp001005.htm

Decomposition of observed spreads in euro area gov't bond markets
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There is an open call for tenders from the Economic and Financial Affairs DG for a study on "The decomposition of observed spreads in the euro area government bond markets". Sounds fascinating.
http://europa.eu.int/comm/economy_finance/tenders/call0010.htm

EMU diary
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Why price stability? Conference organised by European Central Bank, November 2/3, Frankfurt
ECOFIN Council, 7 November, Brussels
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Workshop
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More than 30 participants attended last week's EUbusiness
workshop, "eEurope - preparing for the digital economy". Patrick O'Beirne, B.Sc. M.A. FICS., IT Systems Consultant and head of Systems Modelling Ltd moderated the discussion, which had a fine panel of experts, including Martin Ulbrich, from the European Commission's Information Society DG, policy and planning, who outlined the EU's various initiatives in this key area.
Story: http://www.eubusiness.com/item/28705
Transcript: http://www.eubusiness.com/item/28661
Background links and docs: http://www.eubusiness.com/item/27427
Experts: http://www.eubusiness.com/item/28533
http://www.eubusiness.com/workshop/

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