IP/06/1902
Brussels, 28 December 2006
Euro banknotes and coins: five years in, people are at ease with the euro, but need to be better informed Five years after they were first brought into circulation, euro banknotes and coins are a well-established and familiar part of daily life for euro-area residents. The amount of cash in circulation has grown steadily to reach a value of more than €600 billion at the end of 2006 as the euro is increasingly used outside as well as in the euro area. But although euro-area residents are generally happy with their shared currency, many still associate it with price increases or are not fully aware of its advantages, which shows the need for better communication at all levels – especially from national politicians. "The euro has brought us many advantages: the most obvious are that it has given us a level of inflation and interest rates which, for many countries, has never been so low for so long; it has spared us the exchange rate crises and market speculation that at times engulfed the old currencies; because it is stable and strong, it makes our imports cheaper – including oil; it has increased trade and investment within the zone, making us less dependent on the outside world; it has made travelling easier and cheaper; and it has increased price transparency and, therefore, competition," said Joaquín Almunia, European Commissioner for Economic and Monetary Affairs. He added:" Let's make people aware of these benefits – low inflation and interest rates in particular are a boon for the vast majority of wage earners – so that they take advantage of them rather than using the euro as a scapegoat for other problems".
On 1st January it will be five years since the euro banknotes and coins arrived. In 1999, monetary union became a reality as the exchange rates of the participating countries were irrevocably locked, but it was another three years before the euro made its way into the pockets of the residents of 12 European Union countries (Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain). In January, the euro area will welcome a new member, Slovenia, bringing the total population of the area to 316.6 million.
Rising circulation
The total value of banknotes in circulation has almost tripled since the changeover, from €221 billon in January 2002 to €595 billion in October 2006. The increase in coins is more moderate, from €13.0 billion to €17.6 billion, a Commission Communication on Five Years of Euro Banknotes and Coins shows.
Euro banknotes, and to a lesser extent euro coins, are also widely used by the outside world: 10 to 20 % of the total value of banknotes in circulation are used outside the euro area, according to the ECB. The euro is also the official currency of Monaco, San Marino and the Vatican City. Finally, its use as a parallel currency for international payment transactions, for savings purposes or simply as payment in tourist areas throughout the world is also increasing.
Mental changeover
Recent Eurobarometer surveys[1] show that people’s mental changeover to the euro has been a gradual process. While 57 % of respondents say they calculate in euros for common day-to-day purchases, 22 % still count in the old currency (and 21 % say they use either). For occasional, expensive purchases, the most common of which are a home and a car, people still regularly revert to the old currency (40 %), though the euro is progressively becoming a benchmark currency for these infrequent purchases as well.
Public perceptions of the euro
The surveys also show that although a clear majority (68 %) are happy with the single currency, there remains a lingering but distinct feeling that it has increased prices, a perception which is clearly not borne out by the facts since inflation has stood at only slightly above 2%. This distorted perception can be explained by the bad impression caused by some abuses in certain sectors and certain countries around the changeover in 2002 and the generally observed psychological tendency to note price increases more readily than price decreases (which have occurred, for example, in electronic and IT consumer goods and telecoms services). The good news, however, is that the gap between real and perceived inflation is progressively closing.
It is also striking that some advantages of the euro are unknown to a large majority of citizens. Only a quarter are aware that there are no extra costs or charges when withdrawing money with a bank card in another EU country (23 %) or paying with a bank card (27 %), while even fewer (16%) are aware that there are no extra costs or charges for executing a bank transfer.
Many national sides to a euro
While consumers are generally happy that each coin has a national side that depicts ruling monarchs, monuments or other national symbols, it may in the future be worthwhile for interested Member States to agree on a standard national side for the small 1-, 2- and 5-cent denominations in order to reduce production and other costs.
On 25 March 2007, all euro-area countries will issue a commemorative €2 coin with a common 'national' side to celebrate the 50th anniversary of the Treaty of Rome. Commemorative coins have become popular, but this will be the first time one will be issued by all.
For the Communication and accompanying technical paper see:
http://ec.europa.eu/economy_finance/publications/euro_related/2006/eurorelated_fiveyears_banknotescoins_en.htm
http://ec.europa.eu/economy_finance/euro/slovenia/main_en.htm
For Eurobarometers see:
http://ec.europa.eu/public_opinion/euro_en.htm
[1]See Flash Eurobarometer 193, published in November 2006, available at: http://ec.europa.eu/public_opinion/euro_en.htm
