Tuesday, 21 October 2008

Euro banknotes and coins Ie: Issuing eurozone cash

Procuring cash for the 15 member eurozone and its 320 inhabitants is a huge and complex operation, led by the European Central Bank (ECB). At the end of 2007, the 302 branches of national central banks served the citizens’ needs for banknotes through 173,396 commercial bank branches and 246,101 automated teller machines:

http://www.ecb.europa.eu/stats/euro/logistics/html/index.en.html

The treatment of banknotes is more centralized than the issuing of euro coins.

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Euro banknotes

The 53 Articles of Protocol (No 18) on the Statute of the European System of Central Banks and of the ECB repeat and elaborate on the treaty provisions; in the consolidated version of the treaties, OJ 29.12.2006 C 321 E/256─280.

Article 16(1) of the Statute echoes the wording of Article 106(1) TEC, adding only that the authorising decisions are taken by the ECB’s Governing Council:

Article 16 ECB Statute
Banknotes

In accordance with Article 106(1) of this Treaty, the Governing Council shall have the exclusive right to authorise the issue of banknotes within the Community. The ECB and the national central banks may issue such notes. The banknotes issued by the ECB and the national central banks shall be the only such notes to have the status of legal tender within the Community.

The ECB shall respect as far as possible existing practices regarding the issue and design of banknotes.

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The Governing Council’s right to decide on the authorisation is exclusive, but the concrete issuing of euro banknotes can be done by the ECB or the national central banks.

We have seen that, in principle, the treaties are written as if there were a single currency (the euro) for the whole European Community (EC). Still, three of the “old” member states have clinged to their national currencies and even with Slovakia entering the eurozone from the beginning of 2009, as yet eight of the twelve “new” EU member states have not been able (or willing) to fulfil the convergence criteria. In practice, as the ECB points out in various instances and by employing the word Eurosystem, Community has to be read as the Eurosystem (euro area).

Anyway, the so called single currency is a remarkable achievement. From the beginning of next year, euro banknotes are the only bills used as legal tender ─ for the payment of debts, the purchase of goods and other exchanges for value ─ by about 325 million people in 16 countries.

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Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro, OJ 11.5.1998 L 139/1, restated that the ‘ecu’ was to become the euro, divided into 100 cents, and contained provisions to ensure the smooth changeover as from 1 January 1999 and the substitution of the currency of each participating state at the conversion rate.

Article 10 provided that as from 1 January 2002, the ECB and the central banks of the participating Member States shall put into circulation banknotes denominated in euro.


The latest amendment is by Council Regulation (EC) No 693/2008 of 8 July 2008 amending Regulation (EC) No 974/98 as regards the introduction of the euro in Slovakia, OJ 24.7.2008 L 195/1. (For the researcher the recital is convenient, in that it clearly sets out all the amendments to the regulation.)

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In the Decision of the European Central Bank of 20 March 2003 on the denominations, specifications, reproduction, exchange and withdrawal of euro banknotes (ECB/2003/4), published in OJ 25.3.2003 L 78/16, the ECB’s governing council defined the seven denominations of euro banknotes, from 5 to 500 euros, and their basic designs (Article 1).

Reproduction rules are set out in Article 2, with the aim to ensure that the public can distinguish genuine euro banknotes from reproductions.

Article 3 lays out rules on the exchange of mutilated or damaged genuine euro banknotes, including ones damaged by activated anti-theft devices, with the establishment of fees in Article 4.

Article 5 concerns the withdrawal of euro banknotes.

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The Decision of the European Central Bank of 6 December 2001 on the issue of euro banknotes
(ECB/2001/15), OJ 20.12.2001 L 337/52, allocates the total value of euro banknotes in circulation to the Eurosystem members by application of a banknote allocation key.

The latest amending decision is the Decision of the European Central Bank of 7 December 2007
amending Decision ECB/2001/15 of 6 December 2001 on the issue of euro banknotes (ECB/2007/19), OJ 4.1.2008 L 1/7.


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Non-compliant reproductions of euro banknotes are targeted in the Guideline of the European Central Bank of 20 March 2003 on the enforcement of measures to counter non-compliant reproductions of euro banknotes and on the exchange and withdrawal of euro banknotes
(ECB/2003/5), OJ 25.3.2003 L 78/20.

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Balancing an open market economy with safety concerns in the production of euro banknotes is the subject matter of the Guideline of the European Central Bank of 16 September 2004 on the procurement of euro banknotes (ECB/2004/18), OJ 21.10.2004 L 320/21.





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Euro coins

Article 11 of Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro, OJ 11.5.1998 L 139/1, stated:

Article 11 Regulation 974/98

As from 1 January 2002, the participating Member States shall issue coins denominated in euro or in cent and complying with the denominations and technical specifications which the Council may lay down in accordance with the second sentence of Article 105a(2) of the Treaty. Without prejudice to Article 15, these coins shall be the only coins which have the status of legal tender in all these Member States. Except for the issuing authority and for those persons specifically designated by the national legislation of the issuing Member State, no party shall be obliged to accept more than 50 coins in any single payment.

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Council Regulation (EC) No 975/98 of 3 May 1998 on denominations and technical specifications of euro coins intended for circulation, OJ 11.5.1998 L 139/6, contains specifications to ensure that the euro coins can be used smoothly throughout the euro area, including in vending machines.

The coins were given one European and one national side, thought to be an appropriate expression of the idea of European monetary union between Member States and intended to increase the degree of acceptance of the coins by European citiziens.

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The Governing Council of the ECB regulates the volume of euro coins through annual decisions. The latest is the Decision of the European Central Bank of 23 November 2007 on the approval of the volume of coin issuance in 2008 (ECB/2007/16), OJ 5.12.2007 L 317/81. (Given the present date, a decision concerning 2009 is to be expected soon.)

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ECB opinions

We remember the mandatory consultation pursuant to Article 105(4) TEC of the ECB concerning draft legislative provisions.

In addition, there is Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft legislative provisions, OJ 3.7.1998 L 189/42, which set out the main areas where the participating states must consult the ECB:

Article 2 Council Decision 98/415

1. The authorities of the Member States shall consult the ECB on any draft legislative provision within its field of competence pursuant to the Treaty and in particular on:
- currency matters,
- means of payment,
- national central banks,
- the collection, compilation and distribution of monetary, financial, banking, payment systems and
balance of payments statistics,
- payment and settlement systems,
- rules applicable to financial institutions insofar as they materially influence the stability of financial institutions and markets.

2. In addition, the authorities of Member States other than participating Member States shall consult the ECB on any draft legislative provisions on the instruments of monetary policy.

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Here are two fresh examples of ECB opinions concerning euro banknotes and coins, one with regard to Sweden and the other one regarding Germany:

Opinion of the European Central Bank of 9 October 2008 at the request of Sveriges Riksbank on a draft Regulation on the redemption of banknotes and coins (CON/2008/47)


Opinion of the European Central Bank of 16 October 2008 at the request of the German Ministry of Finance on a draft order on the replacement of euro coins and German euro commemorative coins which are unfit for circulation and the charging of appropriate fees (CON/2008/49).



Ralf Grahn