Joaquín Almunia
European Commissioner for Economic and Monetary Affairs

Consumers in new Member States need more and better information to be able to embrace the euro changeover with confidence

Meeting of the Public Administration Network II
Brussels, 30 January 2006

Ladies and Gentlemen,

In June 2004, I had the pleasure to open the first meeting of the Public Administration Network II which -- like the first group of countries that created the euro in 1999 -- is overseeing the practical preparations for the adoption of Europe's common currency in the new Member States. I am glad to be here again today especially as this historic step is getting closer for some of you.

I have closely followed the activities of this group as I take a strong interest in the state of practical preparations for the introduction of the euro. Indeed, the countries aspiring to join the euro area should not only meet the different convergence criteria, but should also be properly prepared from a practical perspective. I systematically address this issue during my visits to the different new Member States or when receiving the visit of your respective finance ministers or central bank governors.

In this respect, I believe the PAN-II has to fulfil three key roles:

First of all, it is a forum for exchanging information on a large number of technical, legal, economic, and even political issues which are relevant for a successful changeover to the euro.

The second role of the PAN-II is to provide a network of useful contact points to each of you in order to exchange views on specific issues. Past experience shows that discussions within the PAN have often resulted in common approaches or solutions to specific problems. More generally, the PAN-II allows the new Member States to learn from the experience gathered by the current euro-area countries. This is why you invite representatives from the current euro-area countries on a case by case basis to discuss topical issues.

The third, but certainly not the least important function of the PAN-II, is to provide a critical but constructive assessment of each country's changeover plans and preparations. This peer review and support process has proven highly beneficial. It has been helping you to improve and to strengthen the quality of the preparations in your respective countries.

My overall impression is that the PAN-II is on the right track. A lot of necessary and important work has been completed. I would like to thank each of you for your constructive input and for your commitment, while also inviting you to gear up your activities in preparation for the introduction of the euro in your country.

This brings me to the centrepiece of my intervention today, namely the general state of practical preparations for the introduction of the euro.

Last year, I visited eight of the newly acceded Member States and I will visit the remaining countries this year. These visits allowed me to get an even better understanding of the specific situation in each country, not only with respect to the convergence criteria but also as regards their practical preparations.

In general, all countries are still facing important challenges, as was already pointed out in the Report which the Commission adopted in November last year on the State of Practical preparations. Obviously, many countries are several years away from euro adoption and have put less focus on practical preparations. Other countries are preparing themselves for an early adoption of the euro, but still have to tackle a number of key challenges.

I will briefly present six key challenges, which I consider to be among the most important and urgent ones.

First of all, many of your countries clearly favour a "big bang" scenario for the introduction of the euro. I understand this choice. This scenario has indeed many advantages. For instance: it is easy to understand by the public, and it avoids the paradoxical situation that the euro can only be used for scriptural operations although euro cash already exists. At the same time, the "big bang" approach is particularly demanding for enterprises and public administrations because the change of currency happens overnight. I therefore believe that the use of this scenario requires the countries concerned to be even better prepared than the first-wave countries which benefited from a transitional period.

Secondly, many existing plans are almost exclusively focused on the cash changeover. This is the most visible part of the transition, and it rightly deserves a lot of attention. But you should not underestimate the time necessary for the switch-over of enterprises and public administrations. The conversion of administrative and accounting systems in the public and the private sector constitutes a delicate and time-consuming aspect of the changeover. It deserves considerably more attention than it usually receives in the changeover plans.

Thirdly, I would like to urge you to apply the different good practices which have been recognised as highly commendable during the previous changeover. These measures should not be seen as a form of misguided perfectionism, but rather as basic requirements for a swift and smooth changeover. I am thinking first of all on the imperative need for comprehensive frontloading and sub-frontloading before €-day : it is needed to ensure that consumers pay with euros from the first day of the changeover. As from €-day, all cash dispensers should be immediately switched over and bank opening hours should be extended during the first days of the changeover to ensure the widespread availability of euro cash. In addition, during the period of dual circulation, it is essential that retailers give change exclusively in euro, and that no legacy currency is being recycled. Moreover, consumers should be urged to avoid exchanging small amounts of national currency at banks, but rather to spend it in shops. In addition, hoarded coins should be returned to banks well before €-day so that to limit the workload during the early days of the changeover. There are many more of such good practices and they will help you in ensuring a smooth and swift transition.

Fourthly, as the introduction of the euro in some countries gets near, fears about price increases also emerge. This is something we also experienced before and after the introduction of the euro notes and coins in 2002. We know, the figures show that these fears are generally unfounded but they require our utmost attention and vigilance. The statistical data clearly indicate that the changeover effect on the current euro-area prices was very marginal (the impact registered by Eurostat for the euro area was estimated to be within the range of 0.09% to 0.28%).

But the perception of the public in most countries is that the prices have increased. This split between the real and the perceived inflation stems from the fact that the price of some everyday products and services have indeed increased, which has introduced a bias in people's overall perception of prices. Furthermore, for some products such as coffee, for example, Eurozone citizens appear to compare the price of a coffee today with the price in, say, francs or lire, five almost five years ago. This, obviously, does not take into account the normal evolution of prices which would have occurred in any event.

I am all the more concerned that these fears and perceptions related to price increases have spilled over to the new Member States. Indeed, 75% on average of the people in these countries are afraid of price abuses during the changeover.

I believe that we can and must tackle this problem.

First of all, we must address and prevent abusive price increases in certain sectors. We now know much better which sectors are more prone to abuses. This can be counteracted by adequate information combined with confidence-building measures. Codes of conduct agreed between representative associations of retailers and consumers and containing clear commitments towards price stability have already proven their value. Those codes should be materialized by a sticker to be put in the windows of the shops. You should communicate heavily on those stickers so that the customers look for them. Appropriate price monitoring arrangements should also be put in place, particularly right before and after the introduction of the euro cash, in order to allow prompt corrective action whenever necessary and to nip in the bud any false inflation rumour.

The fifth challenge to tackle is the state of public opinion towards the euro in most of the Member States preparing themselves for the introduction of the euro. The present situation constitutes a reason for serious concern.

For instance, according to the most recent Eurobarometer, 53% of the citizens on average in the new Member States are personally unhappy about the introduction of the euro and only 17% of the citizens would like the euro to become their currency as soon as possible. There are probably many reasons for this including emotional ones and resulting again from erroneous perceptions. That the public feels strongly about adopting a new currency is also absolutely normal. It is our duty as politicians and government officials to explain the benefits, which are plentiful, in terms reduced costs for companies, lower interest rates for both businesses and families and greater resilience to world shocks which comes as a consequence of having one of the two major global currencies.

But we must also listen to their concerns and, above all, prevent the occurrence of abusive price increases which, no matter how small the weigh of the affected product in the overall price basket, undermines consumer confidence.

The same opinion poll demonstrates that two thirds of the citizens do not feel well informed about the euro. This brings me to my sixth challenge, namely the need for a pro-active and well-prepared communication strategy. Citizens will only change over to the euro with confidence if they get adequate and comprehensive information early on. National communication strategies need to be defined as soon as possible. The implementation of comprehensive communication activities needs to take place well in advance of the euro introduction.

Important elements to address in the communication strategy are the benefits of the euro, the challenges which the changeover process brings and the concerns and fears which people might have.

The introduction of the euro in the euro area has shown that the mental or psychological changeover by citizens is probably the most difficult part of the whole changeover exercise. This concerns issues such as the already mentioned perception of price increases, or the difficulty for many people to adjust their scales of value from one currency to the other. A comprehensive communication campaign to address these issues is key for a successful changeover.

The Commission supports the development and implementation of Communication strategies through a variety of means. First, we cooperate with the Member States which are close to their target date in the framework of so called Partnership Agreements.

We have already signed three such agreements with the Governments of Slovenia, Lithuania and Estonia and we support a series of communication activities in these countries. Second, we support twinning programmes, in the framework of which euro area Member States and the recently acceded Member States exchanges experience and best practice on various issues related to the euro introduction. Thirdly, and finally, we carry out a number of activities at central level which supplement the communication activities at national level: opinion polls, conferences and seminars, external information activities, publications and other information products.

The importance of proper and early communication cannot be overstated. A smooth introduction of the euro will only succeed if we communicate clearly and convincingly why we intend to introduce the euro and how we are going to address citizens' concerns.

Ladies and gentlemen,

Let me conclude. The euro is a vital element for Europe's strength and prosperity. Every day, it is proving its value and importance. It is one of Europe's greatest achievements and we can be proud of it.

The countries which are represented in this group have everything to gain from adopting the euro in due time. The single currency will help them to establish a stable economic environment and at the same time foster each country's integration into the European Union.

I very much appreciate that the PAN II network helps you in achieving this important endeavour. I encourage you to continue your work with enthusiasm and commitment. You can always count on the Commission as an active partner to assist and support your efforts.

Thank you very much for your attention.