Third report on practical preparations for the euro: Commission urges Slovenia to speed up final steps

22 June 2006

With only six months to go before the expected adoption of the euro, the European Commission today urged Slovenia to step up the final preparations for a successful introduction of the single currency expected to take place on 1 January 2007. The Commission particularly encourages the Slovenian authorities, consumer associations and the retail sector to ensure that there are no abuses when prices are converted into euros. In its third report on the state of practical preparations for the introduction of the euro in the Member States with a derogation¹, the Commission also encourages the countries, which aspire to adopt the euro in 2008, to speed up their own preparations.

"While the adoption of the euro crucially hinges on the respect of the conditions set out in the Treaty, efficient and timely practical preparations play an important role for a smooth changeover. Slovenia should use the remaining six months to make sure that consumers and enterprises are fully ready to use the euro from day one and that the retail sector undertakes and implements fair-pricing commitments to avoid abuses. The countries that aim at introducing the euro in 2008 should pay particular attention notably to information and communication aspects, especially as the population in the countries that joined the EU in 2004, with the remarkable exception of Slovenia, feels ill-informed and needs re-assurance, as demonstrated by the latest Eurobarometer survey," said Economic and Monetary Affairs Commissioner Joaquín Almunia.

This is the third report on the practical preparations for the future enlargement of the euro area since 2004, when the European Union took in 10 new Member States.

The report concludes that the preparations are at an advanced stage in Slovenia, as it should be since it is expected to adopt the euro in 2007, subject to a favourable decision of the Council currently scheduled for July 11.

But more work is needed to fully address citizens' fears about price increases. The experience with the first wave of countries that adopted the euro shows that this is the number one concern, which highlights a gap between perceived inflation and actual inflation resulting from the gradual adjustment of consumers to the new scale of values (e.g. prices are often compared with years-old reference prices), but is also due to abuses in a few specific sectors. In addition to adequate price monitoring, Slovenia should promote a fair-pricing agreement between retailers and consumers, in which retailers commit not to use the introduction of the euro as an opportunity for price rises. Such agreements have proved useful to creating a climate of confidence and awareness in the past.

Slovenia must also ensure that banks are fully ready to dispense euro cash at automatic machines from € - day and stay open longer around € - day. There should also be a sufficient number of euro kits to enable Slovenian citizens to familiarise themselves with euro coins in the second half of December.

Turning to the other countries with a derogation and comparing with the second report carried out in November 2005², the situation with respect to the national target dates for the adoption of the euro has significantly evolved. The target dates of several countries are being (or have been) revised, namely those of Estonia, Latvia and Lithuania. The date of introduction of the euro is subject to the fulfilment of the Maastricht convergence criteria, and therefore not predictable with complete certainty. Nevertheless, the setting, or re-setting, of a credible target date is a necessary instrument to provide momentum for timely practical preparations of all sectors concerned.

Al in all, the progress with the practical preparations varies widely.

In total, eight Member States have now created a national body in charge of the changeover preparations, but only six have formally adopted a national changeover plan, which is needed to provide guidance to all actors and sectors concerned as well as to ensure a smooth changeover.

Cyprus and Malta which like Estonia aspire to adopt the euro in 2008 are particularly encouraged to step up preparations and Cyprus should moreover adopt a national changeover plan without further delay.

Support for the euro on the increase

The overall perception of the euro has improved in the recently acceded Member States, but many citizens still feel ill-informed about Europe's single currency and its benefits, according to a Eurobarometer survey conducted in April this year.

More than half of the respondents (52%) in the new Member States think that the euro will be positive for their country (38% in 2005). A total of 48% (36% en 2005) were also happy, or very happy, about the changeover, the happiest of all being the Slovenians 64% while support was lowest in Lithuania (28%).

In contrast to the empirical evidence that inflation has been systematically low in the euro area, with annual inflation rates not exceeding 2.4% since the introduction of the euro in 1999, 46% of respondents in the new Member States fear that the introduction of the euro will increase inflation in their country. This shows a need for more and better information as early as possible. Indeed, the survey confirms that the majority of citizens (60%) consider themselves badly informed about the euro, and indicates that early information on the introduction of the euro is highly appreciated.

The full report, including a Staff working paper, is available on: ec.europa.eu

Source: European Commission

¹ The ten recently acceded Member States and Sweden are Member States with a derogation.

² The Second Report on the Practical Preparations for the future Enlargement of the euro area can be found at ec.europa.eu.