ECONOMY

29 questions and answers on the euro

1 What is the parity for converting drachmas into euros? According to Council Regulation 1478/2000 of June 19, 2000, this parity was set at 1 euro for 340.75 drachmas, which is irrevocable, that is, it can never change. The same applies to the parities of the other national currencies of the eurozone (deutschemark, French franc etc.) with the euro. 2 Where can drachmas be exchanged for euros? In any bank. 3 Will banks charge commission for the exchange? No, banks will not charge commission in the exchange of drachmas for euros. 4 Until when can drachmas be exchanged for euros? Until February 28, 2002, notes and coins may be exchanged at any bank. As of March 1, 2002, coins can be exchanged at the Bank of Greece or public tax offices until February 29, 2004. Drachma notes may be exchanged as of March 1 at the Bank of Greece and all its branches for a period of ten years, that is, until February 29, 2012. 5 Until when will payment in drachmas be acceptable? Cash payments in either drachmas or euros will be acceptable in January and February. Credit card charges and checks will be issued only in euros. 6 How long will the drachma circulate along with the euro? For two months; as of yesterday and until February 28, there will be parallel circulation of drachmas and euros. As of March 1, the drachma will not be legal tender and cannot be used in transactions. 7 Will banks charge for converting accounts from drachmas into euros? No, the conversion will take place free of charge. 8 What about loans? Loans were automatically converted into euros yesterday, without any charge. 9 Will the value of money fall in the conversion into euros? No, the value of drachmas we possess or will receive (e.g. salaries and pensions) will not change. 10 Conversion of drachmas into euros? There should not be a problem. However, certain practical issues will arise. If, for instance, we used to buy three kilos of potatoes for 900 drachmas, we will still buy the same amount with the corresponding money in euros. As the price per kilo was 300 drachmas and the corresponding amount in euros 0.88, the greengrocer may round the price up to 0.90. 11 What problems are citizens likely to face during the initial period of circulation of the euro? One of the first things to happen will be a loss of the sense of prices, as those in euros will be completely different from those in drachmas. There will also be a «problem» with salaries and pensions which, in absolute figures, will be much lower than those people were used to. Someone, for instance, who had savings of 3,407, 500 drachmas, will now have 10,000 euros. Figures in millions are now equivalent to figures in thousands. The purchasing power remains the same. The biggest problems are likely to be faced by the elderly, the illiterate and people with special needs, who may find it more difficult to make certain numerical calculations. These groups will probably need a longer period to adapt. 12 Are notes the same or different in the 12 countries of the eurozone? The seven notes denominated in euros are the same, on both sides, in all the member countries of the eurozone. 13 Are coins the same or different in the 12 countries? The obverse side of each coin, the European, will be identical in the 12 countries, depicting variations of the map of Europe. The reverse side will differ from country to country. 14 Will the coins that have Greek representations on the national side be acceptable in the other 11 member countries of the eurozone? Yes, they will circulate in the other 11 countries in the same way as in Greece. 15 Conversely, will the coins of the other 11 countries with national representations be acceptable in Greece? Yes. 16 As of when will cash register machines have the euro as a basis for calculations? According to the law, all cash registers must use the euro as a basis for calculations as of yesterday. All users of cash registers must have already ensured the necessary conversions. A Finance Ministry circular has given an extension of the deadline until January 10, 2002. 17 How are sums rounded off? The conversion of sums from drachmas into euros is done by dividing the initial sum by the exact parity (1 euro = 340.75 drachmas) and rounding off the resulting figure to the nearest cent. That is, figures with a third decimal point equal or greater than 5 are rounded up and those with a third decimal point lower than 5 are rounded down. Example: In order to convert 53,000 drachmas into euros, 53,000/340.750 = 155.539 euros. This is rounded up to 155.54 euros. Conversely, in order to convert a sum expressed in euros that is going to be paid in drachmas, we multiply by the exact parity and round off to the nearest full drachma. If the resulting figure is equal or higher than 0.5000 drachmas it is rounded up, and if lower than that it is rounded down. Example: In order to convert 136.53 euros into drachmas, 136.53×340.750 = 46,522.5975 drachmas. This is rounded up to 46,523 drachmas. 18 What will become of sums smaller than 1 cent? In the rounding-off procedure, a buyer in a transaction gains amounts smaller than half a cent (rounding down to the nearest cent), while for amounts equal or larger than half a cent he is charged a whole cent (rounding up to the nearest cent). The converse applied to the seller. Therefore, gains and losses will be negligible, particularly as averages per citizen. 19 What about public utility bills? If after the rounding off of prices a small adjustment is needed for purposes of convenience, this will be done downward (e.g., from 5 euros to 4.99) so that the consumer does not lose. 20 Will anything change in life insurance policies? Of course not. A special regulation stipulates that there is absolute continuity of all insurance policies and other contracts, with the replacement of all amounts expressed in national currencies in euros. 21 Will prices rise as a result of the euro? It is likely that certain rounding off of figures will take place as prices are converted from drachmas to euros, but these will not necessarily be upward. Some will be downward, and so the overall level of prices is not expected to be significantly influenced. Of course, some prices may not be mechanically converted according to the parity (1 euro = 340.750 drachmas) but may be adjusted to figures convenient for attracting customers (e.g., from 4.97 to 4.99 euros), but with a parallel change in quantity. 22 What is the purpose of notes of large value (e.g., 500 euros)? Some countries such as Germany had national bank notes of large value which had to be replaced by euro notes of corresponding value. 23 Can we use the euro in countries not belonging to the eurozone? The euro is an international currency. It will therefore be easily accepted in other member states of the European Union (i.e., Britain, Sweden and Denmark). It will be equally easily accepted in the other European countries not belonging to the EU. Properly speaking, however, euros must be converted to local currencies in these countries. In London, for instance, we must change euros into pounds sterling. Nevertheless, in many shops of other countries, particularly in tourist and border areas, the euro will be accepted through a simple conversion on the basis of the current parity of the local currency with the euro. 24 What applies to checks? The checks in drachmas dated before January 1, 2002 can be paid during the two-month period when the two currencies will circulate in parallel, that is, until February 28. However, checks in drachmas dated after December 31, 2001 will not be accepted by banks. If you have checks in drachmas payable after December 31, 2001, you must ask the issuer or whoever gave it to you to replace it with one in euros. 25 Are interest rates the same in all 12 countries of the eurozone? The European Central Bank determines the basic interest rate of the euro, which influences rates in the interbank market where commercial banks conduct their transactions. These rates are the same throughout the international money market in euros. This, however, does not mean that bank lending and deposit rates are the same in all eurozone countries. Each bank will offer its own rates, although differences are bound to be small. 26 What security devices do euro notes carry? The cotton fibers the notes are made of give them a characteristic texture. Indeed, some parts on the obverse side of notes are embossed in order to be recognized by touch. If we look at a note against the light we notice the watermark, the security strip, and the half-finished design on one side which is complemented by the corresponding half-finished design on the other side. The notes are authentic if this characteristic design is visible from both sides. If we look at the notes of small value at an angle and against the light, we shall notice on their reverse side a fluorescent strip, while in the notes of large value we shall observe ink of variable coloring. 27 What about the security of coins? Modern coin-producing technology makes counterfeiting them extremely difficult. The 1- and 2-euro coins are bimetallic, that is, made of two metals. The rim of the 2-euro coin carries an inscription and it is one of the first coins in the world combining a technology of three alloys and two colors, in other words, an inner and and outer rim in different alloys. The outer rim is made of bronze and nickel and the inner of nickel and copper alloy and nickel. Coins are distinguished by their weight (from 2.3 grams to 8.5 grams) and size (from 16.25 mm to 25.75 mm). They also have characteristic colors (two colors, copper or yellow) and their thickness varies between 1.36 mm to 2.125 mm. 28 What will be the repercussions of the introduction of the euro on the economy? The use of the physical euro will particularly facilitate transactions within the eurozone, by eliminating the cost of converting national currencies and the currency risks associated with changes in their parities. As it puts an end to the fluctuations of currency parities and the resulting – and often arbitrary – changes in the competitiveness between member countries of the eurozone, it helps to deepen the single market for goods, services and capital. At eurozone level, the physical introduction of the euro will particularly benefit consumers as price comparisons become easier, and it will thereby boost competition between producers. Firms with a strong export orientation will also benefit as the euro will reduce the cost of pricing products in different currencies. Moreover, the euro is projected to give a boost to growth and employment by bolstering market confidence and helping create a healthy economic environment of price stability and low fiscal deficits and public debt. 29 After January 1, 2002, can we use the national currencies that we have kept from previous trips to Europe or are they now useless? Up until February 28, 2002, in other words as long as the period of «parallel circulation» exists, we can use either the national currencies or the euro in most countries of the eurozone, with three exceptions. For the Netherlands, the deadline is January 27, for Ireland it is February 9 and for France it is February 17. Until the deadlines, we can pay in the national currency and receive change in euros. After the deadline, national currencies must be exchanged at commercial banks for a specific period, and after this at branches of the countries’ central banks for a much longer period or, in some cases, indefinitely. For more information, visit www.euro.ecb.int on the Internet.