ECONOMY

Getting ready for the euro

BRUSSELS – The European Commission urged the EU’s 10 newcomers yesterday to speed ahead with preparations for a «big bang» adoption of the euro, which some want to use in barely two years’ time. The European Union executive noted that four of the EU countries that joined the bloc in May are planning to adopt the single currency in 2007, while the other six plan to be using the currency by 2010 at the latest. In a report on practical preparations, it urged the mostly ex-communist states to introduce euro notes and coins from the start, rather than having a transition phase before the full-blown launch, as the current 12 members did. The euro was launched in 1999 in check form and as a virtual currency used in electronic financial transactions. After a three-year transitional phase, banknotes and coins were introduced on January 1, 2002. «But the lessons drawn since show that this is neither necessary nor advisable for the new countries,» said a Commission report, noting that five countries are so far «considering a ‘big bang’ scenario.» EU Monetary Affairs Commissioner Joaquin Almunia said that the introduction of the euro in the newcomer states should be easier than its initial launch five years ago, because the currency is already widely in circulation. «The introduction of the euro in the new countries should be faster and even smoother than in the current eurozone members since an average of 50 percent of the population has already used euro notes and coins,» said the Commission. But Almunia cautioned against complacency in practical preparations. «Although the euro is already an established and successful currency, preparations for its adoption in the new member states should not be underestimated or delayed if we want to ensure a wide public acceptance and a smooth transition,» he said. A Commission spokeswoman stressed that the new report has nothing to do with an assessment of whether the new EU states fulfill the various criteria, such as budget deficit levels, to join the euro. But the spokeswoman, Amelia Torres, said the report «shows that there should be no room for complacency, and (that) the practical preparations should go ahead as soon as possible.» The 10 countries that joined the EU on May 1 are: Cyprus, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Malta, Poland, Slovakia and Slovenia. Under their accession treaties, the new members are obliged to adopt the euro at some point. Of the older EU members, Britain, Denmark and Sweden have opted out of the common currency. Before they join the euro, the new EU states must first spend at least two years in a second-generation Exchange Rate Mechanism (ERM II), which sets fluctuation limits between their currencies and the euro. Three countries – Estonia, Lithuania and Slovenia – joined ERM II in June, with the aim of adopting the euro in 2007, while Cyprus also wants to join then, the Brussels report noted. Malta, Latvia and Slovakia are aiming to join from 2008, Poland and the Czech Republic from 2009 and Hungary in 2010, it said. The EU executive welcomed the fact that the euro – currently soaring to record levels on currency markets against the dollar – is already widely used in the new EU countries. «Citizens in the new member states are already familiar with the euro,» it said, noting that on average 50 percent of those countries’ citizens have used them, rising to 79 percent in Slovenia.