Slovenia is well prepared for the euro

Slovenia appears to be fairly well prepared for the euro on 1 January but would gain from adopting further measures to strengthen consumers’ confidence that prices will remain stable during the changeover. This is one of the conclusions drawn by the fourth report on the practical preparations for the enlargement of the euro area. The report focuses particularly on Slovenia, as it is about to adopt the euro, but also looks closely at the changeover plans adopted by Cyprus and Malta, which aspire to do the same in 2008. Although the Cypriot plan covers all aspects of the changeover, the details are patchy, while Malta‘s plan appears to be both comprehensive and detailed. A Eurobarometer survey also shows that public opinion in the new Member States remains positive about the single currency, more so than in 2004 and 2005, although the results differ from country to country.

The European Heads of State or Government and European Union Finance Ministers in June concluded that Slovenia met the economic and legal criteria set in the EU Treaty to adopt the euro in January 2007, and fixed the conversion rate at 239.640 tolars to the euro.

Since the Commission’s last report on the practical preparations for the euro in June 2006, Slovenia has made further progress, notably on the cash changeover: further details on the supply of euros to banks and retailers before €day (so-called frontloading and sub-frontloading) have been satisfactorily provided, while the conversion of cash dispensers has now been planned in detail. Credit institutions have also agreed to open 42 branches throughout the country on 1 and 2 January to facilitate the exchange of tolars into euros.

But the Commission would welcome measures to reassure consumers that the conversion rate will be respected and the changeover period will not be used to increase prices abusively, a concern shared by 66% of consumers, according to a September Eurobarometer survey. Such measures could include fair-pricing agreements between retailers and consumers (e.g. a code of conduct signed by representative organisations of both parties).

The Commission assesses the state of practical preparations in the countries ‘with a derogation’once a year (or more often when a country is about to adopt the euro). Those preparations include the adoption of a changeover plan including details on the duration of the period during which both the national money and euro cash are legal tender or the preparation of starter euro kits to accustom consumers to the new currency.

These assessments are separate and different from the Convergence Reports, which assess whether countries comply with the Maastricht criteria, including limits on deficit and inflation levels, and thus whether they qualify for euro adoption at all. The next Convergence Report is planned for December.

 

Cyprus and Malta

Cyprus and Malta have also made progress in their practical preparations, with Malta the more advanced of the two.

Cyprus‘ national changeover plan addresses all the different practical issues, but is thin on detail, for example on the frontloading operation, the return of national cash to the central bank and the period of dual price display. And further measures are necessary here too to boost consumer confidence that the changeover will not push prices up.

Malta‘s plan is more detailed, though some aspects require further specification, notably the timing of frontloading and sub-frontloading, the accelerated conversion of cash dispensers and the content of starter kits. Due to the particularly high amount of national cash in circulation in Malta (approximately the equivalent of €2,789 per capita), more than twice the euro-area average, the backflow of national currency and the exchange of national cash into euros requires special arrangements. On the other hand, Malta appears to be taking consumer concerns seriously by encouraging retailers to sign up to fair-pricing agreements and creating a ‘Euro Observatory’ to monitor prices.

In most of the other Member States concerned, there have been no major developments since the June report.

The new Eurobarometer survey shows that public opinion in the new Member states remains largely positive about the euro, though with marked differences between countries. Overall, 50% of respondents believe that the euro will have positive consequences for their country, a better result than in 2004 and 2005, but slightly lower (2 percentage points) than the last survey, in April 2006.

On the negative side, more than half of all respondents (58%) still say that they are not very well, or not at all, informed about the euro, including in Cyprus (60%) and Malta (62%). This shows that communication remains an important challenge for the new Member States – one that the Commission remains ready to help them meet. However, 83% of the Slovenians polled feel rather or very well informed and 61% – the highest percentage of any country – are also confident about the benefits of the euro.
For report see:

http://ec.europa.eu/economy_finance/publications/eurorelated_en.htm
For Eurobarometer see:

http://ec.europa.eu/public_opinion/euro_en.htm