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1. First and foremost, the single monetary policy and the enhanced co-ordination of economic policies that underpin the euro have brought about cheaper finance for all: interest rates are at historically low levels, fostering investment and consumption and resulting in real benefits for consumers, for example through low mortgage rates and cheap loans.
2. Secondly, increased price transparency within the euro area, together with the ECB's firm management of monetary policy, have lead to a stable environment including low inflation (only 2,3% in 2001 and 2002 subsequently), supporting private consumption.
3. In the third place, the euro has brought about improved resilience of the euro-area economies against financial crises. Without the single currency, recent events such as the terrorist attacks of 11 September 2001 in New York and 11 March 2004 in Madrid or the financial accounting scandals of 2002 would have triggered major turbulences in Europe as a whole and in many euro area economies in particular and would have made national currencies collapse.
4. Fourthly, the elimination of the exchange rate risk within the euro zone has made travel easier within the euro area without the hassle and cost of changing currencies. Travelling outside the euro area is also easier since the euro has become a widely accepted international currency.
5. In the fifth place, raw materials and oil being offered on the world market in US dollars, European consumers benefit from the relatively strong euro compared to the dollar. The positive exchange rate brings about relatively low fuel prices and lower foodstuff prices for the European consumers.
6. Another positive effect of the euro is that it has brought about an increase in trade within the EU. Several studies prove that EMU has had a positive impact on intra-euro area trade, by roughly 10 % on average for all the countries in the eurozone, and up to around 17 % in some countries such as the Netherlands, Spain, Belgium and Austria, since the euro came into being. In addition, the single currency has also contributed to increased trade with the outside world. Since 1999, international trade invoicing in euros has increased considerably.
7. In addition, the euro has gained a high standing in international financial markets, and is taking on an important role as an international reserve currency (from 13,5% of world reserves in 1999 to 19,7% in 2003). Thus, the euro is becoming a preferred vehicle for international investment and borrowing (international securities in euros now rival those in US dollars). In addition, this should strengthen Europe’s role in international fora and organisations.
8. Currency integration is also stimulating capital markets' integration inside the EU, triggering structural change in the banking and financial spheres. Cross-border business has increased and consolidation is on the rise. Ultimately more choice and lower prices should trickle down to the average financial services consumer.
9. Last but not least, EMU has created a welcome pressure on Member States to implement stability-oriented fiscal policies. The theory says that the existence of a currency union implies co-ordinated or harmonised fiscal policies, to reduce the risk of ‘free-riding’ by some Member States to a minimum. Back in 1999, the necessary disciplinary strait-jacket policy-makers came up with was the so-called Stability and Growth Pact. Despite the criticisms that can be levelled at it, it is clear that the Pact still proves its usefulness by improving fiscal discipline. Your rapporteur believes that the revision of the Pact recently agreed by the European Council can only be considered as an improvement if all Member States without exception adhere fully to the new agreement. If the new agreements are disrespected again the credibility of the euro as well as its public image will be permanently damaged.
All these benefits are the result of a very successful introduction strategy from a technical point of view, both in 1999 when the old currencies were converted to the euro, as in 2002 during the physical changeover. The logistical feat of simultaneously introducing banknotes and coins in 12 countries cannot be underestimated. Despite glitches here and there, the operation was successful, so much so that little thought is given to the implications behind it. Apart from the European Central Bank, the European Commission and Member State governments, stakeholders like SME’s consumer organisations, trade unions, employers' organisations etc have contributed to this success. The European Parliament played a pivotal role in providing strong backing to the Commission's efforts, by approving a significant budget for the campaign, and also by being a critical partner in the debate with the Commission and the ECB. More than €200 million of European Commission funds were allocated from 1996 to mid-2002, mainly from the PRINCE programme budget lines. Member States spent much more than this, and the ECB spent €80 million.
III. The euro’s problems
Having stated all of this, your rapporteur believes nevertheless that there is room for improvement as far as the communication strategy of the euro is concerned. After a significantly long period of 7 years of euro and EMU it is time take some distance and analyse our currency framework with objectiveness. This is all the more necessary because the Euro project is by no means over: in fact, promoting the virtues of the euro is an ongoing and everyday exercise; maintaining and improving the credibility and stability of the euro area is a never-ending task that needs constant care and attention. The possible future enlargement of the euro area to new countries merits an in-depth reflection on the way that policy makers should take to avoid the mistakes of the past and on how they can improve previous communication campaigns.
Indeed, it is dispiriting to notice that despite the objective benefits of the euro as described above, and despite the generally smooth changeover that occurred, a certain section of the European public continues to claim to have a negative perception of the euro. And it seems this tendency is on the rise. Baffling as this may be, policy makers, and notably the Commission and Member States' Finance ministries, need to take stock of these perceptions and undertake steps to correct them. Recent Eurobarometer polls show that support for the currency in the euro zone was 68% just before the changeover, 75% just after, and 66% in the first half of 2004.
These polls are reinforced by recent ones conducted in the new Member States, which also reflect an increasing hostility towards the adoption of the euro: only 44% of the population in the new Member States believe that the introduction of the euro will have positive consequences for their country, and 47% is unhappy about the euro replacing their national currency. Needless to say, public opinion in the three pre-enlargement non-euro countries, the UK, Sweden and Denmark, continues to be broadly opposed to the currency union, a fact that was brutally exposed in the negative results of the referenda in Sweden and Denmark.
Amongst a variety of reasons that are not the subject of this report (euroscepticism, nationalism, attachment to national traditions and so forth), one of the main reasons that public perception has been so negative in those Member States that adopted the euro is the feeling that prices increased dramatically after the changeover. The overall effect of the introduction of the euro on inflation is now estimated to have only been 0.2% in 2002. But this very low increase hides a reality that was painfully obvious to the man on the street during 2002 and 2003. Being an average, the figure disguises the enormous prices hikes in everyday consumption items such as coffee, vegetables, bread, newspapers, a haircut, local taxes, including parking meters, and so on. Although inflation around January 2002 was partly caused by bad harvests and other economic factors, it is the contention of your rapporteur that these perceptions were to a large extent compounded by some errors made during the changeover. For example, not enough information was provided to the average consumer on the likely risk that prices of everyday items and services would soar. Citizens were thus taken by surprise. And these impressions linger on for a long period of time. SMEs were also inadequately informed and were insufficiently supplied with enough cash to cope with all the transactions that took place in the first few months. Agreements between central governments and organisations of SME's and, more scandalously, local government to avoid unscrupulous price increases appear not to have worked or only up to a point. Finally, it is now clear that it was a mistake to stop communication campaigns on the euro so early after its physical introduction. More time would have been needed to solidify the euro's image in the public's eye and to swiftly correct the wrong impressions caused by some price increases: albeit being of minor economic importance for the overall economy, they weighed heavily on the average consumers' budget. Therefore this rapporteur proposes the presentation by the ECB of a yearly quantitative analysis of the benefits the euro has brought about for ordinary citizens. This has the added advantage of forcing the EU policy makers to take into account not only macro-economic aspects of the development of the currency but also its effects for ordinary citizens.
Several other benefits of the euro, such as greater price transparency and its effects on competition, will only come if and when governments take the necessary measures in completing the internal market, hopefully in the framework of the Lisbon Strategy.
IV. Proposals for improvement
With this in mind, this report's aim is to try to suggest what is a possible way forward. It does not claim to set out a detailed spending programme on communication campaigns or other details but rather to present the European public with clear political messages and choices, thereby setting the ground for the Commission and the Member States to take up a vigorous defence of the currency.
The single currency remains and should indefinitely remain as a communication priority for the EU. The benefits of the euro and of EMU need to be sold and explained to the public continuously: policy-makers cannot let their guard down. If the euro project is taken for granted, any external shock or political crisis could trigger an attack on the currency union. The euro should not be the scapegoat for others' failures. This is particularly relevant in light of the different referenda currently being held in the EU to ratify the Constitutional Treaty.
Your rapporteur therefore welcomes the Commission's latest report on its communication strategy on the euro but believes that it is excessively optimistic in view of the problems mentioned above. The Commission needs to clarify its key communication targets and to detail the steps needed to achieve them. It should apply more modern 'marketing' techniques and try to sell the euro and its benefits as a global ‘package’. For this, it is necessary that the European Parliament continues its strong support of the PRINCE programme and authorises an increase in funds for it.
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