Complete replacement of one circulating currency with another happens rarely. When it does, the challenges of economic co-ordination and public co-operation are vast. In both respects – novelty and difficulty – the introduction of euro banknotes and coins at the start of 2002 is unique, for not one currency, but 12, will be replaced simultaneously, in an economy of over 300 million people. How can success for this unprecedented project be assured and what will it require? At the simplest level, introducing euro cash requires that enough of it – an initial supply of some 14.5 billion banknotes with a value of around €642 billion – be available on 1 January 2002. Banks, security firms, retailers and the cash-operated machine industry must be closely involved in preparations at an early stage, and the entire process must be accompanied by a campaign to inform the general public and prepare professional cash handlers. Finally, a series of legal and organisational measures is needed to ensure both the success of the cash changeover and unhindered circulation of euro banknotes and coins in the future. In order to provide everyone concerned with sufficient time to prepare, the logistics of introducing euro banknotes and coins into circulation were worked out far in advance, with the European Central Bank (ECB) focusing on timely production of banknotes and on the technical organisation of the transition. During the second half of 1999, intensive discussions involving the ECOFIN Council (comprising European Union finance ministers), the national central banks and the ECB led to an agreement on the following goals: · euro area Member States will seek to ensure that the bulk of cash transactions can be made in euro within a fortnight of 1 January 2002; · the period for withdrawing old banknotes and coins will last between four weeks and two months; Member States are also to facilitate the exchange of old banknotes and coins after this period; · financial institutions, cash-in-transit companies and retailers will be “frontloaded” with euro banknotes and coins some time before 1 January 2002 so that a sufficient quantity of cash will be in circulation during the first few days of the year; · in order to help citizens familiarise themselves with the new coins and to facilitate the changeover, Member States will make limited quantities of coins available to the public on request – notably to vulnerable sections of the population – but not before the second half of December 2001. However, as explained below, euro banknotes will not be provided to the public before 1 January 2002. Following the agreement on these issues, the Governing Council of the ECB established general guidelines to regulate the frontloading of financial institutions with euro banknotes and coins, how and when these institutions are to be debited for the frontloaded currency, and the coverage of risks related to the transactions. These general guidelines were subsequently fine-tuned at the national level to reflect local conditions. Given the paramount importance of frontloading euro banknotes and coins to credit institutions for a smooth transition, the Governing Council set 1 September 2001 as the starting date. In parallel, the credit institutions will sub-frontload target groups (such as retailers and the cash-operated machine industry). However, within the maximum four-month lead time set by the ECB, each national central bank is free to operate as it sees fit in order to meet frontloading needs – as long as Member States recall that this must not lead to euro banknotes and coins being put into circulation before 1 January 2002. This means that actual lead times in the different countries may differ between target groups as well as between banknotes and coins. Financial institutions will be permitted to sub-frontload euro coins to the general public from the second half of December 2001. But, as mentioned before, the ECB has ruled out sub-frontloading banknotes to the general public.. The different treatment for banknotes and coins has attracted some attention in recent months. In order to understand the rationale behind the decision not to sub-frontload the general public with euro banknotes, it is important to realise that, in practice, doing so would be both unmanageable and of dubious benefit: It would, for example, be unmanageable for credit institutions, because during the crucial period leading up to January 2002 they would have to devote ample resources to preparing for the potential demand for euro banknotes from European citizens. This would increase the cost of the cash changeover, particularly for the credit institutions; It would also be unlikely to result in real practical benefits for the average citizen. For what benefit can possibly be derived from carrying around banknotes that will not be accepted as a means of payment until 1 January 2002? In fact, it seems to me that the existence of liquidity restrictions for many European citizens, the risk of loss, the time spent queuing at the bank and the possible confusion created would, in practice, mean that the costs are considerably higher than the potential benefits. Moreover, steps have been taken to address the specific concerns raised by retailers, mainly to facilitate the changeover at outlets. The measures include the sub-frontloading of coins to the general public in the second half of December 2001, the sub-frontloading of banknotes and coins to retailers well in advance of 1 January 2002, the dispensing of preferably low-denomination euro banknotes via automated teller machines (ATMs) from the first day of 2002, and the conversion of the majority of ATMs within the first week of 2002. To ensure a smooth and fluid substitution of national banknotes and coins, Europe’s citizens must recognise that, although some inconvenience will occur during the cash changeover, the introduction of the euro banknotes and coins into circulation will be beneficial. Replacing 12 circulating currencies with one single currency will complete the decade-long process – begun in 1992 with the Maastricht Treaty – of building Economic and Monetary Union in Europe. All European citizens, without exception, will be able to participate in this final challenge: the success of the euro cash changeover. With it, and dependant upon it, is the realisation of Maastricht's promise of a united and prosperous continent.