by Hugh Oram
From Issue 82, Autumn 1998.
Ireland’s national currency the punt or Irish £, is being swept away as the new European currency, the Euro is launched. Although it comes into effect on January 1st 1999, the actual euro coins and notes won’t be seen until January 1st 2002.
The euro is a standardised currency that will apply across eleven of the fifteen countries in the European union: i.e. Ireland, Germany, France, Spain, Italy, Finland, Netherlands, Portugal, Austria, Luxembourg and Belgium. Denmark, Sweden and Britain have opted out (for the moment, but Britain intends to join in the next five years), while Greece has not met the various requirements. Once national currencies have been abolished in the eleven, the same bank notes and coins will be used throughout .
Link with Sterling
Ireland first introduced its own excellently designed notes and coins in 1928, with the graceful outline of Lady Lavery on the banknotes and symbols of Irish animals and fish (like the pig, bull, horse, and salmon) on the coins. This early currency has come to be regarded as a Collector’s Item, and you can buy it at coin dealers.
The present banknotes are also works of considerable artistic merit, many of them having been designed by Dublin artist Robert Ballagh.
Irish currency was linked with sterling until 1979, so its period of “independence” has been brief – less than twenty years. With the new European Central Bank in Frankfurt, Germany, coming into existence, all decisions on the new currency and related matters (such as interest rates) will be taken there on a centralised basis, and not in the Central Bank of Ireland in Dublin, which was set up in 1942.
Common Currency
The euro coins will be in the following denominations: 1;2;5;10;20 and 50 cents and 1 and 2 euros. The Irish face of the euro coins will feature the stars of the European Union, the year of minting and the Irish harp. Banknotes will be issued in 5;10;20;50;100;200 and 500 euro denominations. The face of these banknotes show rather insipid designs based on European bridges, but there won’t be any national designs.
The introduction of the Single Currency is all part of the plan to create a single united Europe. By the same plan, duty free shopping within the EU is scheduled for abolition at the end of June 1999 (despite vocal protests from the Irish corner!).
A substantial changeover programme to take account of the new currency has already started in Ireland across all industrial and commercial sectors. A Euro Changeover Board has been set up by the Department of Finance to oversee a smooth transition. Already, the currencies of the eleven European states taking part in the scheme have been locked in to the Euro. As from January 1st 1999 it will exist officially. From that date, it can be used for any paperless transactions, including cheque book and credit card dealings, accounts and paying your income tax.
Everyday use
But the actual euro notes and coins won’t be launched until January 1st 2002. In the six months following this date the national currencies and the Single Currency (Euro) will run side by side. The plan is that by July 2002 (or possibly earlier) national currencies will have been abolished and the euro will take over as the sole currency in the eleven member states.
At that stage, every kind of money transaction, including bank accounts, will have to be converted to euros. The exact conversion rate won’t be known until January 1st 1999, but it is likely to work out at about 80p to each Euro.
The long transition period has been strongly criticised. When decimalisation came in 1971, it happened overnight. There are many other criticisms too of the euro. Many critics say that since the European Central Bank will be based in Frankfurt, and Germany has been one of the main drivers of the single currency, the new bank is only the Bundesbank (the German Central Bank) under another name.
Worrying Concerns
The euro will mean that common interest rates will prevail across the member states. In countries where unemployment is high (like France and Germany) the introduction of low interest rates will be an advantage. But in countries like Ireland, where economic growth has been much stronger than anywhere else in Europe, lower interest rates won’t be so beneficial and the fear is that lower cost loans and mortgages could push up inflation. Ireland has performed so strongly that it doesn’t need lower interest rates, goes the argument, but under the euro regime any room for independent manoeuvre will have been banished. In future, say the euro critics, if a country wants to make cutbacks, it can only be done by putting people out of work, a sure recipe for social unrest. The space for national flexibility in managing national economies will have gone.
Another major cause of concern is the transition from punts to euros. Often prices are offered enticingly as (say) £2.99. But punts may not translate happily to euros: if it translates to 3 euros 73 cents, for example, shopkeepers could be tempted to round them up – say to 3 euros 99 cents. Some maintain that the conversion will be the cause of massive price inflation, as happened when the currency went decimal in 1971 and inflation increased dramatically.
However a single currency will make comparison shopping across national borders much easier, especially for people shopping on the Internet. It will be very easy to see just how much the same goods and services cost in each country in Euroland. It will also make it easier for Irish-based firms to sell elsewhere in Europe and for Irish consumers to buy goods and services in mainland Europe.
Tourism
If you are a visitor travelling through Europe, you will find it much easier having just the one currency through the eleven participating states. If you are claiming back VAT (see Issue 80) on purchases made in Ireland as a non-resident, that won’t change, except that the calculations will be made in Euros rather than punts as at present.
But in Ireland, the two parts of the island will continue to use two different currencies; In the Republic the euro will be in ordinary use, but Northern Ireland will continue to use sterling, so long as Britain remains outside the Single Currency.
The advent of the euro is doing away with a lot of history: The French have had their own currency for 638 years, but they have been the first European country to mint euro coins. The first French francs were struck in 1360 by King John the Good, to signify that his part of France was “franc des anglois” or free of English domination.
World currency?
Now the hope is that the euro will become a world currency to match the US dollar. But a reminder of the earlier times will be around for years to come: The symbol of the euro is a lower case ‘e’ with two diagonal lines through it. Existing keyboards still have the £ sign and it will be years before the euro symbol comes into universal use on keyboards. The introduction of the euro might seem neatly bureacratic to the pen and mouse pushers of Brussels, but the whole enterprise is still fraught with uncertainty. Its introduction coincides with the great computer conversion to make computers year 2000 compliant. Many sources say that European businesses have been putting more resources into converting to the euro than making sure that their computer systems run correctly come January 1st 2000. No wonder that one newspaper in Germany (where the deutschmark is being very reluctantly relinquished in favour of the euro) had a very anti-euro cartoon: It was in the Neues Deutschland in Berlin and showed a cheering crowd giving the euro a good send-off: But the Euro looked like an airship – and we all know what happened to those!
*** The exchange rate of the Irish punt to the Euro is an irrevocable .787564.