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The most frequently asked questions with regard to the introduction of the Euro - FAQ Citizens

Last update: 10.10.2007 06:00

1.1.1 The Euro and Eurozone

I. What is the Euro?

The Euro is the common currency of those countries of the European Union which are also active members of the Economic Monetary Union.  The Euro was adopted by eleven member states of the EU on 1 January 1999:  Belgium, Germany, Spain, France, Ireland, Luxembourg, the Netherlands, Austria, Portugal, Slovenia, and Finland.  Greece began to use the Euro on 1 January 2001 and Slovenia on 1 January 2007.  The name of the Euro currency was chosen by the heads of the member states or relevant governments at the European Council summit in Madrid in December 1995. After the American dollar, the Euro is the second most important world currency.  One Euro consists of 100 cents. From 1 January 1999, the Euro could be used in  non-cash transactions. Bank notes and coins came into circulation on 1 January 2002. 

II. What is the Eurozone?

The Eurozone is a geographical area of the EU countries with the Euro as their common currency.  The Eurozone was established in January 1999, when the European Central Bank took over responsibility for the monetary policy of the national central banks of eleven member states of the EU.  Greece joined the Eurozone in 2001 and Slovenia joined the Eurozone in 2007 as the thirteenth member.  Meeting the convergence criteria was a condition for joining the Eurozone. This condition was applicable to all thirteen countries.  The same condition also applies to the other member states of the EU which are still preparing for the adoption of the Euro.  The convergence criteria stipulate economic and legal assumptions for successful participation in the monetary union and the Euro as a common currency.  All the member states of the EU are members of the Economic and Monetary Union, although not all countries use the Euro as a common currency.  

III. In which countries it is possible to pay with the Euro?

At present, the Euro is the national currency in the thirteen countries of the Eurozone:  Belgium, Finland, France, Greece, the Netherlands, Ireland, Luxembourg, Germany, Portugal, Austria, Spain, Italy, and Slovenia. With the consent of the European Community, the Euro is also legal tender in some countries that are not members of the EU.  These are small countries which did not have their own currency even prior to the introduction of the Euro.  They are San Marino, Monaco, and the Vatican.  However, some other European countries use the Euro without formal agreement:  Kosovo, Montenegro, and Andorra.  

IV. What is the Euro's official sign?

The Euro sign € was inspired by the Greek letter epsilon as a reference to the cradle of European civilization and it denotes the first letter of the word Europe.

V. What is the European Central Bank?

The European Central Bank (ECB) is the central bank for the Euro as a common currency.  The ECB defines the monetary policy for the Eurozone countries.  The ECB's main goal is to maintain price stability and low inflation in the Eurozone.  The ECB has its headquarters in Frankfurt, Germany.
What is the Eurosystem?
The Eurosystem is a system of central banks in the Eurozone, consisting of the European Central Bank and individual national central banks of the Eurozone countries.  The national central banks carry out some activities on behalf of the Eurosystem, in accordance with the decisions of the ECB. 

1.1.2 Introduction of the Euro in Slovakia

I. What is the National Plan for the Introduction of the Euro?

The National Plan for the Introduction of the Euro is a plan of technical preparations so that the transfer to the Euro in Slovakia will be smooth and effective.  Any entity in Slovakia can gain support from the national plan within the process of Euro-introduction.  The basic principles, the time schedule, institutional provision of the introduction of the Euro in the Slovak Republic, identification of tasks within individual fields, deadlines for individual tasks, the setting of controlling terms, responsibility of individual entities etc. are the main parts of the National Plan for the Introduction of the Euro.  There are six working committees preparing technical documentation for the individual issues related to the transfer of the Slovak economy to the Euro:  the Banks and Financial Sector Committee, the Public Administration Committee, the Non-Financial Sector and Consumer Protection Committee, the Legislative Committee, the Communications Committee, and the Informatics and Statistics Committee.  The National Plan for the Introduction of the Euro was adopted by Slovak Republic Government Decree No. 525, on 6 July 2005. The National Plan was updated in March 2007. There will be further updates which will supplement and clarify individual tasks before the Euro is introduced.  The National Plan is accessible to the public at the NBS's website or at this website.

II. What is the dual circulation?

From 1 until 16 January 2009, there will be a dual (double) circulation in Slovakia.  Over this time period, it will be possible to pay in cash using SKK bank notes and coins in addition to the Euro.  However, when paying in SKK, the money returned will be in EUR.  From From 17 January 2009, only the Euro will be used for payments.  

III. How to exchange money?

The easiest way is to deposit money, prior to the introduction of the Euro, in a bank account where it will be automatically converted to the Euro.  After the introduction of the Euro, commercial banks will exchange, free of charge, SKK bank notes until the end of 2009 and coins until June 2009. Banks will be entitled to restrict the free-of-charge exchange of SKK for the Euro according to the number of bank notes and coins being exchanged; however, the limit for the free-of-charge exchange must be not less than 50 pieces.  The National Bank of Slovakia will exchange bank notes without a deadline and coins up to the end of 2014. 

IV. Who will determine the exchange rate and when?

The conversion rate will be determined by the Council of the EU, probably in July 2008. Each country of the Eurozone, including Slovakia, must agree to the conversion rate.  The European Commission submits a proposal for the conversion rate.  The Council of the EU will also discuss this decision with the European Central Bank.  The conversion rate will be set as a coefficient with six valid figures – two in front of the decimal point and four decimal places.  
Although the conversion rate will be announced as early as summer 2008, it will only come into effect at the introduction of the Euro in Slovakia – on 1 January 2009. 

V. How are citizens to prepare for the introduction of the Euro?

Citizens have no specific tasks prior to the introduction of the Euro.  However, they can contribute to the smooth conversion to the Euro by depositing their excess cash in the banks in advance, by trying to get used to the new prices in EUR as speedily as possible, by pointing out potential unjustified increases of prices following the introduction of the Euro, and also by being tolerant and patient when in the shops and banks in the first days after the conversion to the Euro.

VI. What is dual display of prices?

Dual display of prices means an expression of monetary values in SKK and in EUR simultaneously, or displaying an amount in both currencies.  The dual display will be obligatory from one month after the conversion rate is set, probably from August 2008. This obligation will last for twelve months following the introduction of the Euro.  It will be optional to use the dual display after this time period.  The dual display will be required everywhere where the citizen comes into contact with a monetary amount, i.e. in addition to prices in shops, the dual display will be used for salaries, pensions, social benefits, bank accounts, invoices, price offers, catalogues, etc.  Prices will be converted according to the conversion rate and rounded up to the nearest Eurocent. 

1.1.3. The Euro bank notes and coins 

I. What are the Euro bank notes and coins?

There are seven Euro bank notes:  500, 200, 100, 50, 20, 10, and 5 Euro and 8 Euro coins in the value of: 2 Euro, 1 Euro and 50, 20, 10, 5, 2, 1 cents.

II. What do the bank notes look like?

The series of Euro bank notes consists of seven different nominal values of bank notes, which are legal tender over the whole territory of the Eurozone.  Each Euro bank note represents one architectural style.  That means that they show the architectural styles of the seven periods of European cultural history.  From the thematic point of view, these styles are depicted in the form of windows, gates, and bridges.  On the front face of the bank notes, there are windows and gates which represent a symbol of European spirit of openness and cooperation.  In addition to the architectural elements, there is the European Union flag on the front face of the bank notes.  The twelve stars of the European Union express the dynamics and harmony of the present Europe.  Bridges, which are the mainspring on the reverse face of the bank notes, symbolise communication between the European nations and between Europe and the rest of the world.  The Euro bank notes were designed by Róbert Kalina, with the Austrian Central Bank, whose creative drafts won the Europe-wide contest in 1996.  
5 Euro bank note – Classical style
10 Euro bank note – Romanesque style
20 Euro bank note – Gothic style
50 Euro bank note – Renaissance style
100 Euro bank note – Baroque and Rococo
200 Euro bank note – the age of iron and glass
500 Euro bank note – modern architecture of the 20th century

III. What are the protective components of the Euro bank notes?

All Euro bank notes are protected against counterfeit using state-of-the-art protective components and specific paper, which, from the first touch, differs significantly from common paper.  Bank notes contain an embossment, watermark, protective stripe, guide mark, hologram, and either a gold stripe (lower values) or an optically changing colour (higher values)

IV. Are there national motifs of individual member states on the Euro currency?

The Euro coins have a common side – the same for all coins - and a national side, according to which country issues the coin.  The common side of the coins represents a map of the European Union.  In the background, there are the stars of the European flag.  The position of Europe in the world is shown on the 1, 2 and 5-cent coins, while the 10, 20 and 50-cent coins show the European Union as a community of nations.  The Euro coins with the highest value show Europe without borders.  The common side of coins was designed by Luc Luycx, with the Belgium Royal Mint.  
The reverse side of the coins is designed for national symbols which are chosen by each member state. All Euro coins are valid within the territory of all states of the Eurozone, regardless of the state of issue.

V. What are the national sides of the Slovak Euro coins?

The national sides of the Slovak Euro coins have been chosen by the National Bank of Slovakia, based on the results of a nationwide survey in December 2005. The winner of the survey was a motif of a double cross on a three-peaked mountain – Slovakia’s state symbol, which will appear on the one and two-Euro coins.  Bratislava Castle will be on the  50, 20 and 10-cent coins and Kriváň will be on the 5, 2 and 1-cent coins The authors of the motifs are Ivan Řehák (the double cross on a three-top mountain), Ján Černaj and Pavel Károly (the BratislavaCastle) and Drahomír Zobek (Kriváň). 

1.1.4. Wages

I. In what currency will the wage for December 2008 be paid out?

Because the wage for December is paid in January of the following year, the wage will be calculated according to the wage conditions agreed in SKK, but the employer will pay it or will transfer it to the employee’s account in EUR.  The conversion must be done precisely according to the conversion rate.

II. How will the individual wage components, agreed upon in SKK, be rounded?  

Monetary amounts, including wage components, agreed upon or set in SKK, but which are to be paid or charged in EUR, will be rounded to the nearest cent.  The final amount will be rounded, not the partial items – in most cases, the net income or the amount to be paid out will be rounded.  When converting the Slovak values to the Euro, no related fees may be charged.

III. How will the wage components stipulated in the law, performance agreed upon in the wage part of a collective agreement, and performance agreed upon as the wage terms and conditions in a contract of employment, be transformed into EUR?  

Any performance, wages and salaries stipulated in the law, agreed upon in a collective agreement or in a contract of employment in SKK, will be converted using the conversion rate which will be irrevocably set by the Council of the EU.  It will be possible to convert any SKK  values as of 1 January 2009 only on the basis of this conversion rate and it will not be possible to use any other rate.  The Slovak Republic Ministry of Finance will be in charge of the conversion of the public administration employees' tariff wages and salaries using the conversion rate. 

1.1.5. Price

I. What measures will be taken to protect the consumer against increased prices?

Based on the experience from the first phase of the Euro-introduction, measures for the provision of a price conversion will be taken, laying emphasis upon the protection of the consumer.  In addition to the information campaign for the public, there will be a period of approximately eighteen months for the dual display of prices of goods and services; further, there will be an adoption of the code of conduct, in providing an advance supply of Euro coins to merchants in sufficient quantity, etc.  However, the most important thing will be the engagement of customers themselves, who should try to uncover any potential higher increase of prices and to do their shopping in shops that perform correctly.

II. Is there a threat of higher prices after the introduction of the Euro?

With regard to the adoption of the Euro, there is often a fear of a sudden increase in prices.  According to the September 2006 survey, as many as 73% of Slovaks are afraid that the introduction of the Euro will be abused in order to increase prices.  However, the exchange of SKK for EUR is only a technical change, within which all financial data will be converted using a precisely set conversion rate.  The conversion from SKK to the Euro itself is not a reason for a price increase.  However, a certain increase of prices can be associated with the rounding process.  The rounding should be performed according to mathematical rules to two decimal places and, in practice, there should be a zero impact upon the price level.  
Eurostat estimates that the introduction of the cash Euro as of 1 January 2002 contributed to a price increase only by 0.12 – 0.29%, while overall inflation in 2002 accounted for 2.3%. At the same time, inflation in the Eurozone in 2002 was just as inflation in 2001. There was only a short-term impact of the Euro upon the price increase and this applied only to a part of consumer prices, in particular in those market segments in which there was insufficient competition.  After the introduction of the cash Euro in 2002, consumers thought that inflation was higher than it actually was.  This difference between so-called perceived and actual inflation was, probably, connected with the fact that prices of those goods and services which did increase were more visible.  These were products and services of everyday consumption, which, of course, influenced the consumers' opinion; however, the share of these items in the overall consumers’ basket was small.  That is why there was a difference between how consumers perceived inflation and the actual inflation reported by official consumer price indexes.  However, in connection with this, it is necessary to state that the introduction of the Euro will, on the mid-term horizon, have a muting impact upon the development of prices because it will make the comparison of prices between countries easier.  This will improve the functioning of international markets and will strengthen the competitive environment and will lead to higher economic effectiveness.  

III. After joining the Eurozone,  will there be higher inflation in Slovakia as a result of catching up with the price level in the developed countries?

Slovakia’s entry into the Eurozone will mean a significant impulse for growth at the economic level.  This process will be associated with the balancing of price levels, i.e. the price level in Slovakia will gradually get closer to the European Union’s average.  However, this is a long-term process that is also associated with catching up with the economic level of these countries and also with growth in productivity, wages, and standard of living.  In no case will there be any significant inflation impact associated with a negative impact upon the economy.  This process is on-going in some of the less developed countries of the Eurozone, e.g.  Greece, Spain, Portugal, etc.  However, inflation in these economies has been stabilized and only slightly exceeds the Eurozone’s average.  

IV. The independent monetary policy of the NBS will cease to exist after joining the Eurozone. Will the central bank perform some activities associated with the monetary policy?  

After joining the Eurozone, the NBS will not perform its own national monetary policy; however, it will become a member of the Eurosystem.  The Governor of the National Bank of Slovakia will become a member of the Council of Governors, i.e. a decision-making body of the ECB, which is responsible for the formulation of monetary policy for the Eurozone.  The Governor’s participation in the monetary-political decisions requires thorough readiness.  The tasks of the special departments and employees who currently deal with monetary policy issues will be expanded.  In addition to the person of the Governor, other NBS employees also take part in the preparation of the monetary policy by actively participating in the work of various committees of the Eurosystem.  The most important committees in the area of monetary policy are: the Monetary Policy Committee, the Committee for International Relations, and the Committee for Open Market Operations.  The national central banks, following the adoption of the common currency, participate in fulfillment of some of the Eurosystem tasks.  These are, in the main, the realization of the monetary-political operations, management of own foreign exchange reserves and the ECB’s foreign exchange reserves, supervision of the national payment systems, management and supervision of cash operations, and cooperation with the ECB regarding the gathering of statistical data.
After joining the Eurozone, the NBS will continue to perform its other activities that do not relate to monetary policy.  These are supervision of the financial market, operation of the domestic payment system, and other activities.

V. What will the loss of its own monetary policy mean for Slovakia?

Monetary policy is one of the economic policy tools for stabilisation of the economy.  As far as the open character of the Slovak economy and the overall globalisation of the world economy are concerned, the effectiveness of national monetary policy is declining.  Monetary policy has been influenced by regional impacts and the ECB’s monetary policy itself.  The foreign trade of the Slovak Republic is mainly effected with the present and future countries of the Eurozone, while the adoption of the Euro will further stimulate the growth of foreign trade within this region.  This fact supports the greater integration of the Slovak economy into the European region.  The higher the level of integration with the markets of these countries we achieve, the better the ECB’s monetary policy will be for Slovakia.  By joining the Eurozone, the Slovak economy will, at the same time, be protected against some of the external shocks related to the existence of the floating exchange rate. 

1.1.6 Pensions and social benefits 

I. Does the dual display also relate to pension benefits?

The decisions on the granting and increase of pension benefits in the second half of 2008 will include the amounts of benefits in SKK and simultaneously in EUR.  The double display of the amounts will have to start not later than one month after the setting of the exchange rate and it will be obligatory for the period of twelve months after the introduction of the Euro.  

II. How will the pension benefits be rounded?

There are general rules applying to the rounding of monetary amounts.  The amounts are rounded to two decimal places in Eurocents, according to mathematical rules.  As far as pension benefits and social benefits are concerned, there will be an exception and the amounts will always be rounded upwards –to the benefit of the citizen.  According to the type of benefit, the amounts will be rounded to the closest higher Eurocent or up to 10 cents.  

III. Will the introduction of the Euro result in a decrease of the values of pensions in Slovakia?

The introduction of the Euro itself will neither increase nor decrease the value of social insurance benefits, which include the pension insurance benefits, such as old-age pensions, premature old-age pensions, invalidity pensions, widow’s pensions, widower’s pensions, orphan’s benefits, accident benefits, guarantee insurance benefits in SKK will be considered as amounts of benefits in EUR, converted at the conversion rate determined by the Council of the EU in July 2008. Valorization will continue to be the basic tool for balancing the real value of pension benefits and their harmonization especially with the development of inflation in the national economy.

IV. In connection with the introduction of the Euro, will there be an increase in wages, social benefits, and pensions?

The introduction of the Euro should have a positive impact upon economic growth in the Slovak economy, which will be reflected in more rapid growth in the standard of living of the population, mainly thanks to the increase in wages.  A study, prepared by a group of authors from the NBS, estimates the additional contribution of the Euro to the growth of wages to be, on average, 0.7 percentage point annually for a period as long as twenty years.  In addition, the growth in the economy should also lead to an increase in overall employment, which will also increase the working income of households.
If the present valorization mechanism is preserved, this part of incomes will grow as well.  Pensions already granted will grow annually in real terms by half the real increase in wages.  As far as new pensioners are concerned, the Euro will contribute to higher pensions by means of greater growth in wages, which plays a major role in determination of the pension value, which is the basis for the calculation of new pensions.
Social and other income:
With regard to the present legislation, the Euro should not have a significant impact upon social income, because it is, in principle, increased only by the index of price increases, or it is freely determined by government decree.  In the past, the government used to increase benefits according to the rate of inflation.  Thus, even if we can expect slightly higher inflation after the introduction of the Euro, it will not influence the real amount of the income.

V. Will the amount of pensions, after the introduction of the Euro, be comparable with pensions in other countries?

The amount of the pension benefits will, after the introduction of the Euro, remain different in individual countries.  The reason is not the introduction of the Euro, but the development of other factors which influence the amount of pensions.  The rate of economic growth and the growth of wages in the economy will be the key factors for the further development of the level of pensions in Slovakia.  From the perspective of an individual, his amount of pension will be influenced by the period of the social insurance and the amount of calculation bases from which the insurance was paid into the pension system.  All these factors are included in the pension formula which determines the amount of pensions from the social insurance system.

VI. When will pensions be equalized with the European Union?

The advantages which the Euro will bring in the form of higher economic growth and more rapid convergence of the economy with those of the developed countries will also be reflected in more rapid growth in wages and subsequently pensions, social benefits, etc.  The process of equalization of their level with the old member states of the EU will be a long-term process, probably lasting several decades.

VII. The Act on the Inspection of Work stipulates fines for delinquency and imposes fines which can be levied by the work inspectorate in SKK.  In what currency will these fines be levied in connection with the transfer to the Euro?

In connection with the introduction of the Euro, there is no change in the amount of fines, the reasons for their imposition or in the procedure of their charging, which are governed by the Act on the Inspection of Work.  After the introduction of the Euro, the amount of fines will be automatically converted to EUR using the conversion rate.

VIII. Authorities provide, within the framework of active measures on the labour market, various types of contributions, e.g. for education, self-employment, to disabled citizens in order to establish and operate a protected workplace, to employers in order to create jobs, etc.  Will the introduction of the Euro have an impact upon the granting of these contributions?

The granting of contributions for active measures on the labour market has a legal basis in the Act on Employment Services.  Most of these contributions, after meeting the conditions stipulated by the law, are obligatory and there is a legal entitlement to their granting.  The introduction of the Euro will affect all the economic subjects. All agreements on the granting of contributions, valid at the time of the transfer, between providers, i.e. offices of employment, social affairs and family, i.e. job seekers, persons interested in a job, legal entities, physical entities, educational institutions, etc., which were made in SKK, will be converted to EUR.  The conversion will arise from the law precisely according to the conversion rate determined by the Council of the EU.