(August 28)- “Europe’s leading retailers have warned finance ministers that the cash economy will “crash” hours after the introduction of euro notes and coins unless plans for that day are changed,” the Financial Times reports.
“The European Retail Round Table, whose members include Carrefour and Metro, the world’s second and third largest retail groups, as well as Tesco, Sainsbury, and Royal Ahold, the leading Dutch chain, is writing to every European Union finance minister ahead of next month’s Ecofin meeting at Versailles, urging a rethink on “E-day” plans.
A draft letter, passed to the Financial Times, highlights independent research by Insead and WHU Koblenz, the French and German business schools, which it says shows that “the cash economy will crash just hours into the first trading day of 2002. This is because there will be insufficient euro notes and coins in circulation”.
Under existing plans, governments can circulate euro coins to the public a few days ahead of the currency’s introduction on Jan. 1, 2002. A number of states, including Germany and Belgium have already said they would do this.
However, they are not allowed to introduce euro notes in the same way. The round table’s members are arguing for similar “frontloading rules” for notes so customers have smaller notes in their pockets on Jan. 1.
The European Central Bank decided this month that notes can be frontloaded to businesses a few days early but the companies must promise not to put them into circulation.
The retailers argue that – just as when they buy foreign currency for a trip abroad – people should be able to purchase euro notes from banks and ATMs in the days leading up to Jan. 1.
Retailers are being urged to give change in euros from day one and most shops want to follow this advice to speed up the transition period.
But the Insead/WHU report warns of a ‘worst case scenario where stores are running out of cash in the first few hours of operations and are thus forced to shut down and close the shop’.”