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Coffee and whiskey at the Central Bank – how euros replaced the Irish pound 20 years ago

John Kelly tells the inside story of how everyone – from the local parish priests to publicans – helped with the Euro changeover

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IRELANDS EURO SUPERSTARS, IMELDA HICKEY[9[ FROM CASTLEDERMOT CO KILDARE, AND GERARD RAFERTY[11] TUAM CO GALWAY POSE WITH SOME OF THE EURO NOTES DURING A PHOTOCALL AT THE CENTRAL BANK YESTERDAY.

IRELANDS EURO SUPERSTARS, IMELDA HICKEY[9[ FROM CASTLEDERMOT CO KILDARE, AND GERARD RAFERTY[11] TUAM CO GALWAY POSE WITH SOME OF THE EURO NOTES DURING A PHOTOCALL AT THE CENTRAL BANK YESTERDAY.

IRELANDS EURO SUPERSTARS, IMELDA HICKEY[9[ FROM CASTLEDERMOT CO KILDARE, AND GERARD RAFERTY[11] TUAM CO GALWAY POSE WITH SOME OF THE EURO NOTES DURING A PHOTOCALL AT THE CENTRAL BANK YESTERDAY.

On January 1, 2002, all banks were closed except one. It was the day when euro banknotes and coins first went into circulation in Ireland and 11 other eurozone countries, and the Central Bank of Ireland opened to provide euro cash in exchange for Irish pound notes.

On this grey, unseasonably warm day, a small queue formed outside the bank’s Dame Street office before the doors even opened. There was a great sense of occasion; tea, coffee and whiskey were offered to everyone, while Governor Maurice O’Connell was there to greet people.

Numbers passed all expectations and the whiskey quickly ran out. By early afternoon, the queue stretched down Dame Street, and those wishing to join were told it was unlikely they would get in before the bank closed.

While the amount of euro issued that day was a tiny fraction of the total to be put into circulation, the event showed the public’s enthusiasm for the new currency.

The long queues were replicated in banks nationwide in the following week, and by January 9 the value of euro banknotes in circulation exceeded Irish pounds. This made Ireland one of the fastest countries in the eurozone to move to euro cash for everyday transactions.

The speed of the changeover was influenced by a number of factors.

First, the behaviour of the public, which reflected the success of the extensive public information campaign conducted by the Euro Changeover Board of Ireland (ECBI).

The board, established by the Minister for Finance, drew members from a wide range of organisations. Unlike directors of many state boards, they were not paid – their only ‘perk’ was tea/coffee and a biscuit before meetings.

In the largest project undertaken by the ECBI, a Euro Handbook – containing information about most changeover issues – was sent to all adult citizens in October 2001. This was followed by the distribution to every household of an electronic calculator, capable of Irish pound to euro and euro to Irish pound conversions. Mine is still working!

A business awareness campaign, run by Forfas, ensured retailers and other businesses were well prepared and informed in advance of the changeover.

A second factor underpinning the success of the changeover was that euro had been supplied to banks and retailers well in advance, in a process known as ‘frontloading’. About 43,000 retailers were frontloaded, accounting for virtually all cash-based businesses. This enabled retailers to supply euro in change from January 1 and contributed significantly to a quick changeover.

Preparations by the Central Bank facilitated frontloading. Production of euro coins began in September 1999 and about 1,078 million Irish euro coins, with a value of €230m and a weight of about 5,000 tonnes, were minted.

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The number of coins could have been significantly reduced if Ireland, like Finland, had introduced rounding of cash payments from the start, as it did in 2015, and not produced 1 and 2 cent coins.

The printing of euro banknotes began in June 2000 – 300 million notes were produced with a value of about €4bn.

The frontloading of coins began in September 2001 and, with the assistance of the Garda and the Army, whose support was crucial, banknote frontloading followed in November. Ready availability of notes meant that ATMs were converted quickly; 97.5pc were dispensing euro by January 2.

For the general public, euro ‘Starter Packs’, each containing 19 coins to the value of €6.35 and costing £5, went on sale through banks and post offices on December 14. Again reflecting enthusiasm for the euro, the initial supply of 750,000 packs sold out within a couple of days.

A third influence on the speed of the changeover was the length of the cash exchange period, during which both the Irish pound and the euro were legal tender and banks exchanged cash for individuals free of charge, up to certain limits.

In Ireland this period ended on February 9 and was one of the shortest among EMU countries.

Only in the Netherlands was it shorter, ending on January 28 . Though the ECBI had favoured February 2 as the end date – with a view to the symmetry of 02-02-02 – the Central Bank opted for the slightly longer period.

The final step in the changeover was the withdrawal of Irish pounds from the economy.

As the public made the switch to euro very quickly, Irish cash rapidly returned to banks and by February 9 83pc of Irish pound banknotes by value had been withdrawn from circulation.

Withdrawing coins was more cumbersome and at one stage threatened to be a major problem.

Banks charged retailers for lodging and withdrawing coins, which led to exchanges of coins outside the banking system.

There were many arrangements – such as shops getting coins from parish priests and pubs getting change from cigarette machine operators.

Banks were reluctant to waive their fees and retailers were unwilling to pay for lodging large amounts of Irish coins. The logjam was broken by the Central Bank offering to pay banks for returning coins - provided they were packaged in single denominations and lodged on full pallets.

What happened to the Irish pounds? The banknotes were shredded and some were compressed into briquettes, on average containing about £20,000. These were at one stage intended as fuel but largely became collectors’ items. The coins were sent to Spain for smelting.

For those who still have Irish currency, or discover a hoard in granny’s attic over Christmas, the Central Bank on North Wall Quay will (by appointment) convert this into euro at a rate of €1=£0.787564. But they won’t give you crisp new euro notes. Unlike the Dame Street office in 2002, this is a cashless building. In these days of electronic payments, your IBAN will direct the euro to your account.

 

John Kelly is a former deputy head of the Central Bank’s European Monetary Affairs Department and was vice-chair of the Euro Changeover Board of Ireland.


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