An early evaluation of the introduction of euro banknotes and coins

The final stage of the changeover to the euro consisted of the introduction of euro coins and banknotes on 1 January, 2002. The national changeover plans, that provided the scenarios, were based on the exclusive transaction function of money. However, in most European countries high‐denomination banknotes were significantly hoarded and/or used in the underground economy. Since the holders of these banknotes could not convert them anonymously in the two months changeover period, some feared that many banknotes would invade the payment system, leading to a cash‐crash. Nevertheless the changeover process evolved smoothly. As for the future, chances are that some users in the regular sector have permanently changed their payment habits by shifting towards electronic means of payment. In the longer run we believe, however, that the tolerant attitude of the authorities with respect to currency use in the underground sector, will sustain the demand for currency.