This is the third Bill containing provisions relating to economic and monetary union and the changeover to the euro to come before the House this year. The Central Bank Act, 1998, provided for the compatibility of Central Bank legislation with Articles 107 and 108 of the Maastricht Treaty, while the Finance Act, 1998, addressed taxation issues relating to the introduction of the euro. As promised in the national changeover plan, the Bill is designed to provide for the other changes in monetary law and for other changes necessary for the introduction of the euro. We consulted widely in the preparation of this Bill. I wish to express my appreciation of all the organisations involved in the consultation, including those represented on the Euro Changeover Board of Ireland, for their valuable contributions.
Before dealing with the provisions of the Bill, I will describe briefly the legal framework which has been set down at EU level for the use of the euro which forms the backdrop to the Bill. Two EU regulations comprise the legal framework. The first, Council Regulation 1103/97 on certain provisions relating to the introduction of the euro, was adopted by the Council on 17 June 1997. This regulation provides for continuity of contracts and other legal instruments and for the technical rules, including rounding rules, for conversions between participating currencies and the euro. It also provides that from 1 January 1999 the euro will replace the ECU at a rate of one to one.
The second regulation, Council Regulation 974/98 on the introduction of the euro, was formally adopted on 3 May 1998, although its text — apart from the names of the member states participating in EMU — had been settled for a considerable time before that. It provides that from 1 January 1999 the euro will be the currency of the participating member states and sets out the rules governing the three year transitional period which begins on 1 January 1999 and ends on 31 December 2001.
During the transitional period national currencies will continue to exist as subdivisions of the euro. As euro notes and coins will not be available until 1 January 2002 all cash transactions will remain in national currency. Until then the principle of "no compulsion, no prohibition" will apply, whereby economic agents will be free to use the euro but will not be compelled to do so. During the transitional period, unless parties agree otherwise, contracts and other legal instruments denominated in national currency will continue to be performed in national currency, while those denominated in euros will be performed in euros.
An important provision in the regulation relates to payments made by crediting an account. It provides that where a payment can be made by crediting an account a debtor may pay either in euros or in the national currency of the member state where the creditor has his account. The payment must be credited by the financial institution to the account in the denomination of the account, that is, whether it is in the national currency or in euros. Thus, payment in euros credited to an Irish pound account in Ireland will automatically be converted into Irish pounds and a payment in Irish pounds credited to a euro account in Ireland will be converted into euros.
In addition, the regulation provides that member states may take measures for the redenomination of debt into euros and for the redenomination of the unit of account of organised markets, for example stock markets, and of payment systems. The Bill contains measures relating to the redenomination of debt.
The regulation also deals with the final changeover to the euro, which will take place from 1 January 2002. From that date euro notes and coins will be put into circulation and will be legal tender across all the participating member states and references in contracts and legal instruments to participating currencies will be read as references to the euro at the relevant conversion rate. Thus, on 1 January 2002 the legal changeover will be complete and all Irish pound denominated bank accounts, laws and contracts will be read as if they were in euros according to the conversion rate. However, the regulation provides that national currency notes and coins may remain legal tender for at most six months more, that is, up to 30 June 2002. This period may be shortened by national law.
The EU legal framework comprises the core monetary law of the euro area and the two regulations are binding in their entirety and directly applicable in Ireland. However, some national legislation is necessary for the sake of clarity in national law and to avail of options in the legal framework and that is essentially the purpose of the Bill.
The Heads of the Bill circulated for consultation to interested parties last March presented a more extensive reflection of the terms of the EU legal framework than the Bill now contains. However, the European Monetary Institute, in its opinion on the heads of the Bill, expressed a legal concern about such an approach, given that EU regulations have direct effect in national law. Accordingly, the Bill now adopts a narrower approach, essentially declaring that by virtue of Council Regulation 974/98 from 1 January 1999 the currency of the State is the euro and the Irish pound is a subdivision of the euro. The EMI's opinion accepted the need to refer in national legislation to the lawful currency of the State.
The EMI's opinion also raised some other points which have been reflected in the Bill, notably with regard to two imperfections in Central Bank legislation which had been raised in the EMI legal convergence report in March and the desirability of a reference to the fact that DIBOR — the Dublin interbank offered rate — will be replaced by EURIBOR — the European interbank offered rate. The opinion also offered some valuable drafting suggestions which have been taken on board.
Having dealt with the background to the Bill I will give an overview of its main provisions. The Bill declares that by virtue of Council Regulation 974/98 from 1 January 1999 the currency of the State will be the euro and the Irish pound will be a subdivision of it. The Bill removes incompatibilities between Irish monetary law and the EU legal framework for the use of the euro. It also recognises the role of the European Central Bank in the issue of notes and the volume of coins to be issued. The Bill states that as of 1 January 1999 DIBOR will be replaced by EURIBOR. It makes provision for the redenomination into euros of outstanding Government debt.
In addition, at the request of the Tánaiste and Minister for Enterprise, Trade and Employment, I have included three provisions relating to the redenomination of company share capital into euros. These provisions will facilitate companies which wish to redenominate their capital structure into euros before 1 January 2002. Furthermore, the Bill contains two provisions to deal with the two imperfections identified by the European Monetary Institute, EMI, which I mentioned earlier. Finally, the Bill provides for the design, issue and sale of commemorative legal tender coinage.
I now turn to the specific provisions of the Bill. Sections 1 to 4 contain standard provisions as regards short title and commencement, interpretation, expenses and the laying of regulations and orders before the Oireachtas. I draw the attention of the House to an error in section 4, which refers on line 6 to "an order under Section 2 or 15". The reference should be to "an order under Section 1 or 15" and I intend to table an amendment to that effect on Committee Stage. Section 5 defines terms used in the Bill. It also provides that, unless the context requires otherwise, a word or expression in the Bill which is also used in Regulation 974/98 on the introduction of the euro will have the same meaning in the Bill as it has in the regulation.
Section 6 makes an important declaration as regards the currency of the State. It amends section 24 of the Central Bank Act, 1989, which defines the Irish pound as the monetary unit of the State. The section replaces that definition with a declaration that, by virtue of Regulation 974/98, from 1 January 1999 the currency of the State is the euro and the Irish pound unit is a subdivision of the euro. The section goes on to amend section 2 of the Decimal Currency Act, 1969, which states the Irish pound and penny are the only legal denominations of the currency of the State. Obviously, from 1 January 1999 they will not be the only legal denominations of the currency of the State because the euro and the cent will also be legal denominations.
Section 7 declares that contracts may be denominated in euro during the transitional period by virtue of Regulation 974/98, despite the fact that euro notes and coins will not be in circulation. This is necessary because section 25 of the Central Bank Act, 1989, provides only for contracts denominated either in legal tender or in a currency other than the currency of the State. During the transitional period the euro will not exist in legal tender form — because euro notes and coins will not be available — nor will it be a currency other than the currency of the State.
Sections 8 to 14 of the Bill deal with legal tender and legal tender amounts, the provision and issue of euro coins and the costs and proceeds of such provision and issue. Section 8 defines the term "earlier operative date", which is used in Chapter III. Section 9 gives the Minister for Finance power to set a date for the withdrawal of legal tender status from Irish pound notes and coins. As I already outlined, the legal framework allows member states to set a date between 1 January 2002 and 30 June 2002 for the withdrawal of legal tender status. It is too early yet to set a date for withdrawal of legal tender status, so the section gives the Minister power to withdraw that status by order. A date before 30 June 2002 set by the Minister by order will be known as "the earlier operative date". The section also provides for the repeal of section 118(3) of the Central Bank Act, 1989, which provides for the continuing legal tender status of Irish pounds because Irish pounds will no longer be legal tender from 30 June 2002 or the earlier operative date set by the Minister.
Section 10 provides that no one, other than the Central Bank and persons designated by ministerial order, will be obliged to accept more than 50 euro coins in any single transaction. This reflects a provision in the EU legal framework. The section also provides for the repeal, from the date of withdrawal of legal tender status from Irish pound notes and coins, of the present rules about legal tender of coins. These rules are contained in sections 8, 9 and 10 of the Decimal Currency Act, 1969, and section 15 of the Decimal Currency Act, 1970.
Section 11 empowers the Minister for Finance to provide euro coins and to set out by order their technical specifications. These specifications must comply with the technical specifications which the EU Council of Ministers lays down under the Treaty on European Union, and, indeed, the Council has already adopted a regulation on the matter, Regulation 975/98. The section also gives the Minister power to issue through the Central Bank coins provided under this section and confirms that issuance of such coins will be subject to the approval by the European Central Bank of the volume of issue, as required by Treaty as will issuance of commemorative coins provided under Part III of the Act. The section also provides for the repeal of sections 3, 4 and 5 of the Decimal Currency Act, 1969, which deal with the provision and issuance of Irish pound coins, with effect from the date of withdrawal of legal tender status from Irish pound notes and coins.
The purpose of section 12 is to extend to coins issued under this Bill and comparable coins issued by other member states participating in the euro area the prohibition on counterfeiting contained in the Decimal Currency Act, 1969. Sections 13 and 14 deal respectively with the costs of providing euro coins under section 11 and the proceeds of issuing such coins. The cost will be charged to the general fund of the Central Bank and debited to the currency reserve, while the proceeds will be paid into the general fund and credited to the currency reserve.
Sections 15 to 19 deal with the withdrawal of legal tender status from notes and coins. In particular, they refer to the "calling in" and "redemption" of notes and coins. The expression "to call in" means to demonetise or put out of currency, that is, to deprive of legal tender character. In other words, a subdivision of a currency unit that is called in may no longer circulate or be used as money. Redemption, on the other hand, involves the replacement of notes and coins which are worn out, defaced, or otherwise damaged, or which have become surplus to circulation requirements, by the issue of other coins or currency notes, or by crediting their face value against an account at the Central Bank.
Section 15 extends to coins issued under this Bill and to euro coins issued by other participating member states which will be legal tender in Ireland, the power already available to the Minister for Finance to call in Irish coins by order. The section limits the Minister's power by requiring the consent of the European Central Bank to any order relating to matters within its competence under Article 105a(2) of the Treaty. This states "Member States may issue coins subject to approval by the European Central Bank of the volume of the issue". Section 16 extends the Central Bank of Ireland's existing power to redeem Irish coins to include coins issued under this Bill and euro coins issued by other participating member states which will be legal tender in Ireland.
Section 17 extends the existing prohibition on melting down of coins to include coins issued under this Bill and euro coins issued by other participating member states which will be legal tender in Ireland. Section 18 amends section 121 of the Central Bank Act, 1989, which deals with the redemption of legal tender notes only, to provide that the Central Bank may continue to redeem Irish pound notes even after they have ceased to be legal tender. Section 19 amends section 122 of the Central Bank Act, 1989, to provide that the Central Bank must have the authority of the European Central Bank to call in notes.
Sections 20 to 30 are a collection of miscellaneous sections. The main provisions in them relate to the substitution of EURIBOR for DIBOR, redenomination of debt and company share capital. Section 20 amends section 57 of the Copyright Act, 1963, to reflect the copyright of the European Central Bank in regard to euro notes and the copyright of the Minister for Finance in regard to the national face of euro coins issued under section 11. As Deputies will be aware, euro coins will have a national face. In our case the national face will show the twelve stars of the EU flag, the year, the harp and the word "Éire".
Section 57 of the Copyright Act, 1963, protects the copyright of the Central Bank of Ireland in legal tender notes issued by it and the copyright of the Minister for Finance in coins issued under the Currency Act, 1927, and the Coinage Acts, 1926 and 1950. In particular, it provides that some general exceptions to copyright, which are allowable under Part II of the Copyright Act, 1963, are not allowable in relation to such notes and coins. The Decimal Currency Act, 1969, as amended, extends the protection of copyright to coins issued under that Act. It is now necessary to extend this protection to euro notes and coins.
Section 21 provides that the issuing authority for statutory forms which contain references to sums in Irish pounds or are designed to accommodate references to such sums may change the forms or allow them to be changed to show also the corresponding amounts in euro or to accommodate references to sums in euro. Section 22 states from 1 January 1999 the Dublin Interbank Offered Rate, DIBOR will be replaced by the European Interbank Offered Rate, EURIBOR. A statement to this effect has already been made in the National Changeover Plan.
Section 23 governs the arrangements for the redenomination of tradeable debt instruments dueing the transitional period from 1 January 1999 to 31 December 2001. The section also contains certain provisions for facilitating the redenomination of the non-tradeable debt of State bodies. All participating member states, including Ireland, have signalled their intentions to redenominate their "own-currency" tradeable debt instruments in the first week of 1999. It is particularly important for Ireland to redenominate our domestic currency debt into the euro immediately this becomes feasible — as we will be a small issuer in a large euro bond market, we will need to ensure the liquidity and attractiveness of our bonds from the very outset in order to secure our place in that market.
A critical factor in this is that the markets should be crystal clear as to how bonds, bills and Exchequer notes issued by me as Minister for Finance, or by the National Treasury Management Agency on my behalf, will be redenominated. As it would be inappropriate to use primary legislation to this end, I propose later this year to issue an order under section 23(1) which will set out the method of redenomination. On the advice of the NTMA, I will be specifying what is called a ‘bottom up' method of redenomination, which is designed to redenominate the debt with the minimum of inconvenience to bondholders, the NTMA and the Central Bank. This method simply involves changing the denomination of each individual holding of a bond using the conversion rate, and issuing or withdrawing small amounts of that bond to ensure that the sum of the individual holdings of the bond will equal the euro value of the total Irish pound amount of the bond.
Turning to Irish Government debt issued under the law of another participating member state and denominated in currencies to be replaced by the euro, the NTMA will be keeping under active review the practicality and desirability of redenominating this debt. However, as it is largely either in bearer form or is not actively traded, I understand the NTMA has no current intention to redenominate it. Nevertheless, if circumstances arise in which it might be necessary or desirable to redenominate this debt, provision is being made in section 23(2) for this possibility. If at some stage it is decided to redenominate this debt, the Bill provides that the method used should comply with the law of the member state which governs the debt in question. Moreover, the Minister for Finance will be obliged to give adequate notice of the proposed redenomination to the holders of such debt by means of a notice in Iris Oifigiúil at least one month before the event.
While it is not germane to this Bill, I put on record that the NTMA will not be changing the market conventions for outstanding Government paper, such as those governing how interest is calculated and how often it is paid. Existing conventions will continue to apply. However, the agency is exploring ways of enabling bondholders to switch out of existing bonds into bonds to which, for the most part, the conventions recommended by the market associations will apply. As for new debt to be issued in euro, the agency will generally apply the conventions which the market associations have recommended.
I am also providing in section 23(2) that, where other issuers of tradeable debt choose to use the method envisaged for redenominating Government debt, which I will set out in the order mentioned above, they will have the authority of law to do so unilaterally. However, I emphasise that there is no compulsion on such issuers to use this method — they are perfectly free to use any other method of their choice but if they propose to do so they will have to observe the terms of the contract they have with bondholders. In other words, it is only where they use the Government's method that they will have the authority of this subsection to redenominate their tradeable debt unilaterally.
Section 23(3) has been included to facilitate the redenomination of the non-tradeable debt of State bodies. What I am seeking to do here is to remove an administrative obstacle to such redenomination. In the normal course, if State bodies and their lenders wished to redenominate into euros any borrowing facility contracted between them, they would have to come back to the Minister who agreed the borrowing in the first place for approval to make any consequential change in the facility agreement. In order to obviate this requirement and the administrative burden it would entail, I am proposing that ministerial consent to any such changes in facility agreements shall not be required. However, to ensure this provision is not abused, I am providing that the waiver is subject to the limit on borrowings to which a Minister of the Government has already consented. Section 23(3) contains a similar provision in relation to guarantees which the State has given in respect of the borrowing of State bodies.
Sections 24 to 26, inclusive, of the Bill are included at the request of the Tánaiste and Minister for Enterprise, Trade and Employment. They are designed to specify the manner in which redenomination of company share capital will be effected when, on 1 January 2002, references to national currencies in legal instruments are to be read as references to the euro at the conversion rate. They also provide a mechanism whereby companies wishing to redenominate their share capital into euro during the transitional period will be able to do so.
To effect redenomination or renominalisation during the transitional period, a company will have to have the necessary resolution passed by its shareholders. The redenomination must occur at the level of the total share capital authorised or issued or at the level of the total class of share. The individual nominal share par value will then be determined by dividing the redenominated amount by the number of shares involved, and the nominal share par value will be expressed in an unrounded amount.
It is likely that many companies will want to express their nominal share value in even euro amounts, and section 26 will facilitate such companies. The provision deals with situations where the renominalisation involves an increase in capital, as well as situations where it involves a decrease. In the former case, use may be made of distributable reserves or the introduction of additional capital, while in the latter, an amount equal to any decrease in capital — which cannot amount to more than 10 per cent of the reduced capital — will have to be paid into a fund to be known as a capital conversion reserve fund. In essence, where the renominalisation involves a decrease in nominal value, the actual total amount of the company's capital will remain unchanged, but will be expressed in different ways. Provision for renominalisation in this way will be available during the transitional period and for an 18 month period after the end of the transitional period. After that, companies which wish to adjust their capital will have to operate under the existing company law provisions.
Turning to sections 27 and 28, I mentioned earlier that two legal imperfections were identified by the European Monetary Institute in its assessment of Ireland's legal convergence in March 1998. I undertook to address these imperfections at an early date. These two sections perform that task. Section 27 amends section 134 of the Central Bank Act, 1989, to confirm that the Minister for Finance's ability to suspend certain transactions in the national interest under that section will be without prejudice to the performance by the Central Bank of any function, duty or power required under the treaty or the statute of the European System of Central Banks, or ESCB. Section 28 amends sections 10 and 13 of the Central Bank Act, 1997 to confirm that the requirement that the Minister for Finance's consent be obtained before the Central Bank refuses to approve the rules of a payment system or subsequently revokes such approval will not extend to the ESCB-related activities of the Central Bank.
Section 29 is a general provision empowering the Minister for Finance to make regulations enabling Part II of the Bill to have full effect.
Sections 30 to 34 provide for the design, issue and sale of commemorative legal tender coinage. Commemorative coins have been only a rare feature of Irish coinage over the years but the Bill codifies the practice which has been followed up to now in relation to the issuance of such coins when it has occurred. I emphasise there is no specific intention to issue such a coin; the purpose of this part of the Bill is simply to provide a general power for such coins in Irish law.
Turning to the specific provisions, section 30 empowers the Minister for Finance to provide coins of a commemorative nature and to put them on sale to the public through the Central Bank. Section 31 provides that the Central Bank shall determine the price at which any type of commemorative coin is put on sale, but must not determine a price below face value. Section 32 provides that commemorative coins will be legal tender in the State, subject to the general limit on the number of coins that are legal tender for any single transaction. Section 33 provides for meeting the cost of providing commemorative coins out of the general fund of the Central Bank and for paying into that fund the proceeds of issue of such coins. Section 34 applies section 57 of the Copyright Act, 1963 to commemorative coins.
I turn now to the timetable for the changeover to the euro. Deputies will recall that at the beginning of May, EU Heads of State and Government confirmed that 11 member states, including Ireland, fulfilled the necessary conditions for adopting the euro. Accordingly, on 1 January 1999 these 11 member states will form economic and monetary union or EMU, the euro will come into being and the exchange rates of the 11 participating member states will be irrevocably fixed against it.
From 1 January 1999, the euro will be usable for cashless transactions — for example, cheques, direct debits and credit transfers — but euro notes and coins will not yet be available, so Irish pound notes and coins will continue in circulation. On 1 January 2002, euro notes and coins will be put into circulation and by 1 July 2002 at the latest, and probably a good deal earlier, Irish pound notes and coins will cease to be legal tender. The changeover to the euro will then be complete.
Finally, I would like to describe briefly the practical preparations being made for the changeover to the euro. As far back as 1995, my Department set up the Single Currency Officers Team, SCOT, which includes a representative from every Department. In 1996 my Department established the Euro Changeover Group: it included representatives from ICTU, IBEC, the IFA and a wide range of business and professional associations, and its purpose was to help co-ordination of the changeover across the economy.
Both SCOT and the Euro Changeover Group were involved in the preparation of the second edition of the national changeover plan, which I published last January. The plan outlines the arrangements that will be made across the public sector, as well as by banks, building societies and the Irish Stock Exchange, to facilitate the changeover. I aim to publish a third edition of the plan in the run-up to the start of EMU on 1 January 1999.
As regards information for business about the changeover, the EMU Business Awareness Campaign being run by Forfás has produced an excellent information pack, of which some 35,000 copies have been circulated. The campaign has also circulated a summary leaflet in conjunction with the Revenue Commissioners, over 140,000 copies of which have been distributed.
Forfás has also drawn up a short leaflet specifically for small and medium size enterprises and over 80,000 copies of this leaflet have been distributed. A document entitled What about Sterling: Actions for Companies was recently added to the Forfás information pack. A survey of company awareness and preparedness was also launched recently. A guide for retailers and a document on the information technology implications of the changeover will be added over coming weeks.
Following the decision by EU Heads of State and Government that Ireland would be joining EMU from the start, on 5 May I established the Euro Changeover Board of Ireland, ECBI. The membership of the board draws on the organisations which had been represented on the Euro Changeover Group, while its chairperson and secretariat are provided by my Department. The ECBI has two tasks: to oversee the detailed implementation of the changeover and to provide public and consumer information.
At the start of June I launched a public information campaign, which included a large scale advertising campaign over the first two weeks of June on radio and television and in the print media. A leaflet setting out essential information on the changeover to the euro is being sent to all households. In addition, a poster showing the euro notes and coins and the changeover timetable is being widely distributed. A follow-up survey will be conducted to help shape the further development of the information programme.
While much of it is necessarily somewhat technical, this Bill nevertheless represents an important third step, after the Central Bank Act, 1998, and the Finance Act, 1998, in our domestic legislative preparations for the introduction of the euro. It marks a historic change in our monetary law by declaring that, by virtue of Council Regulation 974/98, from 1 January 1999 the euro is the currency of the State. It will govern the arrangements for the redenomination of tradeable debt into euro during the transitional period.
It will facilitate companies which wish to redenominate their share capital into euro during the transitional period. It removes incompatibilities between Irish monetary law and the EU legal framework for the euro. Finally, it provides a general power for the provision of commemorative coins.
I commend the Bill to the House.
