Computation of the Irrevocable Conversion Rates for the Euro1

MEMO/99/11

Brussels, 11 March 1999

Computation of the irrevocable conversion rates for the euro1

The irrevocable conversion rates for the euro were adopted by the EU Council upon a proposal from the Commission and after consultation of the European Central Bank (ECB) on 31 December 1998 and entered into force together with the substitution of the euro for the national currencies on 1 January 1999. The Ministers of the Member States adopting the euro as their single currency, the Governors of the Central Banks of these Member States, the European Commission and the European Monetary Institute/European Central Bank issued two joint communiqués on the determination and the adoption of the irrevocable conversion rates for the euro dated 3 May and 26 September 1998 respectively. The European Commission and the European Central Bank hereby provide the details of the computation of these conversion rates.

Calculation of the exchange rates of the official ECU on 31 December 1998 On 31 December 1998, the final official ECU exchange rates were calculated and adopted by the EU Council as the irrevocable conversion rates for the euro on the first day of Stage Three, i.e. on 1 January 1999. This was done by using the regular daily concertation procedure, which continues to be used in Stage Three for quoting the euro reference exchange rates.

Three steps can be identified. Step 1: Determination of the EU currencies’ concertation exchange rates against the US dollar A teleconference was initiated at 11:00 a.m. (C.E.T.), in which the EU central banks, including those whose currencies were not components of the ECU basket, provided each other with the US dollar exchange rate for their respective currencies. These exchange rates were recorded as discrete values lying within the market bid-ask spreads prevailing at the time of the teleconference. The central banks of the Member States adopting the euro as their single currency were prepared to use, if needed, appropriate market techniques to ensure that, at the time of the teleconference on 31 December 1998, the market exchange rates would be consistent with the ERM bilateral central rates.

1 Joint information Notice by the European Commission and the European Central Bank The Joint Communiqué of last May had already mentioned the possibility that, owing to rounding, the implicit bilateral rates which could be derived from the euro conversion rates would not necessarily correspond, up to the last (sixth) significant figure, to the pre-announced ERM bilateral central rates. In order to minimise such inconsistencies, the exchange rates of the participating currencies vis-à-vis the US dollar were quoted with a high degree of precision. First and in line with the regular concertation procedure one euro area currency, i.e. the Deutsche Mark, was quoted against the US dollar according to prevailing market conventions (5 significant digits). Then, the US dollar exchange rates for the other euro area currencies were determined by multiplying their pre-announced ERM bilateral central rates against the Deutsche Mark by the DEM/USD exchange rate . The exchange rates of the eleven euro area currencies so calculated had 11 significant digits, all of which were retained for maximum accuracy. Since the ERM bilateral central rates were lying within the market bid-ask spreads for the participating currencies prevailing at the time of the teleconference on 31 December 1998, equality between the market and the pre-announced exchange rates was ensured and the likelihood of rounding errors was minimised. The next two steps were part of the usual procedure for the daily calculation of ECU rates since the creation of the basket in 1979. Step 2: Calculation of the exchange rate of the official ECU against the US dollar The US dollar rates recorded by the EU central banks were thereafter communicated by the National Bank of Belgium to the European Commission, where they were used to calculate the exchange rates of the official ECU. The USD/ECU exchange rate (expressed as 1ECU=xUSD) was obtained by summing up the US dollar equivalents of national currency amounts that composed the ECU. Step 3: Calculation of the exchange rates of the official ECU against the EU currencies participating in the euro area. The official ECU exchange rates of the EU currencies were calculated by the Commission by multiplying the non-rounded value of the USD/ECU exchange rate by their respective exchange rates vis-à-vis the US dollar. The resulting ECU exchange rates (i.e. units of currency per ECU) were rounded to the sixth significant digit. This calculation was performed for all EU currencies, not only those which were components of the ECU basket. The Commission also calculated as usual the ECU rates for a number of non-EU currencies. The ECU rates of 31 December 1998 were published in the Official Journal (Part C). For the participating currencies, these rates were then proposed as the irrevocable euro conversion rates. The table below illustrates the calculation of the official ECU exchange rates vis-à- vis all EU currencies on 31 December 1998.

2 Table: Calculation of the ECU exchange rates on 31 December 1998

Amount of national Currency units in Exchange rate vis-à- Equivalent in dollars ECU exchange the vis the USD on of Currency ECU basket 31-Dec-98 national currency rates amount (a) (b) (c)=(a):(b) (d)=(USD/ECU)*(b) DEM 0.6242 1.6763000000 0.3723677 1.95583 BEF 3.301 34.574525650 0.0954749 40.3399 LUF 0.13 34.574525650 0.0037600 40.3399 NLG 0.2198 1.8887542620 0.1163730 2.20371 DKK 0.1976 6.3842 0.0309514 7.44878 GRD 1.44 282.57 0.0050961 329.689 ITL 151.8 1659.5403526 0.0914711 1936.27 ESP 6.885 142.60652886 0.0482797 166.386 PTE 1.393 171.82913150 0.0081069 200.482 FRF 1.332 5.6220755180 0.2369232 6.55957 GBP @ 0.08784 1.6539 0.1452786 0.705455 IEP @ 0.008552 1.4814687984 0.0126695 0.787564

USD/ECU # = 1.1667521 1.16675209439842 0 FIM 5.0959687630 5.94573 ATS 11.793642176 13.7603 SEK 8.1320 9.48803

@ The exchange rate in column (b) for the GBP and IEP is the number of dollars per currency unit rather than the number of currency units per dollar. Column (c) is therefore calculated for each of these two currencies by multiplying the value in column (a) by that in column (b); and column (d) by dividing the dollar equivalent of the ECU (i.e. USD/ECU) by the rate in column (b). # The USD/ECU rate is shown after rounding to the 7th decimal place, whereas a higher degree of accuracy is used for computational purposes.