International Business News, January 5, 1999

Examiner International Finance

Central Bank ready to begin minting of euro coins

by Kyran Fitzgerald
POCKETS will continue to jingle when the euro starts to appear on the street in three years' time. The Central Bank will start minting the new euro coins within the next couple of months, while work on the printing of the new euro bank notes will get underway early in the year 2000, providing of course that the Millennium Bug does not bring an end to civilisation.
The Central Bank estimates that 950 million euro coins will be required by the time the changeover is complete, along with around 150 million euro denominated notes. Production of Irish notes and coins will also continue for the time being.
All of this means that extra bodies will be required for some time up at the Irish mint in Sandyford in the foothills of the Dublin mountains. Currently, 150 people are employed producing the cash that set the tills ringing merrily over Christmas.
According to the Bank, dual currency production means that around six employees will be hired on a temporary basis.
The euro coins and notes produced here will be valid throughout Europe. Equally, notes and coins produced in other EMU countries will be valid here. The Bank assumes things will balance themselves out. We are unlikely to be swamped with excess notes and coin, nor is there likely to be any noticeable shortage.
The changeover will cost the Bank several million pounds. This is because the Bank is in the process of installing new equipment to handle the new currency. Most of this capital investment would be required anyway, according to bank sources, as much of the equipment dates back to the early 1970s, when the Sandyford facility first opened its doors.
The currency changeover brings to an end a long tradition of domestic currency bank note design. The original design for the pound note was completed by Irish artist, Sir John Lavery. A portrait of his wife, Lady Lavery, reputedly a lover of Michael Collins, appeared on the bank note.
The latest bank note was designed by Robert Ballagh.
Irish euro coins will continue to carry an Irish design on one side. The first Irish euro coins will feature the harp symbol, which will be surrounded by the distinctive euro star design.
The volume of coins in circulation will be even greater than previously after the changeover.
There will be a coin of two euro denomination in circulation (worth around £1.58).
However, the coins will be lighter and presumably easier on hard pressed Irish pockets than its domestic Irish predecessor.

Bank moves foreign reserves to ECB

by Kyran Fitzgerald
THE Central Bank has moved ahead with the transfer of 425 million euro worth of foreign reserve assets to the European Central Bank. This will represent around 1% of total ECB reserves.
However, the Europeans have not emptied the country's financial larder.
For a start the transfer is a notional transfer. The money will still be managed by the Central Bank under the decentralised system of management that is being adopted by the ECB.
The Central Bank will also continue to manage its own portfolio of foreign reserve assets, currently amounting to around six billion euro (worth just over £4.8bn).
The question facing euro region central banks is will it be necessary to maintain the same level of reserves, now that they form a new large-reserve currency, with less exposure to currency speculators.
According to Central Bank spokesman, Hugh O'Donnell, "European central banks will be assessing the situation to see if there is scope to carry less liquidity."
No timescale on the rethink is being disclosed. It could be a matter of months, or years, according to Mr O'Donnell.
According to the latest published figures, up to September 1998, just under £4.5bn of a total of £5.7bn in official external reserves were in foreign exchange form. The bulk of Ireland's foreign exchange reserves are held in dollars with most of the remainder being held in Japanese Yen. The Central Bank's holdings of gold amounted to just £70m. Unlike older central banks, the Irish Central Bank has never held much gold bullion.
The 425m euro transfer was made up of 325m euro in dollars, 36m euro in Yen and 64m euro worth of gold, the vast bulk of the Bank's gold holding.
None of the reserves are held in equities, deemed far too risky. They are held either in cash or in bonds. Large cash holdings are required for reasons of liquidity. Part of the reserves are held in bonds, to produce income.
It is likely that the Bank will look at the mix between bond and cash holdings, with a view to increasing the former, though nothing has been decided formally.