Euro at 20: recalling the currency’s ambitious debut

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The provision of a currency as a public good is one of the most prestigious public services. In a book contribution for the Deutsche Bundesbank, Wolfram Seidemann, CEO of G+D Currency Technology, talks about the euro as global currency model and a masterpiece of banknote technology, on the occasion of its 20th anniversary. Here is an extract.

A portrait of Dr. Seidemann — Wolfram Seidemann, CEO G+D Currency Technology

When the euro was launched in 1999, we were entering into uncharted territory in terms of monetary policy, even if key foundations had already been laid in the form of the European Monetary System and the European Currency Unit. But the practical dimensions of the project too far exceeded anything that Europe’s central banks or their suppliers had set in motion up to then. While coins ranging from the 1 cent coin to the €2 coin were to be produced exclusively at state mints, banknotes were intended to be manufactured at a mix of state central banks’ in-house printing works and qualified private industrial partners.

This was also necessary: the aim, after all, was to produce a huge number of new notes to common quality standards in a relatively short period of time. It was the sheer scale of these production specifications and the limited time involved that later turned out to be the biggest challenge.

The euro as a forerunner in the logistics network

Before the euro was introduced, central banks still put the production batches for their banknotes out to tender according to their requirements, and the notes were then printed by their own in-house printing works or a very limited number of specialized partners. But now a lot more players were needed to produce the necessary amount of money in the quantity and quality required: in addition to the various state printing works, over 50 suppliers were involved in the project, who were to shape the new single currency according to standardized rules. The various processes and requirements, which up until that point had been country-specific, now had to be synchronized and aligned with new standards.

In its new role, the ECB developed cooperation, coordination, and leadership skills, without which the project could not have been successfully implemented. The ECB also took responsibility for defining specifications, steering complex processes in cooperation, coordinating the division of tasks, and building up an elaborate quality assurance system for topics ranging from audits to certifications.

The euro as a forerunner of banknote technology

As an industrial partner, we were able to build on decades of experience and expertise gained in the development and production of secure banknotes during the practical implementation of the euro project. For the first generation of the euro (ES1), the production of 14.9 billion banknotes, worth a total of around €633 billion, was envisaged, of which the Deutsche Bundesbank – and thus we as a Bundesbank partner – were to take on the largest share.

Alongside fulfilling the quantitative requirements, we also had to ensure we implemented the high qualitative standards that were clearly and unambiguously defined from the outset: in technological terms, the new euro notes were to be state of the art.

But for the euro, each central bank involved could incorporate the security features it considered most important, in line with the ECB’s stipulations. This brought about a “best-of- breed” package, in which the most advanced banknote technologies were combined.

For instance, especially thin security threads, just 1.2 mm wide, were used for the new paper. Optically variable ink and foil elements that had not been seen before in currencies were also used for the first time. New pigments, silk-screen printing elements, and marking materials, amongst other things, were also incorporated. The result was banknotes that met the highest durability, security, and efficiency standards.

The euro and protection against counterfeiting

In the constant battle against counterfeiters, the hurdles were set extremely high. Generally speaking, all security features have been designed for security on three levels.

The obvious characteristics (Level 1) – such as watermarks, security stripes, or transparent windows – are immediately recognizable, both visually and haptically, to everyone and can be easily verified. The next level up (Level 2) includes features such as magnetic pigments, fluorescent ink, and electrical conductivity. And then there is an additional range of security elements whose specifications, features, and identification methods are restricted to central banks and covered by strict secrecy measures (Level 3).

Technological future of the euro

As banknotes have to meet ever-higher requirements and counterfeiters are always finding new technical capabilities, constant adjustments must be made and, at the same time, effects and designs that are difficult to imitate must be developed to make banknotes more secure against counterfeiting.

Cleartext technology is used in the case of Level 1, for example. This involves previously applied layers being partly removed, resulting in additional information, such as text, appearing clearly when held up to the light, which is where this security feature gets its name. Innovative coatings are also increasing the barriers for counterfeiters.

Generally speaking, the combination of high-tech security features resulting from the two different stages of production – paper production and banknote printing – is the ideal way to protect against counterfeiting and ensure unambiguity in identifying counterfeits.

The euro as a sustainable means of payment

Alongside durability and security aspects, the focus on sustainability issues in the production of banknotes is increasing. Taking the total production and distribution effects into account for a cash-specific CO₂ protocol, roughly 20% is attributable to production and 80% to distribution.

This primarily means employing the use of more environmentally friendly substrate solutions in the production of banknotes. In this context, sustainable natural cotton is superior to all other alternatives. The cotton comber noils used in banknote production accumulate as a waste product in the textile industry anyway, meaning that they are – if you like – a recycling product without any recycling effort involved.

“The only thing that is missing for the success story of the euro to be continued, and for it to be made available to all citizens for digital payments, is a counterpart to cash in digital form: a central bank digital currency – a ‘digital public good,’ so to speak. It will have the same features and advantages as cash but will travel the rest of the path towards digitization, followed by the economy, commerce, and society, in digital form – as the only secure, legitimate, sovereign, and freely available alternative and complement to cash“

Wolfram Seidemann
CEO of G+D Currency Technology

Cash is freedom and inclusion

However frequently, loudly, and gladly people may declare cash to be obsolete, this widespread opinion is in fact miles away from reality and belies the fundamental significance of this universal means of payment for societies at every stage of development.

According to ECB data, the volume of cash in the euro area is growing by 8 % to 10% per year. Learn more about this and further interesting euro facts in our dedicated article. Cash is the only form of money we can all use immediately and independently of the issuer. It allows every citizen to access payment transactions, regardless of social status and irrespective of account ownership or online access.

The only thing that is missing for the success story of the euro to be continued, and for it to be made available to all citizens for digital payments, is a counterpart to cash in digital form: a central bank digital currency – a “digital public good,” so to speak. It will have the same features and advantages as cash but will travel the rest of the path towards digitization, followed by the economy, commerce, and society, in digital form – as the only secure, legitimate, sovereign, and freely available alternative and complement to cash.

An extract from The Euro at 20: The Future of Our Money (Johannes Beermann, editor) published by Penguin Random House, 2022

Published: 07/11/2022

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#Finance #Financial Service Providers #Central Banks #Commercial Banks #Printworks

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