Identifier
Created
Classification
Origin
02ROME1059
2002-02-28 14:30:00
UNCLASSIFIED
Embassy Rome
Cable title:
THE EURO CHANGEOVER IN ITALY
how-toThis record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 04 ROME 001059
SIPDIS
BRUSSELS ALSO FOR USEU
DEPT FOR EUR/WE, EUR/ERA
DEPT PASS TREAS FOR OASIA HARLOW, JONES
STATE PASS FRB FOR GUST
E.O. 12958: N/A
TAGS: ECON EFIN EFIN EFIN EFIN IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF
SUBJECT: THE EURO CHANGEOVER IN ITALY
REF: (A) 2002 MILAN 14 (B) 01 ROME 6222; (C) 01 MILAN
728 AND OTHERS
UNCLAS SECTION 01 OF 04 ROME 001059
SIPDIS
BRUSSELS ALSO FOR USEU
DEPT FOR EUR/WE, EUR/ERA
DEPT PASS TREAS FOR OASIA HARLOW, JONES
STATE PASS FRB FOR GUST
E.O. 12958: N/A
TAGS: ECON EFIN EFIN EFIN EFIN IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF
SUBJECT: THE EURO CHANGEOVER IN ITALY
REF: (A) 2002 MILAN 14 (B) 01 ROME 6222; (C) 01 MILAN
728 AND OTHERS
1. SUMMARY: ITALYS TRANSITION TO THE EURO WENT
SMOOTHLY, WITH A FEW SNAGS PRINCIPALLY IN THE SOUTH.
ITALIANS STOPPED USING LIRE ON FEBRUARY 28, ALTHOUGH
BANKS, AT THE REQUEST OF THE BANK OF ITALY, HAVE
EXTENDED THE DEADLINE FOR EXCHANGING LIRE FOR EUROS
UNTIL JUNE 30. OPINIONS ARE MIXED ABOUT THE
INFLATIONARY IMPACT OF THE CHANGEOVER. OFFICIAL DATA
SHOW A MODEST IMPACT, WHILE CONSUMER ASSOCIATIONS
ARGUE THAT THE INFLATIONARY EFFECT WAS FAR HIGHER, BUT
T
NOT CAPTURED BY OFFICIAL STATISTICS. ITALYS FIRST
COUNTERFEIT EUROS HAVE BEEN FOUND. END SUMMARY.
A LONG CHANGEOVER
--------------
2. THE ITALIAN EURO CHANGEOVER PERIOD WAS ONE OF THE
LONGEST AMONG THE 12 EU COUNTRIES THAT ADOPTED THE NEW
CURRENCY. GERMANY, NETHERLANDS, IRELAND AND FRANCE
ALREADY FINISHED THEIR CHANGEOVER. ITALY WAS TO HAVE
FINISHED BY FEBRUARY 28, BUT, AT THE REQUEST OF THE
CENTRAL BANK, THE ITALIAN BANKING ASSOCIATION EXTENDED
THE CHANGEOVER PERIOD FOR FOUR ADDITIONAL MONTHS UNTIL
THE END OF JUNE. THE EURO WILL BE THE ONLY LEGAL
CURRENCY IN ITALY STARTING MARCH 1, BUT CUSTOMERS MAY
CHANGE LIRE INTO EURO, FREE OF CHARGE, AT BANKS UNTIL
UNCLASSIFIED
PAGE 03 ROME 01059 01 OF 04 281501Z
JUNE 30. THERE WILL BE SOME CONDITIONS: THE MAXIMUM
ALLOWED PER EXCHANGE WILL BE 1,000,000 LIRE (516 EURO)
PER DAY FOR CHECKING ACCOUNT HOLDERS BUT ONLY 500,000
(258 EURO) DAILY FOR OTHER CUSTOMERS. LARGER
TRANSACTIONS WILL REQUIRE MORE NOTICE. POST OFFICES,
WHICH ACCEPT CURRENCY PAYMENTS FOR UTILITIES, SAVINGS
PLANS, ETC., ARE CONSIDERING EXTENDING THE CHANGEOVER
PERIOD. AFTER MID-JUNE, CUSTOMERS MAY STILL CHANGE
LIRE INTO EUROS AT BANK OF ITALY BRANCHES UNTIL
FEBRUARY 2012, FREE OF CHARGE.
3. ITALY IS NOT THE ONLY COUNTRY OF THE EURO-ZONE
THAT HAS EXTENDED THE CHANGEOVER PERIOD FOR BANKS.
BANKS IN FRANCE, LUXEMBOURG, PORTUGAL, AND SPAIN WILL
EXCHANGE NATIONAL CURRENCY FOR EUROS, FREE OF CHARGES,
UNTIL END-JUNE. ANOTHER FOUR COUNTRIES (AUSTRIA,
FINLAND, GREECE AND IRELAND) ARE DISCUSSING A POSSIBLE
EXTENSION. IN THE NETHERLANDS, EXCHANGE WILL BE
POSSIBLE UNTIL THE END OF 2002.
CHANGEOVER DATA
--------------
4. THE ITALIAN CHANGEOVER WENT SMOOTHLY, BUT THERE
ARE STILL LIRE BANKNOTE CIRCULATING, NOTICEABLY IN
SUPERMARKETS, SHOPPING CENTERS, MALLS AND RESTAURANTS.
THE OVERALL VALUE OF LIRE CIRCULATING IN ITALY AT THE
END OF 2001 WAS 120 TRILLION LIRE, EQUIVALENT TO 62
BILLION EURO. ACCORDING TO THE BANK OF ITALY, MORE
THAN 1.6 BILLION LIRE BANKNOTE HAVE BEEN WITHDRAWN
FROM CIRCULATION, VALUED AT ABOUT 90 TRILLION LIRE
UNCLASSIFIED
PAGE 04 ROME 01059 01 OF 04 281501Z
(46.5 BILLION EURO). THERE ARE REMAINING 30 TRILLION
LIRE (15.5 BILLION EURO) OR 25 PERCENT OF LIRE VALUE
STILL IN CIRCULATION. MOST LARGE LIRE BANKNOTES HAVE
BEEN EXCHANGED FOR EUROS. DESPITE THE SUCCESS OF THE
CHANGEOVER, 1.5 BILLION LIRE IN BANKNOTES ARE EXPECTED
TO REMAIN IN CIRCULATION AFTER FEBRUARY 28, MOSTLY IN
SMALL DENOMINATIONS. THE EXTENSION OF THE LIRA/EURO
EXCHANGE DEADLINE IS EXPECTED TO HELP SMALL
SHOPKEEPERS, THE ELDERLY AND OTHER GROUPS THAT HAVE
BEEN SLOW TO ACCEPT THE EURO CHANGEOVER.
5. ACCORDING TO THE ITALIAN BANKING ASSOCIATION,
DURING THE CHANGEOVER, ITALIAN BANKS HAVE WITHDRAWN
100 TRILLION LIRE (51.6 BILLION EURO) SO FAR AND ARE
EXPECTED TO WITHDRAW ANOTHER 110 TRILLION (56.8
BILLION EURO) BY THE END OF FEBRUARY. (COMMENT: THE
DATA REFER TO LIQUIDITY CONVERTED FROM LIRE TO EURO SO
FAR, WITH NO IMPACT ON OVERALL LIQUIDITY.)
ONE- AND TWO-CENT COINS DEBATE
--------------
6. LATE IN JANUARY, ECONOMY MINISTER GIULIO TREMONTI
MENTIONED THAT GOI IS CONSIDERING FOLLOWING FINLANDS
UNCLASSIFIED
UNCLASSIFIED PTQ1822
PAGE 01 ROME 01059 02 OF 04 281502Z
ACTION EUR-00
INFO LOG-00 AGRE-00 AID-00 CEA-01 CIAE-00 CTME-00 INL-00
DODE-00 ITCE-00 DOTE-00 SRPP-00 EB-00 EXME-00 E-00
FAAE-00 UTED-00 VC-00 FRB-00 H-01 TEDE-00 INR-00
ITC-01 L-00 VCE-00 AC-01 NSAE-00 NSCE-00 OMB-01
OPIC-01 PC-01 ACE-00 SP-00 SSO-00 SS-00 STR-00
TEST-00 USIE-00 FMP-00 SNIS-00 NISC-00 DRL-02 G-00
SAS-00 /009W
-------------- 6D4A2B 281502Z /38
R 281430Z FEB 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 2491
DEPT OF TREASURY WASHDC
INFO AMCONSUL MILAN
AMCONSUL FLORENCE
AMCONSUL NAPLES
EUROPEAN POLITICAL COLLECTIVE
USDOC WASHDC
UNCLAS SECTION 02 OF 04 ROME 001059
SIPDIS
BRUSSELS ALSO FOR USEU
DEPT FOR EUR/WE, EUR/ERA
DEPT PASS TREAS FOR OASIA HARLOW, JONES
STATE PASS FRB FOR GUST
E.O. 12958: N/A
TAGS: ECON EFIN EFIN EFIN EFIN IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF
UNCLASSIFIED
PAGE 02 ROME 01059 02 OF 04 281502Z
SUBJECT: THE EURO CHANGEOVER IN ITALY
LEAD AND ELIMINATING ITS SMALLEST EURO COINS.
TREMONTI TOLD REPORTERS THAT GETTING RID OF THE TINY
ONE- AND TWO-CENT COINS WOULD CERTAINLY WIN THE FAVOR
OF ITALIAN CITIZENS AND SAID HE WAS CAREFULLY
CONSIDERING THE IDEA. BUT THE MINISTER, WHO WAS
CRITICIZED AS A EURO-SKEPTIC IN THE WAKE OF HIS COOL
RESPONSE TO THE INTRODUCTION OF THE NEW SINGLE
CURRENCY, STRESSED THAT SUCH DECISIONS SHOULD NOT BE
UNILATERAL. CALLS FOR SUCH A PRACTICE ARE GAINING
MOMENTUM IN ITALY. THE MAYOR OF THE NORTHEASTERN CITY
OF TREVISO, GIANCARLO GENTILINI, SAID THAT HE HAD
WRITTEN TO TREMONTI URGING THE ELIMINATION OF THE
COINS. GENTILINI SAID HE HAD HAD NUMEROUS COMPLAINTS
FROM CITIZENS EXASPERATED BY THESE TWO MICROSCOPIC
COINS. OUR WALLETS ARE ALREADY STUFFED TO
OVERFLOWING WITH THE BIGGER COINS. THE CENTS WERE
FINE BEFORE WORLD WAR II, WHEN MANY PEOPLE DIED
OPLE DIED
WITHOUT EVER TASTING THE JOY OF HANDLING A THOUSAND
LIRE BANKNOTE.
7. GIANCARLO DEL BUFALO, OF THE EURO COMMITTEE OF THE
MINISTRY OF ECONOMY AND FINANCE, DEFENDED THE EURO-
CENTS, WHICH ALLOWED A MORE PRECISE CONVERSION OF LIRE
PRICES INTO EURO PRICES. ECHOING THE OPINION OF
FINANCE MINISTRY UNDERSECRETARY VITO TANZI, DEL BUFALO
SAID THE MARKET WOULD BE THE ULTIMATE ARBITRATOR OF
THE TYPE OF COINS USED.
UNCLASSIFIED
PAGE 03 ROME 01059 02 OF 04 281502Z
PUBLIC OPINION
--------------
8. ACCORDING TO A MID-FEBRUARY SURVEY BY THE UNION OF
ITALIAN CHAMBERS OF COMMERCE AND THE POLLING COMPANY
TAGLIACARNE INSTITUTE, THE CHANGEOVER WAS SMOOTH. THE
SUPPLY OF EUROS IN BANK CHANNELS WAS SUFFICIENT IN
MOST CASES: ONLY 17 PERCENT OF THOSE POLLED HAD
PROBLEMS WITH OBTAINING EUROS AT BANKS. POST OFFICES
DID EVEN BETTER: ONLY 11 PERCENT OF THOSE POLLED HAD
PROBLEMS OBTAINING EUROS AT POST OFFICES. WITH
RESPECT TO PRICE HIKES, 37 PERCENT SAID THAT EURO
PRICES FOR GOODS AND SERVICES HAD INCREASED FROM THE
LIRE PRICES. (THIS CONTRASTS WITH A MUCH GREATER
NUMBER -- 55 PERCENT OF THOSE SURVEYED WHO SAID IN
JANUARY THAT EURO PRICES WERE HIGHER.) THE POLL SHOWED
A LARGE DIFFERENCE BETWEEN NORTHERN AND SOUTHERN ITALY
IN TERMS OF EURO SUPPLY AND PRICE INCREASES. FORTY-
ONE PERCENT OF THOSE SURVEYED IN THE SOUTH SAID THEY
HAD SIGNIFICANT DIFFICULTIES AT THE POST OFFICE, WHILE
ANOTHER 32 PERCENT SIGNALED THE SAME DIFFICULTIES AT
BANKS. SEVENTY-SEVEN PERCENT OF THE SAMPLE SURVEYED
IN THE SOUTH LAMENTED UNJUSTIFIED PRICE INCREASES.
9. IN THE SOUTH, LONG LINES AT BANKS AND POST OFFICES
PERSISTED THROUGH THE END OF JANUARY. EVEN AS THE
FEBRUARY 28 DEADLINE APPROACHED, MANY TRANSACTIONS IN
SMALL SHOPS WERE STILL BEING CARRIED OUT IN LIRE.
TAXIMETERS, WHICH HAD BEEN CONVERTED TO EUROS IN ROME
SOON AFTER THE NEW YEAR, STILL SHOWED PRICES IN LIRE
IN NAPLES AS RECENTLY AS LATE FEBRUARY. SHOPKEEPERS
UNCLASSIFIED
PAGE 04 ROME 01059 02 OF 04 281502Z
IN NAPLES FREQUENTLY HAVE PROBLEMS MAKING CHANGE, AS
MOST CASH DRAWERS CONTAIN FAR MORE LIRE THAN EUROS.
DESPITE THE INITIAL CONFUSION, AND THE CONTINUING
RESISTANCE TO THE NEW CURRENCY, BANCO DI NAPOLI
OFFICIALS MINIMIZED THE PROBLEMS WITH THE CHANGEOVER
IN THE SOUTH. THEY BELIEVE THAT THE PROCESS OF
ADAPTATION WILL ACCELERATE QUICKLY ONCE THE LIRA LOSES
ITS VALUE AS LEGAL TENDER.
INFLATIONARY IMPACT OF THE CHANGEOVER
--------------
10. ANECDOTAL EVIDENCE SHOWS THAT, IN SEVERAL SECTORS,
PRICES WERE ROUNDED UP TO FACILITATE THE EURO
CONVERSION. ONLY AFTER FIRST QUARTER RESULTS ARE IN
WILL A MORE COMPLETE PICTURE BE POSSIBLE. OFFICIAL
STATISTICS INDICATE A 0.5 PERCENT INCREASE IN PRICES
FROM THE PREVIOUS MONTH BOTH IN JANUARY AND FEBRUARY.
IN PARTICULAR, PRICE FIGURES FROM TWENTY ITALIAN
CITIES, RELEASED ON FEBRUARY 21, INDICATE THAT THE
YEAR-TO-YEAR INFLATION RATE INCREASED FROM 2.4 PERCENT
IN DECEMBER AND JANUARY TO 2.5 PERCENT IN FEBRUARY.
CENTRAL BANK CONTACTS SAY A 0.7 PERCENT INCREASE IN
INFLATION IS LIKELY IN THE FIRST QUARTER BECAUSE OF
UNCLASSIFIED
UNCLASSIFIED PTQ1827
PAGE 01 ROME 01059 03 OF 04 281502Z
ACTION EUR-00
INFO LOG-00 AGRE-00 AID-00 CEA-01 CIAE-00 CTME-00 INL-00
DODE-00 ITCE-00 DOTE-00 SRPP-00 EB-00 EXME-00 E-00
FAAE-00 UTED-00 VC-00 FRB-00 H-01 TEDE-00 INR-00
ITC-01 L-00 VCE-00 AC-01 NSAE-00 NSCE-00 OMB-01
OPIC-01 PC-01 ACE-00 SP-00 SSO-00 SS-00 STR-00
TEST-00 USIE-00 FMP-00 SNIS-00 NISC-00 DRL-02 G-00
SAS-00 /009W
-------------- 6D4A41 281502Z /38
R 281430Z FEB 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 2492
DEPT OF TREASURY WASHDC
INFO AMCONSUL MILAN
AMCONSUL FLORENCE
AMCONSUL NAPLES
EUROPEAN POLITICAL COLLECTIVE
USDOC WASHDC
UNCLAS SECTION 03 OF 04 ROME 001059
SIPDIS
BRUSSELS ALSO FOR USEU
DEPT FOR EUR/WE, EUR/ERA
DEPT PASS TREAS FOR OASIA HARLOW, JONES
STATE PASS FRB FOR GUST
E.O. 12958: N/A
TAGS: ECON EFIN EFIN EFIN EFIN IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF
UNCLASSIFIED
PAGE 02 ROME 01059 03 OF 04 281502Z
SUBJECT: THE EURO CHANGEOVER IN ITALY
THIS ROUNDING UP. THIS INCREASE WILL NOT BE EASILY
ABSORBED DURING THE YEAR AND COULD PUSH THE YEARLY
AVERAGE INFLATION RATE CLOSE TO TWO PERCENT. THERE
WAS SOME ROUNDING DOWN AS WELL, WHICH COMPENSATED FOR
A SMALL AMOUNT OF THE ROUNDING UP.
11. THE RESEARCH DEPARTMENT OF ITALYS LARGEST
INDUSTRIAL ASSOCIATION, CONFINDUSTRIA, CONSIDERS THE
ACCELERATION OF INFLATION A TEMPORARY EFFECT OF THE
CHANGEOVER, AND BELIEVES THAT THE DECELERATION WILL
START IN THE NEXT TWO MONTHS. HOWEVER, AS A RESULT OF
THE FIRST TWO MONTHS OF 2002, THE CONFINDUSTRIA
ESTIMATE OF AN INFLATION RATE OF 1.5 PERCENT IN 2002
HAS HAD TO BE REVISED UPWARD TO ABOUT 2.0 PERCENT.
THE MINISTRY OF ECONOMY AND FINANCE AND THE MINISTRY
OF PRODUCTIVE ACTIVITIES CONTINUE TO TRUST IN THE
ANTI-INFLATIONARY MECHANISMS SET UP BY THE GOI, AND
PREDICT THAT THE CHANGEOVER WILL HAVE ONLY A MODEST
INFLATIONARY IMPACT. OTHER GOI CONTACTS PREDICT THAT
ADDITIONAL PRICE INCREASES MAY OCCUR ON MARCH 1, WHEN
THE LIRA IS TAKEN OUT OF CIRCULATION. CARLO RIENZI,
PRESIDENT OF THE LEADING CONSUMER ASSOCIATION,
CODACONS, FORESEES SUBSTANTIAL PRICE INCREASES
STARTING MARCH 1, WHEN LIRE PRICES WILL NO LONGER BE
POSTED FOR COMPARISON. FROM THAT DAY, JUNGLE LAW WILL
PREVAIL, RIENZI SAID.
12. THE CONSUMER ASSOCIATIONS, ADICONSUM, CODACONS AND
UNIONE CONSUMATORI, SAY THAT THE INFLATIONARY IMPACT
UNCLASSIFIED
PAGE 03 ROME 01059 03 OF 04 281502Z
IS HIGHER THAN THE GOI HAS REPORTED. THESE
ASSOCIATIONS PLAN TO APPEAL TO ISTAT, THE CENTRAL
INSTITUTE OF STATISTICS, WHICH IS IN CHARGE OF THE
CALCULATION AND THE PUBLICATION OF THE PRICE DATA,
REQUESTING THE COMPOSITION OF THE NEW INDEX AND THE
METHODOLOGY FOR CALCULATION OF PRICE INCREASES.
ACCORDING TO THE ASSOCIATIONS, THE JANUARY DATA DO NOT
MEASURE THE REAL INFLATIONARY IMPACT OF THE EURO
CHANGEOVER, WHICH, THEY SAY, MAY EQUAL AN AVERAGE
INFLATION OF THREE PERCENT THIS YEAR. THE
ASSOCIATIONS ESTIMATE THAT PRICES WILL INCREASE BY 14
PERCENT IN 2002 ON AVERAGE, WITH A LOSS OF PURCHASING
POWER OF 557.77 EURO (USD 490) A YEAR PER HOUSEHOLD,
,
APPROXIMATELY 40 TO 50 EURO PER MONTH. THE CONSUMER
ASSOCIATIONS RECENTLY PUBLISHED A PAMPHLET
HIGHLIGHTING PRICE INCREASES. HIGHWAY TOLLS ROSE BY
2.21 PERCENT, NATIONAL TELEVISION FEES BY 1.46
PERCENT, LOTTERY TICKET PRICES BY 16 PERCENT FROM
5,000 LIRE (EURO 2.58) TO THREE EUROS. IN MILAN,
PUBLIC TRANSPORTATION TICKETS INCREASED BY 29.1
PERCENT, FROM 1,500 LIRE (EURO 0.77) TO ONE EURO.
MONEY-LAUNDERING AND COUNTERFEITING
--------------
13. THE EURO HAS BLACK-MARKET BENEFITS THAT THE DOLLAR
CANNOT MATCH. THE SINGLE CURRENCY GLIDES WITHOUT A
TRACE ACROSS A NEWLY BORDER-LESS EUROPE IN BILLS
DENOMINATED IN LARGE VALUES SCARCELY SEEN IN THE
REGION. THE E500 NOTE THE HIGHEST DENOMINATION - IS
UNCLASSIFIED
PAGE 04 ROME 01059 03 OF 04 281502Z
ALSO ABOUT FIVE TIMES THE VALUE OF THE LARGEST DOLLAR
NOTE IN CIRCULATION, THE USD 100 BILL. WHETHER
MEASURED BY WEIGHT OR VOLUME, THIS MEANS MORE EUROS
CAN BE JAMMED INTO A BRIEFCASE THAN DOLLARS OR OLD
EUROPEAN CURRENCIES. ACCORDING TO THE MINISTRY OF
ECONOMY AND FINANCE, THE ARRIVAL OF THE EURO
INCREASED THE RISKS OF MONEY-LAUNDERING. THE PERIOD
OF DOUBLE CIRCULATION LIRA-EURO REPRESENTS THE LAST
CHANCE FOR HOLDERS OF ITALIAN LIRE OF ILLICIT ORIGIN
TO TRY TO RECYCLE THROUGH THE CONVERSION IN EURO OR
THROUGH THE PURCHASE OF GOODS AND INVESTMENTS.
14. ON FEBRUARY 19, LAW ENFORCEMENT OFFICIALS SEIZED
NEAR ROME 25,000 COUNTERFEIT 50 AND 200 EURO
BANKNOTES. THIS IS THE FIRST SEIZURE OF COUNTERFEIT
BANKNOTES IN ITALY, WHICH WERE APPARENTLY OF HIGH
QUALITY. COMMENT: THERE HAS NOT BEEN A NOTABLE
INCREASE IN COUNTERFEIT CURRENCY IN ITALY. LAW
ENFORCEMENT OFFICIALS AT POST AND IN ITALY IN
GENERAL -- SAID THAT THEY EXPECTED A SIGNIFICANT
UPSWING IN COUNTERFEIT EUROS IN THE FIRST WEEKS AFTER
ITS INTRODUCTION, AS COUNTERFEITERS TESTED THE
MARKETS AWARENESS ABOUT THE EUROS APPEARANCE.
HOWEVER, THE EUROS SECURITY FEATURES SEEM TO HAVE
UNCLASSIFIED
UNCLASSIFIED PTQ1831
PAGE 01 ROME 01059 04 OF 04 281503Z
ACTION EUR-00
INFO LOG-00 AGRE-00 AID-00 CEA-01 CIAE-00 CTME-00 INL-00
DODE-00 ITCE-00 DOTE-00 SRPP-00 EB-00 EXME-00 E-00
FAAE-00 UTED-00 VC-00 FRB-00 H-01 TEDE-00 INR-00
ITC-01 L-00 VCE-00 AC-01 NSAE-00 NSCE-00 OMB-01
OPIC-01 PC-01 ACE-00 SP-00 SSO-00 SS-00 STR-00
TEST-00 USIE-00 FMP-00 SNIS-00 NISC-00 DRL-02 G-00
SAS-00 /009W
-------------- 6D4A59 281503Z /38
R 281430Z FEB 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 2493
DEPT OF TREASURY WASHDC
INFO AMCONSUL MILAN
AMCONSUL FLORENCE
AMCONSUL NAPLES
EUROPEAN POLITICAL COLLECTIVE
USDOC WASHDC
UNCLAS SECTION 04 OF 04 ROME 001059
SIPDIS
BRUSSELS ALSO FOR USEU
DEPT FOR EUR/WE, EUR/ERA
DEPT PASS TREAS FOR OASIA HARLOW, JONES
STATE PASS FRB FOR GUST
E.O. 12958: N/A
TAGS: ECON EFIN EFIN EFIN EFIN IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF
UNCLASSIFIED
PAGE 02 ROME 01059 04 OF 04 281503Z
SUBJECT: THE EURO CHANGEOVER IN ITALY
DISSUADED COUNTERFEITING, LAW ENFORCEMENT OFFICIALS AT
POST REMARKED. END COMMENT.
MMENT.
THE THAI THREAT & OTHER STORIES
--------------
15. THE EURO HAS ITS DOUBLES. THANKS TO THE
SIMILARITY BETWEEN THE OLD 500 LIRE COINS AND THE TWO-
EURO COINS (BOTH BI-METALLIC AND WITH ALMOST THE SAME
WEIGHT) IN THE FIRST DAYS OF THE CHANGEOVER, MANY OLD
500 LIRE COINS HAVE BEEN ACCEPTED FOR SMALL PAYMENTS
IN PLACE OF THE TWO-EURO COINS. THE 500-LIRE COIN IS
VERY SIMILAR, BUT IS WORTH ONLY ONE-EIGHTH (26 EURO
CENTS) OF A TWO-EURO COIN.
16. UNFORTUNATELY, THERE IS ANOTHER THREAT. THE THAI
10-BAHT COIN IS A PERFECT TWIN OF THE TWO-EURO COIN,
BUT IS WORTH ONLY 25 EURO CENTS. ANECDOTALLY, WE HAVE
HEARD THAT SOME TEN-BAHT COINS HAVE BEEN USED IN
AUTOMATIC CIGARETTE AND BEVERAGE DISPENSING MACHINES.
ROME MISCELLANY
--------------
17. FEWER THAN ONE THIRD OF ROMES 365 AUTOMATIC BUS
TICKET DISPENSERS ACCEPT EURO COINS. ATAC, THE ROME
CITY TRANSPORTATION AGENCY, PROMISED THAT ALL WOULD
UNCLASSIFIED
PAGE 03 ROME 01059 04 OF 04 281503Z
ACCEPT EUROS BY THE END OF FEBRUARY. AN ESTIMATED
ED
FIVE- PERCENT OF GASOLINE STATIONS DID NOT ACCEPT EURO
BANKNOTES BY THE END OF FEBRUARY. BY MARCH 1, ALL
PARKING METERS WILL ACCEPT THE EURO.
COMMENT
--------------
18. DESPITE THE INITIAL INCONVENIENCE, THE ITALIAN
TRANSITION WAS SMOOTHER AND FASTER THAN EXPECTED AND
MORE ITALIANS ACCEPTED EUROS EARLIER THAN EXPECTED.
TOO MANY SMALL LIRE BANKNOTES STILL CIRCULATE OR AT
LEAST REMAIN TO BE EXCHANGED. THE BANKING
ASSOCIATIONS DECISION TO PROLONG THE ACCEPTANCE
PERIOD FOR LIRE SEEMS WISE, GIVEN THE 1.6 BILLION LIRA
BANKNOTES (WITH AN OVERALL VALUE OF 15.5 BILLION EURO)
IN CIRCULATION. THE ORIGINAL FEBRUARY 28 DEADLINE FOR
EXCHANGING THESE NOTES MIGHT HAVE MEANT A LAST MINUTE
CRUNCH, WHICH COULD HAVE CAUSED SERIOUS DELAYS IN
BANKS AND POST OFFICES. WE ARE MONITORING THE
INFLATIONARY IMPACT OF THE CHANGE TO EUROS, AND WILL
CONTINUE TO DO SO IN THE MONTHS AHEAD. WE WILL ALSO
KEEP ON EYE ON WHETHER THERE IS ANY DOWNWARD PRESSURE
ON PRICES (OR INCREASED DEMAND FOR GREATER
EFFICIENCIES) AS ITALIANS BEGIN TO NOTICE COST
DIFFERENTIALS FOR THEIR HIGH-PRICED GOODS AND SERVICES
COMPARED TO THEIR EURO-ZONE NEIGHBORS. END COMMENT
SEMBLER
UNCLASSIFIED
PAGE 04 ROME 01059 04 OF 04 281503Z
UNCLASSIFIED
>
2002ROME01059 - Classification: UNCLASSIFIED
SIPDIS
BRUSSELS ALSO FOR USEU
DEPT FOR EUR/WE, EUR/ERA
DEPT PASS TREAS FOR OASIA HARLOW, JONES
STATE PASS FRB FOR GUST
E.O. 12958: N/A
TAGS: ECON EFIN EFIN EFIN EFIN IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF
SUBJECT: THE EURO CHANGEOVER IN ITALY
REF: (A) 2002 MILAN 14 (B) 01 ROME 6222; (C) 01 MILAN
728 AND OTHERS
1. SUMMARY: ITALYS TRANSITION TO THE EURO WENT
SMOOTHLY, WITH A FEW SNAGS PRINCIPALLY IN THE SOUTH.
ITALIANS STOPPED USING LIRE ON FEBRUARY 28, ALTHOUGH
BANKS, AT THE REQUEST OF THE BANK OF ITALY, HAVE
EXTENDED THE DEADLINE FOR EXCHANGING LIRE FOR EUROS
UNTIL JUNE 30. OPINIONS ARE MIXED ABOUT THE
INFLATIONARY IMPACT OF THE CHANGEOVER. OFFICIAL DATA
SHOW A MODEST IMPACT, WHILE CONSUMER ASSOCIATIONS
ARGUE THAT THE INFLATIONARY EFFECT WAS FAR HIGHER, BUT
T
NOT CAPTURED BY OFFICIAL STATISTICS. ITALYS FIRST
COUNTERFEIT EUROS HAVE BEEN FOUND. END SUMMARY.
A LONG CHANGEOVER
--------------
2. THE ITALIAN EURO CHANGEOVER PERIOD WAS ONE OF THE
LONGEST AMONG THE 12 EU COUNTRIES THAT ADOPTED THE NEW
CURRENCY. GERMANY, NETHERLANDS, IRELAND AND FRANCE
ALREADY FINISHED THEIR CHANGEOVER. ITALY WAS TO HAVE
FINISHED BY FEBRUARY 28, BUT, AT THE REQUEST OF THE
CENTRAL BANK, THE ITALIAN BANKING ASSOCIATION EXTENDED
THE CHANGEOVER PERIOD FOR FOUR ADDITIONAL MONTHS UNTIL
THE END OF JUNE. THE EURO WILL BE THE ONLY LEGAL
CURRENCY IN ITALY STARTING MARCH 1, BUT CUSTOMERS MAY
CHANGE LIRE INTO EURO, FREE OF CHARGE, AT BANKS UNTIL
UNCLASSIFIED
PAGE 03 ROME 01059 01 OF 04 281501Z
JUNE 30. THERE WILL BE SOME CONDITIONS: THE MAXIMUM
ALLOWED PER EXCHANGE WILL BE 1,000,000 LIRE (516 EURO)
PER DAY FOR CHECKING ACCOUNT HOLDERS BUT ONLY 500,000
(258 EURO) DAILY FOR OTHER CUSTOMERS. LARGER
TRANSACTIONS WILL REQUIRE MORE NOTICE. POST OFFICES,
WHICH ACCEPT CURRENCY PAYMENTS FOR UTILITIES, SAVINGS
PLANS, ETC., ARE CONSIDERING EXTENDING THE CHANGEOVER
PERIOD. AFTER MID-JUNE, CUSTOMERS MAY STILL CHANGE
LIRE INTO EUROS AT BANK OF ITALY BRANCHES UNTIL
FEBRUARY 2012, FREE OF CHARGE.
3. ITALY IS NOT THE ONLY COUNTRY OF THE EURO-ZONE
THAT HAS EXTENDED THE CHANGEOVER PERIOD FOR BANKS.
BANKS IN FRANCE, LUXEMBOURG, PORTUGAL, AND SPAIN WILL
EXCHANGE NATIONAL CURRENCY FOR EUROS, FREE OF CHARGES,
UNTIL END-JUNE. ANOTHER FOUR COUNTRIES (AUSTRIA,
FINLAND, GREECE AND IRELAND) ARE DISCUSSING A POSSIBLE
EXTENSION. IN THE NETHERLANDS, EXCHANGE WILL BE
POSSIBLE UNTIL THE END OF 2002.
CHANGEOVER DATA
--------------
4. THE ITALIAN CHANGEOVER WENT SMOOTHLY, BUT THERE
ARE STILL LIRE BANKNOTE CIRCULATING, NOTICEABLY IN
SUPERMARKETS, SHOPPING CENTERS, MALLS AND RESTAURANTS.
THE OVERALL VALUE OF LIRE CIRCULATING IN ITALY AT THE
END OF 2001 WAS 120 TRILLION LIRE, EQUIVALENT TO 62
BILLION EURO. ACCORDING TO THE BANK OF ITALY, MORE
THAN 1.6 BILLION LIRE BANKNOTE HAVE BEEN WITHDRAWN
FROM CIRCULATION, VALUED AT ABOUT 90 TRILLION LIRE
UNCLASSIFIED
PAGE 04 ROME 01059 01 OF 04 281501Z
(46.5 BILLION EURO). THERE ARE REMAINING 30 TRILLION
LIRE (15.5 BILLION EURO) OR 25 PERCENT OF LIRE VALUE
STILL IN CIRCULATION. MOST LARGE LIRE BANKNOTES HAVE
BEEN EXCHANGED FOR EUROS. DESPITE THE SUCCESS OF THE
CHANGEOVER, 1.5 BILLION LIRE IN BANKNOTES ARE EXPECTED
TO REMAIN IN CIRCULATION AFTER FEBRUARY 28, MOSTLY IN
SMALL DENOMINATIONS. THE EXTENSION OF THE LIRA/EURO
EXCHANGE DEADLINE IS EXPECTED TO HELP SMALL
SHOPKEEPERS, THE ELDERLY AND OTHER GROUPS THAT HAVE
BEEN SLOW TO ACCEPT THE EURO CHANGEOVER.
5. ACCORDING TO THE ITALIAN BANKING ASSOCIATION,
DURING THE CHANGEOVER, ITALIAN BANKS HAVE WITHDRAWN
100 TRILLION LIRE (51.6 BILLION EURO) SO FAR AND ARE
EXPECTED TO WITHDRAW ANOTHER 110 TRILLION (56.8
BILLION EURO) BY THE END OF FEBRUARY. (COMMENT: THE
DATA REFER TO LIQUIDITY CONVERTED FROM LIRE TO EURO SO
FAR, WITH NO IMPACT ON OVERALL LIQUIDITY.)
ONE- AND TWO-CENT COINS DEBATE
--------------
6. LATE IN JANUARY, ECONOMY MINISTER GIULIO TREMONTI
MENTIONED THAT GOI IS CONSIDERING FOLLOWING FINLANDS
UNCLASSIFIED
UNCLASSIFIED PTQ1822
PAGE 01 ROME 01059 02 OF 04 281502Z
ACTION EUR-00
INFO LOG-00 AGRE-00 AID-00 CEA-01 CIAE-00 CTME-00 INL-00
DODE-00 ITCE-00 DOTE-00 SRPP-00 EB-00 EXME-00 E-00
FAAE-00 UTED-00 VC-00 FRB-00 H-01 TEDE-00 INR-00
ITC-01 L-00 VCE-00 AC-01 NSAE-00 NSCE-00 OMB-01
OPIC-01 PC-01 ACE-00 SP-00 SSO-00 SS-00 STR-00
TEST-00 USIE-00 FMP-00 SNIS-00 NISC-00 DRL-02 G-00
SAS-00 /009W
-------------- 6D4A2B 281502Z /38
R 281430Z FEB 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 2491
DEPT OF TREASURY WASHDC
INFO AMCONSUL MILAN
AMCONSUL FLORENCE
AMCONSUL NAPLES
EUROPEAN POLITICAL COLLECTIVE
USDOC WASHDC
UNCLAS SECTION 02 OF 04 ROME 001059
SIPDIS
BRUSSELS ALSO FOR USEU
DEPT FOR EUR/WE, EUR/ERA
DEPT PASS TREAS FOR OASIA HARLOW, JONES
STATE PASS FRB FOR GUST
E.O. 12958: N/A
TAGS: ECON EFIN EFIN EFIN EFIN IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF
UNCLASSIFIED
PAGE 02 ROME 01059 02 OF 04 281502Z
SUBJECT: THE EURO CHANGEOVER IN ITALY
LEAD AND ELIMINATING ITS SMALLEST EURO COINS.
TREMONTI TOLD REPORTERS THAT GETTING RID OF THE TINY
ONE- AND TWO-CENT COINS WOULD CERTAINLY WIN THE FAVOR
OF ITALIAN CITIZENS AND SAID HE WAS CAREFULLY
CONSIDERING THE IDEA. BUT THE MINISTER, WHO WAS
CRITICIZED AS A EURO-SKEPTIC IN THE WAKE OF HIS COOL
RESPONSE TO THE INTRODUCTION OF THE NEW SINGLE
CURRENCY, STRESSED THAT SUCH DECISIONS SHOULD NOT BE
UNILATERAL. CALLS FOR SUCH A PRACTICE ARE GAINING
MOMENTUM IN ITALY. THE MAYOR OF THE NORTHEASTERN CITY
OF TREVISO, GIANCARLO GENTILINI, SAID THAT HE HAD
WRITTEN TO TREMONTI URGING THE ELIMINATION OF THE
COINS. GENTILINI SAID HE HAD HAD NUMEROUS COMPLAINTS
FROM CITIZENS EXASPERATED BY THESE TWO MICROSCOPIC
COINS. OUR WALLETS ARE ALREADY STUFFED TO
OVERFLOWING WITH THE BIGGER COINS. THE CENTS WERE
FINE BEFORE WORLD WAR II, WHEN MANY PEOPLE DIED
OPLE DIED
WITHOUT EVER TASTING THE JOY OF HANDLING A THOUSAND
LIRE BANKNOTE.
7. GIANCARLO DEL BUFALO, OF THE EURO COMMITTEE OF THE
MINISTRY OF ECONOMY AND FINANCE, DEFENDED THE EURO-
CENTS, WHICH ALLOWED A MORE PRECISE CONVERSION OF LIRE
PRICES INTO EURO PRICES. ECHOING THE OPINION OF
FINANCE MINISTRY UNDERSECRETARY VITO TANZI, DEL BUFALO
SAID THE MARKET WOULD BE THE ULTIMATE ARBITRATOR OF
THE TYPE OF COINS USED.
UNCLASSIFIED
PAGE 03 ROME 01059 02 OF 04 281502Z
PUBLIC OPINION
--------------
8. ACCORDING TO A MID-FEBRUARY SURVEY BY THE UNION OF
ITALIAN CHAMBERS OF COMMERCE AND THE POLLING COMPANY
TAGLIACARNE INSTITUTE, THE CHANGEOVER WAS SMOOTH. THE
SUPPLY OF EUROS IN BANK CHANNELS WAS SUFFICIENT IN
MOST CASES: ONLY 17 PERCENT OF THOSE POLLED HAD
PROBLEMS WITH OBTAINING EUROS AT BANKS. POST OFFICES
DID EVEN BETTER: ONLY 11 PERCENT OF THOSE POLLED HAD
PROBLEMS OBTAINING EUROS AT POST OFFICES. WITH
RESPECT TO PRICE HIKES, 37 PERCENT SAID THAT EURO
PRICES FOR GOODS AND SERVICES HAD INCREASED FROM THE
LIRE PRICES. (THIS CONTRASTS WITH A MUCH GREATER
NUMBER -- 55 PERCENT OF THOSE SURVEYED WHO SAID IN
JANUARY THAT EURO PRICES WERE HIGHER.) THE POLL SHOWED
A LARGE DIFFERENCE BETWEEN NORTHERN AND SOUTHERN ITALY
IN TERMS OF EURO SUPPLY AND PRICE INCREASES. FORTY-
ONE PERCENT OF THOSE SURVEYED IN THE SOUTH SAID THEY
HAD SIGNIFICANT DIFFICULTIES AT THE POST OFFICE, WHILE
ANOTHER 32 PERCENT SIGNALED THE SAME DIFFICULTIES AT
BANKS. SEVENTY-SEVEN PERCENT OF THE SAMPLE SURVEYED
IN THE SOUTH LAMENTED UNJUSTIFIED PRICE INCREASES.
9. IN THE SOUTH, LONG LINES AT BANKS AND POST OFFICES
PERSISTED THROUGH THE END OF JANUARY. EVEN AS THE
FEBRUARY 28 DEADLINE APPROACHED, MANY TRANSACTIONS IN
SMALL SHOPS WERE STILL BEING CARRIED OUT IN LIRE.
TAXIMETERS, WHICH HAD BEEN CONVERTED TO EUROS IN ROME
SOON AFTER THE NEW YEAR, STILL SHOWED PRICES IN LIRE
IN NAPLES AS RECENTLY AS LATE FEBRUARY. SHOPKEEPERS
UNCLASSIFIED
PAGE 04 ROME 01059 02 OF 04 281502Z
IN NAPLES FREQUENTLY HAVE PROBLEMS MAKING CHANGE, AS
MOST CASH DRAWERS CONTAIN FAR MORE LIRE THAN EUROS.
DESPITE THE INITIAL CONFUSION, AND THE CONTINUING
RESISTANCE TO THE NEW CURRENCY, BANCO DI NAPOLI
OFFICIALS MINIMIZED THE PROBLEMS WITH THE CHANGEOVER
IN THE SOUTH. THEY BELIEVE THAT THE PROCESS OF
ADAPTATION WILL ACCELERATE QUICKLY ONCE THE LIRA LOSES
ITS VALUE AS LEGAL TENDER.
INFLATIONARY IMPACT OF THE CHANGEOVER
--------------
10. ANECDOTAL EVIDENCE SHOWS THAT, IN SEVERAL SECTORS,
PRICES WERE ROUNDED UP TO FACILITATE THE EURO
CONVERSION. ONLY AFTER FIRST QUARTER RESULTS ARE IN
WILL A MORE COMPLETE PICTURE BE POSSIBLE. OFFICIAL
STATISTICS INDICATE A 0.5 PERCENT INCREASE IN PRICES
FROM THE PREVIOUS MONTH BOTH IN JANUARY AND FEBRUARY.
IN PARTICULAR, PRICE FIGURES FROM TWENTY ITALIAN
CITIES, RELEASED ON FEBRUARY 21, INDICATE THAT THE
YEAR-TO-YEAR INFLATION RATE INCREASED FROM 2.4 PERCENT
IN DECEMBER AND JANUARY TO 2.5 PERCENT IN FEBRUARY.
CENTRAL BANK CONTACTS SAY A 0.7 PERCENT INCREASE IN
INFLATION IS LIKELY IN THE FIRST QUARTER BECAUSE OF
UNCLASSIFIED
UNCLASSIFIED PTQ1827
PAGE 01 ROME 01059 03 OF 04 281502Z
ACTION EUR-00
INFO LOG-00 AGRE-00 AID-00 CEA-01 CIAE-00 CTME-00 INL-00
DODE-00 ITCE-00 DOTE-00 SRPP-00 EB-00 EXME-00 E-00
FAAE-00 UTED-00 VC-00 FRB-00 H-01 TEDE-00 INR-00
ITC-01 L-00 VCE-00 AC-01 NSAE-00 NSCE-00 OMB-01
OPIC-01 PC-01 ACE-00 SP-00 SSO-00 SS-00 STR-00
TEST-00 USIE-00 FMP-00 SNIS-00 NISC-00 DRL-02 G-00
SAS-00 /009W
-------------- 6D4A41 281502Z /38
R 281430Z FEB 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 2492
DEPT OF TREASURY WASHDC
INFO AMCONSUL MILAN
AMCONSUL FLORENCE
AMCONSUL NAPLES
EUROPEAN POLITICAL COLLECTIVE
USDOC WASHDC
UNCLAS SECTION 03 OF 04 ROME 001059
SIPDIS
BRUSSELS ALSO FOR USEU
DEPT FOR EUR/WE, EUR/ERA
DEPT PASS TREAS FOR OASIA HARLOW, JONES
STATE PASS FRB FOR GUST
E.O. 12958: N/A
TAGS: ECON EFIN EFIN EFIN EFIN IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF
UNCLASSIFIED
PAGE 02 ROME 01059 03 OF 04 281502Z
SUBJECT: THE EURO CHANGEOVER IN ITALY
THIS ROUNDING UP. THIS INCREASE WILL NOT BE EASILY
ABSORBED DURING THE YEAR AND COULD PUSH THE YEARLY
AVERAGE INFLATION RATE CLOSE TO TWO PERCENT. THERE
WAS SOME ROUNDING DOWN AS WELL, WHICH COMPENSATED FOR
A SMALL AMOUNT OF THE ROUNDING UP.
11. THE RESEARCH DEPARTMENT OF ITALYS LARGEST
INDUSTRIAL ASSOCIATION, CONFINDUSTRIA, CONSIDERS THE
ACCELERATION OF INFLATION A TEMPORARY EFFECT OF THE
CHANGEOVER, AND BELIEVES THAT THE DECELERATION WILL
START IN THE NEXT TWO MONTHS. HOWEVER, AS A RESULT OF
THE FIRST TWO MONTHS OF 2002, THE CONFINDUSTRIA
ESTIMATE OF AN INFLATION RATE OF 1.5 PERCENT IN 2002
HAS HAD TO BE REVISED UPWARD TO ABOUT 2.0 PERCENT.
THE MINISTRY OF ECONOMY AND FINANCE AND THE MINISTRY
OF PRODUCTIVE ACTIVITIES CONTINUE TO TRUST IN THE
ANTI-INFLATIONARY MECHANISMS SET UP BY THE GOI, AND
PREDICT THAT THE CHANGEOVER WILL HAVE ONLY A MODEST
INFLATIONARY IMPACT. OTHER GOI CONTACTS PREDICT THAT
ADDITIONAL PRICE INCREASES MAY OCCUR ON MARCH 1, WHEN
THE LIRA IS TAKEN OUT OF CIRCULATION. CARLO RIENZI,
PRESIDENT OF THE LEADING CONSUMER ASSOCIATION,
CODACONS, FORESEES SUBSTANTIAL PRICE INCREASES
STARTING MARCH 1, WHEN LIRE PRICES WILL NO LONGER BE
POSTED FOR COMPARISON. FROM THAT DAY, JUNGLE LAW WILL
PREVAIL, RIENZI SAID.
12. THE CONSUMER ASSOCIATIONS, ADICONSUM, CODACONS AND
UNIONE CONSUMATORI, SAY THAT THE INFLATIONARY IMPACT
UNCLASSIFIED
PAGE 03 ROME 01059 03 OF 04 281502Z
IS HIGHER THAN THE GOI HAS REPORTED. THESE
ASSOCIATIONS PLAN TO APPEAL TO ISTAT, THE CENTRAL
INSTITUTE OF STATISTICS, WHICH IS IN CHARGE OF THE
CALCULATION AND THE PUBLICATION OF THE PRICE DATA,
REQUESTING THE COMPOSITION OF THE NEW INDEX AND THE
METHODOLOGY FOR CALCULATION OF PRICE INCREASES.
ACCORDING TO THE ASSOCIATIONS, THE JANUARY DATA DO NOT
MEASURE THE REAL INFLATIONARY IMPACT OF THE EURO
CHANGEOVER, WHICH, THEY SAY, MAY EQUAL AN AVERAGE
INFLATION OF THREE PERCENT THIS YEAR. THE
ASSOCIATIONS ESTIMATE THAT PRICES WILL INCREASE BY 14
PERCENT IN 2002 ON AVERAGE, WITH A LOSS OF PURCHASING
POWER OF 557.77 EURO (USD 490) A YEAR PER HOUSEHOLD,
,
APPROXIMATELY 40 TO 50 EURO PER MONTH. THE CONSUMER
ASSOCIATIONS RECENTLY PUBLISHED A PAMPHLET
HIGHLIGHTING PRICE INCREASES. HIGHWAY TOLLS ROSE BY
2.21 PERCENT, NATIONAL TELEVISION FEES BY 1.46
PERCENT, LOTTERY TICKET PRICES BY 16 PERCENT FROM
5,000 LIRE (EURO 2.58) TO THREE EUROS. IN MILAN,
PUBLIC TRANSPORTATION TICKETS INCREASED BY 29.1
PERCENT, FROM 1,500 LIRE (EURO 0.77) TO ONE EURO.
MONEY-LAUNDERING AND COUNTERFEITING
--------------
13. THE EURO HAS BLACK-MARKET BENEFITS THAT THE DOLLAR
CANNOT MATCH. THE SINGLE CURRENCY GLIDES WITHOUT A
TRACE ACROSS A NEWLY BORDER-LESS EUROPE IN BILLS
DENOMINATED IN LARGE VALUES SCARCELY SEEN IN THE
REGION. THE E500 NOTE THE HIGHEST DENOMINATION - IS
UNCLASSIFIED
PAGE 04 ROME 01059 03 OF 04 281502Z
ALSO ABOUT FIVE TIMES THE VALUE OF THE LARGEST DOLLAR
NOTE IN CIRCULATION, THE USD 100 BILL. WHETHER
MEASURED BY WEIGHT OR VOLUME, THIS MEANS MORE EUROS
CAN BE JAMMED INTO A BRIEFCASE THAN DOLLARS OR OLD
EUROPEAN CURRENCIES. ACCORDING TO THE MINISTRY OF
ECONOMY AND FINANCE, THE ARRIVAL OF THE EURO
INCREASED THE RISKS OF MONEY-LAUNDERING. THE PERIOD
OF DOUBLE CIRCULATION LIRA-EURO REPRESENTS THE LAST
CHANCE FOR HOLDERS OF ITALIAN LIRE OF ILLICIT ORIGIN
TO TRY TO RECYCLE THROUGH THE CONVERSION IN EURO OR
THROUGH THE PURCHASE OF GOODS AND INVESTMENTS.
14. ON FEBRUARY 19, LAW ENFORCEMENT OFFICIALS SEIZED
NEAR ROME 25,000 COUNTERFEIT 50 AND 200 EURO
BANKNOTES. THIS IS THE FIRST SEIZURE OF COUNTERFEIT
BANKNOTES IN ITALY, WHICH WERE APPARENTLY OF HIGH
QUALITY. COMMENT: THERE HAS NOT BEEN A NOTABLE
INCREASE IN COUNTERFEIT CURRENCY IN ITALY. LAW
ENFORCEMENT OFFICIALS AT POST AND IN ITALY IN
GENERAL -- SAID THAT THEY EXPECTED A SIGNIFICANT
UPSWING IN COUNTERFEIT EUROS IN THE FIRST WEEKS AFTER
ITS INTRODUCTION, AS COUNTERFEITERS TESTED THE
MARKETS AWARENESS ABOUT THE EUROS APPEARANCE.
HOWEVER, THE EUROS SECURITY FEATURES SEEM TO HAVE
UNCLASSIFIED
UNCLASSIFIED PTQ1831
PAGE 01 ROME 01059 04 OF 04 281503Z
ACTION EUR-00
INFO LOG-00 AGRE-00 AID-00 CEA-01 CIAE-00 CTME-00 INL-00
DODE-00 ITCE-00 DOTE-00 SRPP-00 EB-00 EXME-00 E-00
FAAE-00 UTED-00 VC-00 FRB-00 H-01 TEDE-00 INR-00
ITC-01 L-00 VCE-00 AC-01 NSAE-00 NSCE-00 OMB-01
OPIC-01 PC-01 ACE-00 SP-00 SSO-00 SS-00 STR-00
TEST-00 USIE-00 FMP-00 SNIS-00 NISC-00 DRL-02 G-00
SAS-00 /009W
-------------- 6D4A59 281503Z /38
R 281430Z FEB 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 2493
DEPT OF TREASURY WASHDC
INFO AMCONSUL MILAN
AMCONSUL FLORENCE
AMCONSUL NAPLES
EUROPEAN POLITICAL COLLECTIVE
USDOC WASHDC
UNCLAS SECTION 04 OF 04 ROME 001059
SIPDIS
BRUSSELS ALSO FOR USEU
DEPT FOR EUR/WE, EUR/ERA
DEPT PASS TREAS FOR OASIA HARLOW, JONES
STATE PASS FRB FOR GUST
E.O. 12958: N/A
TAGS: ECON EFIN EFIN EFIN EFIN IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF ECON IT UNCLASSIFIED PAGE ROME OF
UNCLASSIFIED
PAGE 02 ROME 01059 04 OF 04 281503Z
SUBJECT: THE EURO CHANGEOVER IN ITALY
DISSUADED COUNTERFEITING, LAW ENFORCEMENT OFFICIALS AT
POST REMARKED. END COMMENT.
MMENT.
THE THAI THREAT & OTHER STORIES
--------------
15. THE EURO HAS ITS DOUBLES. THANKS TO THE
SIMILARITY BETWEEN THE OLD 500 LIRE COINS AND THE TWO-
EURO COINS (BOTH BI-METALLIC AND WITH ALMOST THE SAME
WEIGHT) IN THE FIRST DAYS OF THE CHANGEOVER, MANY OLD
500 LIRE COINS HAVE BEEN ACCEPTED FOR SMALL PAYMENTS
IN PLACE OF THE TWO-EURO COINS. THE 500-LIRE COIN IS
VERY SIMILAR, BUT IS WORTH ONLY ONE-EIGHTH (26 EURO
CENTS) OF A TWO-EURO COIN.
16. UNFORTUNATELY, THERE IS ANOTHER THREAT. THE THAI
10-BAHT COIN IS A PERFECT TWIN OF THE TWO-EURO COIN,
BUT IS WORTH ONLY 25 EURO CENTS. ANECDOTALLY, WE HAVE
HEARD THAT SOME TEN-BAHT COINS HAVE BEEN USED IN
AUTOMATIC CIGARETTE AND BEVERAGE DISPENSING MACHINES.
ROME MISCELLANY
--------------
17. FEWER THAN ONE THIRD OF ROMES 365 AUTOMATIC BUS
TICKET DISPENSERS ACCEPT EURO COINS. ATAC, THE ROME
CITY TRANSPORTATION AGENCY, PROMISED THAT ALL WOULD
UNCLASSIFIED
PAGE 03 ROME 01059 04 OF 04 281503Z
ACCEPT EUROS BY THE END OF FEBRUARY. AN ESTIMATED
ED
FIVE- PERCENT OF GASOLINE STATIONS DID NOT ACCEPT EURO
BANKNOTES BY THE END OF FEBRUARY. BY MARCH 1, ALL
PARKING METERS WILL ACCEPT THE EURO.
COMMENT
--------------
18. DESPITE THE INITIAL INCONVENIENCE, THE ITALIAN
TRANSITION WAS SMOOTHER AND FASTER THAN EXPECTED AND
MORE ITALIANS ACCEPTED EUROS EARLIER THAN EXPECTED.
TOO MANY SMALL LIRE BANKNOTES STILL CIRCULATE OR AT
LEAST REMAIN TO BE EXCHANGED. THE BANKING
ASSOCIATIONS DECISION TO PROLONG THE ACCEPTANCE
PERIOD FOR LIRE SEEMS WISE, GIVEN THE 1.6 BILLION LIRA
BANKNOTES (WITH AN OVERALL VALUE OF 15.5 BILLION EURO)
IN CIRCULATION. THE ORIGINAL FEBRUARY 28 DEADLINE FOR
EXCHANGING THESE NOTES MIGHT HAVE MEANT A LAST MINUTE
CRUNCH, WHICH COULD HAVE CAUSED SERIOUS DELAYS IN
BANKS AND POST OFFICES. WE ARE MONITORING THE
INFLATIONARY IMPACT OF THE CHANGE TO EUROS, AND WILL
CONTINUE TO DO SO IN THE MONTHS AHEAD. WE WILL ALSO
KEEP ON EYE ON WHETHER THERE IS ANY DOWNWARD PRESSURE
ON PRICES (OR INCREASED DEMAND FOR GREATER
EFFICIENCIES) AS ITALIANS BEGIN TO NOTICE COST
DIFFERENTIALS FOR THEIR HIGH-PRICED GOODS AND SERVICES
COMPARED TO THEIR EURO-ZONE NEIGHBORS. END COMMENT
SEMBLER
UNCLASSIFIED
PAGE 04 ROME 01059 04 OF 04 281503Z
UNCLASSIFIED
>
2002ROME01059 - Classification: UNCLASSIFIED