 New Year's Eve is always a moment for celebration and this year even more so as the Euro family gained a new member. Croatia officially adopted the Euro on the first of January 2023. As ECB President Christine Lagarde said on her social media channels, completing all the reforms and restructuring needed in the 10 years since joining the EU is an incredible success and reason to celebrate. But changing currency is a massive undertaking and it's definitely not something that just happens overnight. Today we're going to look at what goes into a cash changeover and the things that people, businesses and national authorities have to do to ensure a smooth transition. You're listening to the ECB podcast bringing you insights into the world of economics and central banking. My name is Katie Ranger. I'm joined here by Patricia Roa Tejero who heads up our currency issue and circulation team here at the ECB. Patricia, welcome to the podcast. Thank you very much, Katie. You're very happy to be here today. Now you're from Spain, one of the first countries to adopt the Euro back in 2002. Where were you on changeover day? I'm quite curious to hear this because I'm from the UK and we've never experienced a cash changeover like this so I'm a bit jealous and I'm curious to hear what your experiences were. Do you remember, for example, the first time you held a Euro banknote or coin in your hands? Well, 2002 is quite far away so I don't remember everything that happened on that day but I do remember that there was quite a lot of back and forth on the currency changeover and what it meant for us. For us as Spanish people and a lot of efforts on communication as to how to get used to that and the euro versus the peseta and the exchange rate for peseta was actually from one euro to 166.386. That was a number that was repeated very often and that we obviously all forgot immediately thereafter. So after a while there was a kind of rule of thumb that was communicated which was six euros being equivalent to 1,000 pesetas and this really stuck with us for a long time and it was very funny to actually go shopping because everybody was sort of trying to remember their maths and how six dividing bikes or multiplying bikes by six should be done and there were a lot of discussions so grandmother grandchildren trying to figure out if the price was right or not really. So this is the only thing I actually remember from changeover day. Everything else I think we got all settled pretty quickly into the euro and how to pay with it. Okay maybe it's good that we didn't have a cash changeover in the UK because maths is not my strong point so I would have struggled with that. Now I said at the beginning that a changeover is a massive undertaking and there are lots of different aspects that go into it. For example in the case of Croatia there were countless legal acts that used to mention the corner as the official currency and obviously they needed changing. There are security issues to do with transporting new coins across the country and I even heard that the military played a role there and of course there was so much more. Now for Croatia's changeover the government the national central bank and colleagues from the ECB work together on all the preparations. Let's talk about the switching of banknotes and coins so the cash that people really use in their everyday lives. That alone must have been a massive task to prepare and of course the euro is a little bit different from other currencies in that euro coins have a different design for each country so it's not just a case of minting more of the existing coins as you would do in a single country. Let's start with banknotes. What kind of steps are involved in producing the cash money there? So like the changeover itself it's quite a bit big task so banknote production in the euro area is pulled so these means that we actually have each national central bank responsible for producing or procuring a part of the total banknote needs of the euro system. It's not the part they exactly need it's a part they are allocated so what the national central banks do is they produce or procure these banknotes and then we merge all the stocks into one common pool and this is where we then pull from when we need banknotes in one country or the other so this is the same that happened for Croatia so the banknotes that have been used to facilitate the changeover were taken from the stocks which we had the ECB and the national central banks had and they had to be delivered from these central banks to Croatia and across the country to be ready for changeover date so Croatia has around four million inhabitants and it's also often referred to as a land of a thousand islands so with this I think you can get a feel for the efforts that had to go into getting these banknotes to the right place. I think we need to acknowledge the very good work that has been done by the Croatian colleagues in making sure that all this happened before 1st of January and just for you to imagine it's not we're not over yet now we need to withdraw or they need to withdraw 500 million pieces of Kuna banknotes and just to give you a feeling if we would pile them up or stack them one on top of each other it would mean almost six times the height of Mount Everest so it's quite a big deal that is still in front of us. Okay I'm starting to get an idea of just how big it was and indeed as I said at the beginning it's not something that just happened overnight you know there was a huge process ahead of 1st of January and indeed as you just said there's a huge process afterwards as well. Now let's talk about the coins that was the banknotes how about the coins how does it work for those? So coins is a little bit different while banknotes look all the same across the euro area euro coins do not this means they have a common side but they also have a national one so you need to decide as a country what you want to show there and what could best represent your country so this process of creative thinking and choosing the symbols that you want to use was also carried out in Croatia before the change overdate it involves consulting the general public but also experts so it takes quite a while and the artists then present their designs and that's not the end so once you have the design there you need to move into production and the Croatian national bank needed to make sure that coins were produced well in advances to be ready for 1st of January. The national central bank in addition to producing also bought coins from two other member states and also borrowed coins from another one so this means that on 1st of January not all euro coins in circulation in Croatia were actually Croatian design but you also had designs from other member states that came in to support. In order to make sure that there were enough coins to go around on the 1st of January. That's it that was an additional help also to the creations to make sure that we had enough volume on the right date yeah and also as regards coins we also have to still withdraw or they would also have to still withdraw more than 1.1 billion pieces of coins Kuna so this means that just to give you also a feel here this would mean filling a football field up to half a meter of height so this is also still a task coming up okay so obviously the official change over day was the 1st of January as we've mentioned a couple of times but in fact banks the Croatian post office and also the Croatian agency that provides financial and electronic services that's called FINA they received euro cash in advance right correct so this is called front loading we call it front loading it's the early supply of cash to financial agents just to ensure that bank notes euro bank notes and coins are distributed smoothly so we cannot afford to deliver all what we've been talking about on one day so we ensure that with front loading we can distribute it smoothly over a longer period of time which helps us from a logistical perspective so for example to be ready for 1st of January and to ensure people could withdraw bank notes in their ATMs we could already have cash dispensers being filled up with euro bank notes before that date and banks could also pass on some euros to retailers to make sure that the shops were ready on 1st of January and this cash front loading as we call it began already last October so this gave a little bit of a head time so October 2022 October 2022 that's right and banks so banks were able to front load but also retailers enterprises were also able to front load and this is another term we call it subfront loading which means also retailers when 1st of January comes have euros available and are able to supply consumers with with the new currency so that that was the second sort of pillar to make sure that that we were ready for 1st of January and in addition we need to mention that in December we started distributing starter kits of euro coins and starter kits and our little bags where you already have some coins available and this were distributed to citizens and businesses so that they would already start getting used to the new currency they could not use it but at least they could have it available ahead of time something I didn't know actually about Croatia was that they already accepted or some shops and restaurants already accepted the euro prior to 1st of January so for tourists I didn't know that I've been to Croatia but I used Kunar but that's interesting so it's not it's not a completely new currency for them in that respect I want to go back to these starter kits because it's also something that we've talked about in the podcast before about other changeovers what exactly is inside there there are two versions of the starter kit depends a little bit on the consumer on the other side so you have one for citizens and one for businesses for citizens it's a little bag with the 33 coins in it of different value and denomination and it's worth a little bit over 13 euros and for businesses since they have a higher turnover it's a bag that is a little bit bigger 500 coins more or less in it with different values also and worth close to 150 euros and the idea of these starter kits is that they basically equip people with coins to do everyday shopping which means the shops don't need to have so many coins on day one to be able to also provide change and with this we facilitate the logistics around the cash changeover otherwise the shops and restaurants and things they'd have to hold a lot of cash which is not what we generally want right and these starter kits they don't get them for free right I mean they have to buy them you said it's just over 13 euros per citizens okay so they buy them and that's what they get in return okay now we've talked a lot about the logistics but I want to turn to the people actually using the money because that's a huge part of any cash changeover and it's really crucial to making it a success that the people understand what's what's required of them essentially it's a massive mental change I mean you have to get used to to thinking in euros and I know that some countries gave out little calculators so that people could get used to converting their previous currency to euros how was it in Croatia? So in Croatia they introduced dual pricing in September this means they show prices for goods both in Kuna and in euros so people could start getting used to the conversion it helps seeing although at the beginning I guess before first of January you most probably stick to the Kuna line but you at least start seeing what it means in euros and this will stay until end December 2023 so there's still one year to go whereby citizens are just able without needing the calculator to check that the price is equivalent okay so they've been seeing the prices in euros and Kuna for quite a while and they will keep seeing them until the end of 2023 how has people's use of money been affected I mean like on a daily basis what what have they had to change when paying with cash? So the Croatian government and the central bank have done everything to make the changeover as smooth as possible so starting from the day of the introduction of the euro there have there has been a two-week period of dual circulation so you could basically either use Kuna or euro and this being said businesses were encouraged to give you the change in euros so as to force you to slowly transition but you could use Kuna's where there was no other option so this was a gradual transition to facilitate that people get used to the new currency this meant also that they didn't need to rush to get their euros all in one go but that we could also facilitate and extend it over time and that the exchange took place in a longer term period as of 15 January the euro became the sole legal tender so this means as of then you could only pay for goods and services in euros and not Kuna's anymore okay and we're talking after the 15th of January so what if not everyone managed to change their Kuna into euros by the 15th of January what can they do so there's there's still quite a bit of time to exchange Kuna's the first deadline is one year from the changeover so 31st December 2023 until then banknotes and coins can be exchanged free of charge at banks also post offices and at the country's financial agency so you have a number of options the only small caveat is there's a maximum per transaction so up to a maximum of 100 banknotes or 100 coins but you basically have quite a number of options available in the course of this first year after that so once of one year is over the Croatian national bank takes over so you would basically then have one place for exchange and there you have three years to exchange your coins three years to exchange your coins at the central bank so this means until 31st December 2025 however there is no deadline for banknotes so banknotes you could basically keep on holding to them not three years but also five ten or even fifteen if if you're interested it's still keeping a little bit of a memory of what Kuna's looked like most cash is generally exchanged within the first weeks after a changeover we are aware that people like to keep the old currency just for memory purposes so we don't expect all banknotes to come back but I said the vast majority does come back in the first weeks after after a changeover date you know I mentioned earlier that I've been to Croatia and I do actually have some Kuna bank notes at home so does it mean that I have to go back to Croatia which is of course not a bad thing if I want to exchange those banknotes into euros do I need to go to Croatia so we also offer options outside Croatia so there is no need for you to fly back we have the other national central banks so national central banks in the euro area who also offer exchange of banknotes free of charge and at the fixed conversion exchange rate so same conditions and you could basically go to your national central bank starting 1st of January until 28th February so you would need to do it in the course of the next weeks and there you can basically exchange up to 8,000 Kuna per day or per person and day so there's still an option before the end of February okay well I don't have that much but I'll be putting a trip to the German central bank here in Frankfurt on my to-do list then okay well that was it for the cash what happened then for the cash changeover and I understand as well that that money in banks so things like savings and deposits the securities bonds all of that kind of stuff the changeover for that happened simultaneously across all banks so there wasn't really a preparation stage as there was for cash in fact creations were encouraged to deposit as much cash as possible into their accounts before the changeover because and it makes sense but this is basically the easiest way to change their money into euros now before we wrap up our conversation we always ask our guests for a hot tip linked to the topic we're discussing today do you have a hot tip something for our listeners I would encourage people to check the design of the new Croatian coins as we mentioned they have a national specificity on the one side so there is a the one euro coin that I think is particularly interesting where there is a Martin on the on the other side this is like a little animal a little bit like a weasel I think I know it in Germany because it's famous for biting into car wires I think that's it so a small mammal basically that that is actually called kuna in Croatian so it gives a the name to the former former currency and not only that but it was also used or it was also pictured on the kuna coins one two and five kunas until now and it was not only on the kuna coins but actually it's a pelt was used as a form of payment in the middle age so when people starting started the transaction in basically the martin was the reference it has also been on former coins so not not only on the recent ones and there are other interesting facts also about the other Croatian national designs so I would just encourage people to check them and also to look for the coins when paying see if they if they get any of them when getting changed from their shops we have a whole section on our website so we'll drop a link to that in the show notes so that people can go and have a look there well patricia thank you so much for breaking down just how a currency changeover works super interesting thank you katie well that brings us to the end of this episode I want to thank patricia roetejero head of our currency issue and circulation team here at the ECB for joining the conversation today check out the show notes for additional material on this topic and a list of colleagues who contributed to this episode you've been listening to the ECB podcast with katie ranger if you like what you've heard please subscribe and leave us a review until next time thanks for listening