Monaco, San Marino and the Vatican to start using the euro

Monaco, San Marino and the Vatican will be able to use the euro as their official currency and grant legal tender status to euro banknotes and coins if the European Commission's latest recommendation is accepted by the Council of Ministers.

The Commission has adopted three recommendations for decisions of the Council of Ministers to allow bilateral agreements between the European Union and the Principality of Monaco, the Republic of San Marino and the Vatican. Decisions are necessary because Italy and France have long-standing monetary arrangements with these countries and the competence for such matters will be transferred to the EU from 1 January 1999.

The three draft Council decisions give a negotiation mandate to Italy (for negotiations with the Republic of San Marino and the Vatican) and to France (for negotiations with Monaco) and define the position to be taken in these negotiations. The Commission and the European Central Bank (ECB) will be fully associated with the negotiations.

France and Italy have long-standing agreements with the Principality of Monaco (France) and with the Republic of San Marino and the Vatican (Italy) concerning monetary or foreign exchange rate matters. The arrangements allow the third countries concerned to issue coins denominated in French Franc or Italian Lira and ensure that banknotes and coins issued by France/Italy have legal tender status in the respective third country. Moreover, financial institutions located in the Principality of Monaco have access to the refinancing facilities of the Banque de France and to French payment systems under the same conditions as French banks.

Since the competence for monetary and exchange rate matters of the Member States adopting the euro will be transferred to the EU from 1 January 1999, the Council of Ministers must decide on the future of these agreements (under Article 109(3)).

The Commission has now made the necessary recommendations for three Council decisions. They suggest that the third countries are allowed to use the euro as their official currency and to grant legal tender status to euro banknotes issued by the European System of Central Banks and to euro coins issued by the Member States of the euro zone. Moreover, financial institutions located in these countries may be granted access to the payment systems inside the euro zone under conditions to be determined in agreement with the ECB.

Monaco, San Marino and the Vatican are expected to undertake not to issue any banknotes, coins or monetary surrogates of any kind unless the conditions for such issuance are agreed with the EU. Moreover, the three countries are expected to make EU legislation on euro banknotes and coins applicable in their territories and to cooperate closely with the EU on measures against counterfeiting of euro banknotes and coins.

Given the close historical links between France and the Principality of Monaco on the one hand and Italy and the Republic of San Marino and the Vatican on the other, the Commission recommends that France and Italy negotiate and conclude the new agreements. The Commission and the ECB, in its fields of competence, will be fully associated with the negotiations.


Source: European Commission
Date: 21 December 1998
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