The euro and seignorage wealth: winners and losers of EMU

The European Economic and Monetary Union has led to considerable transfers of assets between the participating countries. EMU not only communitises the reputation that national currencies have built up but also the seignorage that the central banks gain by making their currency available to the private sector. In the course of time, by expanding the money in circulation, the central banks have accumulated extensive stocks of interest-bearing assets. These assets yield annual flows that contribute to financing the state budget. Up to 1 January 2002 the seignorage wealth of the participating states will be incorporated into the EMU and communitised. This effectively means a redistribution of assets among the participating countries since the interest income that the individual countries receive differs very strongly in many cases from the interest payments they make to the European Central Bank. The introduction of the euro will cost Germany nearly DM 60 billion, and France's gains will be about the same amount. Portugal will gain nearly DM 9 billion and Spain will lose more than DM 20 billion.