One of the most significant factors affecting the demand and specification for banknotes in the first decade of the new millennium has been the Euro currency.

Not only have all the Eurozone state printers and a number of commercial banknote printers focussed on Euro production, but the standards and procedures established by the European Central Bank have been adopted by countries as far away from Frankfurt as Uganda and Namibia, which have adopted aspects of the Euro production protocol as a standard for their own banknote issue. Namibia, for example, will only accept ground transport with armed guards for new banknote deliveries, and Uganda insist that their notes are printed on paper produced by ECB-accredited mills.

Since euro production started in 1999, 64 billion notes have been printed, and annual production volumes have fluctuated widely, from 1.6 billion notes in 2004 to a high of nearly 11 billion notes in 2009. There have been major winners and losers in the commercial battle for Euro production; Royal Joh Enschedé of the Netherlands, for example, formerly one of the smaller producers, is now among the larger commercial Euro printers, while Bundesdruckerei has lost half its national German indent as procurement rules dictated by the European Commission in Brussels ensured competitive tendering.

The peak production of the Euro in 2009 was due to the ECB ordering nearly 11 billion notes in anticipation of the introduction of Euro Series 2 (ES2), which would have been produced from 2010 onwards and would have temporarily reduced output because of the more demanding technical specification of the new series.

At the beginning of 2010, however, the Euro scene has changed dramatically. Production difficulties with some of the new features has forced the ECB to delay the introduction of the new series, but this has paled in comparison with the fact that the whole currency itself is under intense pressure, more so than ever in its 11-year history. 

The backdrop to this latest development are economic strains evident in heavily-indebted countries like Italy, Portugal, Ireland and – above all – Greece, where the impact of the global economic downturn and fiscal policy set in Frankfurt is setting new standards for fiscal creativity, and has highlighted inherent weaknesses in Europe’s form of monetary union. When the financial crisis first hit in late 2008, it was widely assumed that this union would act as a collective cushion against the effects of the global recession. This assumption has been reflected in the value of the currency, which rose against the dollar and other major currencies and has remained high ever since.

But the assumption overlooked two key weaknesses. One is the absence of an accompanying political union that has left Eurozone members collectively responsible for the individual policies that have brought some of the weaker countries to the brink. The other is the inability of these countries to resort to remedies that would help their individual economic circumstances – eg adjusting interest rates or devaluing their currency.

The prospect of such countries – Greece in particular – defaulting is not one that the Eurozone as a whole is likely to contemplate. But the alternative is not particularly palatable either – namely, the more economically prudent among the larger members, Germany it particular, bailing out their profligate neighbours.

So one or more of the economically-challenged members leaving the monetary union is unlikely. The steps taken to avert this, however, will prove wildly unpopular – both among those countries forced to impose severe austerity measures as the price for financial support, and among those countries providing that support as they themselves struggle to come out of recession. In this context, the technical problems and the delay in the second Euro series must be the least of the Eurozone’s worries.