Progress on preparing public administration
in the Federal Republic of Germany for changeover to the euro*

 

Starting point

The introduction of the euro poses a very special challenge to all concerned, and quite particularly to the public administration. Its role is not confined merely to shaping its own changeover scenario and identifying the extent of the required adjustment.

Beyond this, it must set up an explicit and clearly-defined legal framework within which the other active bodies can take their individual decisions concerning the use of the euro. This must take account of the numerous points of contact between the public administration and the private sector.

All plans must give consideration to the fact that a period of three years will elapse between the introduction of the euro on 1 January 1999 and the first placing of euro notes and coins in circulation on 1 January 2002. This means that in Member States with a high proportion of cash transactions, such as the Federal Republic of Germany, the national currency unit will remain the predominant psychological point of referee during the transitional period.
 

Panel on EMU

As early as November l995, the Federal Ministry of Finance set up the Panel on the Legal and Administrative Implementation of EMU (AS WWU) to identify the extent of the adjustment required in legislation and public administration in connection with the introduction of the euro.

The mode of operation of the Panel reflects the federal structure of the Federal Republic of Germany. In accordance with the constitutional assignment of responsibility to federal, regional and loca. levels of government, the principal focus of the Panel's activity is on federal legislation and administration. The Länder and communes in turn have their own coordination bodies The Länder and the communes take part as observers in the meetings of the AS WWU to ensure that changeover tasks are properly coordinated and harmonised.
 

Objectives

The Panel has submitted its first interim report, approved by the government on 28 April 1997. In addition to many technical considerations, this report stresses the following objectives.

- First: On the basis of European Community monetary law, the government's primary objective is to eliminate from the start of the transitional period onwards all legal obstacles impeding the use of the euro in the private sector and to restrict to a minimum the workload imposed by the changeover.

- Second: The use of the euro at the interface of public administration and private sector is to be facilitated. No enterprise is to be deterred from taking an individual decision to use the euro at an early stage by the fact that changeover in the public administration will not take place until the end of the transitional period.

A further interim report is being prepared. This report will comment on current developments.
 

Law introducing the euro

On the basis of the guidelines set out in the first interim report, the German government adopted on 24 September 1997 a draft Law introducing the euro, Germany being the first Member State of the European Union to do so. This law is a further important step in the preparation of European Economic and Monetary Union. It is currently at the committee stage in parliament and is intended to be passed in the first half of 1998.

The aim of this draft law is to create in the Federal Republic of Germany the conditions necessary to ensure problem-free introduction of the euro on 1 January 1999. Under this law, the optional use of the euro by the private sector as from 1 January 1999 is provided and facilitated. Care has been taken to concentrate on simple, inexpensive and flexible conversion procedures.

- First: Opening the law of partnerships and corporations for the euro means that stock corporations (AG) and limited liability companies (GmbH) may also denominate their capital and shares in euro. New companies may be founded on a euro basis and existing companies may be converted to euro. The procedures governing the corresponding shareholder resolutions will be eased and the fees for register entries reduced. As the conversion of DM amounts does not give a round euro amount, capital adjustments may be required in order for instance, to convert a 5 DM share to a 1 euro share. Such adjustments could be dispensed with if shares without a specific face value, i.e. non-paper shares were to be admitted, representing a fraction of the nominal capital without bearing a face value. The German government has already adopted an appropriate draft law. To facilitate the use of the euro, signal amounts in company law may be expressed in round euro amounts from the start of the third stage onwards.

- Second: Opening accounting regulations for the euro means that enterprises may draw up their annual statements of accounts in euro for business years ending after 31 December 1998. These statements of accounts in euro are also admissible for tax purposes. Businesses are free to use the euro in their accounts without the need for any further legislative measure. Besides annual statements and accounts, vouchers expressed in euro (with the exception of tax certificates) are also admissible for tax purposes. Currency gains realised from the irrevocable fixing of exchange rates are not required to be shown immediately in the balance sheet, but may be entered as a special item. This is also admissible for tax purposes.

- Third: The German government will not only issue its new tradable public debt in euro, but will also convert its outstanding federal bonds, federal obligations and treasury bills to euro as at 1 January 1999 in the interests of maintaining German's financial centre status. The draft law regulates the conversion of outstanding debt instruments traded on stock exchanges and the procedure by which other issuers may convert their bonds from DM to euro.

- Fourth: The conversion of stock exchange listings to euro also serves to reinforce Germany's financial centre status. The draft law provides German exchanges with the framework for this and at the same time affords them greater autonomy.

- Fifth: The currently applicable monetary regulation making indexation subject to authorisation by the Deutsche Bundesbank will be repealed. The issue of a legal framework for the application and arrangement of stable-value clauses is being reviewed with reference to price-policy considerations.

- Sixth: The procedure for dealing with the discount or other specific Deutsche Bundesbank rates in laws, contracts and the like will also be regulated. This regulation of reference rates will bridge a gap that would otherwise be created with the assignment of monetary policy to the European Central Bank and the discontinuation of the Deutsche Bundesbank's interest rates. No direct reference can be made to the European Central Bank's range of monetary policy instruments until they have been definitively set out.

For a transitional period not exceeding three years, the discount rate will be replaced by a so-called base interest rate proceeding from the last discount rate figure. It is to be adapted at four-monthly intervals to the reference rate of the European Central Bank most closely corresponding to the discount rate. The law empowers the German government to select this reference figure. Adjustment will be undertaken only if the reference figure changes by at least 0.5 of a percentage point. A comparable ECB interest rats is to be substituted directly for the lombard rate by ordinance having the force of law. If the Frankfurt Interbank Offered Rate (FIBOR) also commonly used as a reference figure, is no longer fixed, provision will be made to determine by ordinance having the force of law an appropriate substitute interest rate.

- Seventh: The summary proceedings for orders to pay debts will also be opened for the euro. Thus there will be no difficulty in asserting claims and enforcing summary court notices and judicial orders for execution denominated in euro.

- Eighth: Further provisions in the draft law will ensure that unissued euro coins whose designs have already been officially determined are secured against confusion with medallions and marks.
 

Additional facilities

On the basis of the ordinance already effective on real property rights in foreign currencies and in euro. the monetary value of mortgages, land charges, annuity land charges and the like may also be expressed in euro.

In accordance with a resolution taken by the Statistical Offices, the bodies obliged to report will be enabled to submit value data in euro as from 1 January 1999.

An important additional facility will be provided in connection with domestic payments. On the basis of an understanding between the associations of the German banking industry, full freedom of choice will exist for cashless payments as from the first day of the third stage in all cashless payments transactions, both the DM amount and the converted euro amount will be input to the data systems. This also enables payment to be made in euro, including payments to the public administration.
 

Euro at the interface of public administration and private sector

No final decision has yet been taken on whether to permit the use of the euro at the interface of public administration and private sector.

As in all Member States of the European Union, there is agreement at central, regional and local government level that the respective national currency will continue to be the appropriate unit of account during the transitional period within the public administration. When issuing official notices, however, administrations will generally be prepared to show sum totals in euro as a memorandum item beside the national currency.

As the bodies responsible for the revenue administration, the finance ministries of the Länder are currently reviewing whether an option should be provided for filing tax and other returns. A decision is to be taken on this by 22 January 1998. In view of the data links existing between the administrations of the federal Länder, the principle of adopting a uniform approach at all levels of administration is to be observed.

 

December 1997



 
 
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