The changeover to the euro in Finland

 

Rauno Niinimäki*

 
The Ministry of Finance started the EMU Project in April 1996. When organizing the Project it was realized from the outset that public sector cannot make its own preparations without close connection and cooperation with the private sector and vice versa. That is why almost fifty organizations from public and private sectors were invited to participate the Project. The idea was to ensure that the changeover to the single currency will happen without distortions and that all parties' interests during the changeover process will be taken into account.

The EMU Projectís working group on legislation published its first report in June 1997. In the report the group examined what changes would be needed in the Finnish legislation. It was found that the necessary legislative changes were perhaps not so many than it was originally expected. With regard to the clarity of the Constitution the provision in the Constitution Act, stipulating that the currency unit of Finland is the Markka, will be amended. The Act on the Bank of Finland needs some changes to ensure that the Bank is properly integrated to the European System of Central Banks. The Currency Act will be modified so that it will be compatible with the Treaty and the ESCB Statute.

On the civil law side it was found that several minor changes can be made in order to facilitate the use of Euro during the transitional period. The most important of these is perhaps the Company Act. A proposal is under preparation according to which companies can change their share capital from Markka to Euro during the transitional period. A possibility to use non par value shares will be introduced. The changes which will happen in monetary policy regime may threaten the continuity of some reference rates which are commonly used in loan and deposit agreements. Procedures and possible legislative actions to take care of this matter are under preparation.

Finlandís National Changeover Plan For The Introduction Of The Euro was published in April 1997 and it's revised version in December 1997. In this plan the interests and intentions of various groups of society has been put together in an organized manner. These groups are citizens, enterprises, financial sector and public sector.

To start with, banks will offer payment services to their customers in Euro from the beginning of transitional period. This will facilitate the use of Euro as a means of payment and as an accounting unit to any economic unit.

Multinational companies will take Euro as their accounting unit from the outset. Firms which are not multinational but have foreign contacts will use Euro as a means of payment from the beginning of 1999.

Sooner or later these firms too will take Euro as an accounting unit in all their functions. All these firms would of course like to have their contacts with the public sector in Euro.

To use Euro as a means of payment between public and private sector is no problem. If somebody for instance would like to pay his taxes in Euro it can be done easily because banks will convert the payment in Markka when it arrives to the account of The National Board of Taxes. Sending information, for instance tax declarations, is another thing. In accepting information in Euro the principle of decentralization is followed. All government branches and ministries will make their own decisions on this matter, and will inform their associates about their decision regarding the changeover to the Euro.

Basic decisions in this respect has already been taken. Firms have the possibility to make tax and customs declarations in Euro and transmit information in Euro to Statistics Finland. Firms can also register articles of association in Euros straightaway. Similarly, balance-sheets will right from the start of transitional period be accepted in the currency unit used by the enterprise. All this means that enterprises have full freedom to use Euro in accounting, in annual reports and in articles of association during the whole transitional period. It can be used in all of these three areas or separately in one or two.

Private citizens are not expected to use Euro until notes and coins are issued. They are expected to get their salaries, pensions and social security contributions in Markka during the whole transitional period. If, however, somebody would get his income in Euro, he can make his tax return in the same unit.

The basic Euro-solution of Public sector in Finland is to make it easy for private sector to take Euro in use. This means that a lot of practical preparatory work in different sectors of administration has already been done. In particular this is true in units with large IT systems, for example in National Board of Taxes, Board of Customs, Social Insurance Institution, State Treasury and Statistics Finland.
 

 

* Head of the EMU Project, Ministry of Finance - Helsinki. <http://www.vn.fi/vn/suomi/vn/74f.htm>  

 


 

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