EMU and Public Administrations :
An Interim Overview
Rolf Kaiser

A positive balance sheet at the beginning of 1998

Considerable achievements have been made during 1997 regarding the preparation of Member States’ public administrations to the euro.

Eleven Member States (Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, Netherlands, Austria, Portugal, and Finland) have so far published a national changeover plan or, in the German case, a comprehensive draft transition law.

A majority of Member States intend to give companies, and in many cases individuals, the option at least partially to communicate and to execute financial flows with public administrations either in the national currency unit or in the euro from January 1999 onwards.

The range of these so-called "euro-options" varies from one Member State to the other. These options cover, among others, such areas as company accounting and reporting, the founding of companies with their capital in the euro or the redenomination of an existing company’s capital into the euro, or tax and social security declarations and payments.

The European Commission gave a detailed interim country-by-country account of these "euro-options" in a working document (SEC(97)2384) adopted on 16 December 1997. The most common option is the possibility for companies to do their accounting and annual reporting in euro, and nine Member States had declared by the beginning of 1998 that they would also accept tax declarations from companies in euro for tax years 1999-2001.

Internally, Member States expecting to participate in 1999 intend to continue to operate (i.e. budgets and internal accounting) in the national currency unit until the end of the transitional period in December 2001. A trend can be identified, however, towards the parallel publication in the euro of major government data at least towards the end of the transitional period, for the sake of familiarisation with the single currency in the public sector. At any rate, the 2002 budgets – necessarily denominated in euro – will of course be debated during the course of 2001.


An eu-wide partnership for the exchange of experiences and solutions : the public administration network

Following the adoption of the changeover scenario to the euro at the Madrid European Council in December 1995, the need was felt, at the level of Member State governments as well as within the Commission, to establish a joint forum for the national co-ordinators responsible for the changeover preparations of their administrations to the euro.

As a consequence, the Commission (namely the Directorate-General for Economic and Financial Affairs – DG II) started in January 1996 to create a network for these officials, in the spirit of a service offered to Member States. A mutual exchange of national plans and directives organising the complex task of leading national administrations towards the changeover to the euro ensued, with the Commission acting as the central service point and facilitating information exchange.

The Commission was also called upon to be present at numerous meetings establishing new changeover co-ordination structures in a majority of capitals. Frequent EU-wide and bilateral meetings within the context of this network have been held and will be held in the future.


The Organisation of National Changeover Activities

In many Member States, initial preparatory work for the changeover of public administrations typically started after the publication of the Commission’s Green Paper "One Money for Europe" in May 1995. The scenario established by the European Council in Madrid in December 1995 subsequently led to the formal creation of specialised units or task forces in national Finance Ministries especially dedicated to the co-ordination of the changeover of public administrations.

Generally, a pattern of national changeover networks evolved, with clearly defined "euro-desks" in all the Ministries and government agencies. Working sub-groups have developed around the subject areas of legislation and legal aspects, financial markets, enterprises, consumers, and communications policy. Several Member States with a pronounced regional/local structure typically involved their regional and local authorities from the start. This regional/local dimension is now continuously gaining importance in national changeover activities.

On of the first tasks of national changeover organisations was to take stock of all existing laws and regulations and to examine them for any necessary change in view of the introduction of the euro. For the sake of clarity and readability, most Member States intend to change "physically" into the euro any existing legal text which is affected and which will still be applicable beyond the end of the transitional period.

Even where such rewriting has not taken place by the beginning of 2002, legal certainty will be ensured by virtue of the European legal framework for the introduction of the euro. This legal framework stipulates that from the beginning of 2002, any reference to a national denomination will be read "automatically" as a reference to the euro, converted on the basis of the irrevocable conversion rate.


"euro-options" granted by member states to private economic agents during the transitional period

The principle of "no obligation, no prohibition" agreed by the Madrid European Council in December 1995 for the use of the euro during the transitional period of course permits private economic agents to transact between themselves in euro as of 1 January 1999. But this principle logically also points the way to granting the optional use of the euro for financial flows and communications between administrations and private economic agents as of 1 January 1999.

The publication of the Belgian changeover plan in July/August 1996, precisely granting such options, led the way for a large majority of Member States to follow suit during the following 15 months.

In terms of national policy approaches, it is noteworthy that, whereas immediately after the Madrid European Council Member States were rather inclined to change over their public administrations to the euro only in 2002, the current situation has considerably changed. A large majority of Member States have now announced that they will allow the optional use of the euro for most, and in some cases all, financial flows and communications (for example: company accounting, tax declarations and tax payments) between private economic agents and public administrations as from 1 January 1999.

This has led a growing number of European enterprises to announce formally that they will execute a maximum changeover to the euro already in 1999. As a consequence, the early use of these "euro-options" will undoubtedly lead to a much faster growth of the day-to-day use of the euro during the transitional period than originally expected, small enterprises, the self-employed and the public-at-large included.