Finland, EMU and the Euro

Abstract

In this speech I shall try explain how an unpopular currency became popular. I will illuminate our experience from three angles, each of which was present in the debate leading to our eventual decision to join. The first angle is one of business cycle management. Finland was not really seen as a part of an optimal currency area with the rest of the eleven countries. We had our own, rather idiosyncratic business cycle. Would the common monetary policy exacerbate cyclical volatility in Finland? The second angle is one of crisis management. At the time when the decision to join was made, Finland’s deep depression of the early 1990's was fresh in our memories. At that time, our recovery was aided by a substantial depreciation of the Finnish markka. How would the loss of exchange rate policy affect our ability to survive truly adverse economic circumstances? The third, and final, angle deals with politics and decision making; to what extent would we have a say on our own fate? Apart from the obvious aspect of shared monetary policy, our membership in the euro area also meant closer cooperation and coordination of fiscal and financial policies and in international fora. Would we be able to find ourselves an active role in the Eurosystem, or become a passive bystander while the bigger players take decisions?