The head of economics at the Finnish Ministry of Finance in Helsinki, Marty Hetemaki, says that EMU will give Finnish pension funds the opportunity to diversify internationally.

Hetemaki says: We have been advocating that funds invest more in assets other than bonds."

He adds: "It is our view that pension funds could benefit by the diversification of their portfolios. With EMU, the pension funds will have more room to invest in foreign bonds and foreign equities because they will incur no currency risk."

This view is backed by two reports published this summer, one by the Ministry of Finance itself and one by the OECD both of which closely linked pension reform to future economic prospects.

The OECD report while acknowledging the possible improvements to be had from EMU stated that it would not be a panacea with Finnish funds unable to take advantage of diversification across emerging markets.

In the Ministry report, 'The Finnish Economy: Outlook and Challenges' Johnny Akerholm, assistant secretary of state went further, canvassing the set-up of personal pensions savings accounts and a move to make employees wholly responsible for their contributions to the second pillar.

However the ministry has indicated that legislation on the matter is unlikely, at least in the near future.

The system currently combines a PAYG first pillar with second pillar industry-wide pension funds with assets totalling FIM224bn in 1996. These management structure of these funds was altered this year to , among other things promote equity holdings. These currently stand at 11% of total assets for 1997 are expected to reach 14% next year."

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