Finnish markka

History

The markka was introduced in 1860 by the Bank of Finland, replacing the Russian ruble at a rate of four markkaa to one ruble. In 1865 the markka was separated from the Russian ruble and tied to the value of silver. From 1878 to 1915, Finland adopted the gold standard of the Latin Monetary Union. Up to World War 1, the value of the markka fluctuated within +23%/−16% of its initial value, but with no trend. However, the markka suffered heavy inflation (91%) during 1914–18. Gaining independence in 1917, Finland returned to the gold standard from 1926 to 1931. Prices remained stable until 1940. but the markka suffered heavy inflation (17% annually on average) during the war years and then up to 1951, and again in 1956–57 (11%). In 1963 the markka was replaced by the new markka, equivalent to 100 old markkaa.

Finland joined the Bretton Woods Agreement in 1948. The value of markka was pegged to the dollar at 320 mk/US$, which became 3.20 new mk/US$ in 1963 and devalued to 4.20 mk/US$ in 1967. After the breakdown of the Bretton Woods agreement in 1971, a basket of currencies became the new reference. Inflation was high (over 5%) during 1971–85. Occasionally, devaluation was used, 60% in total between 1975 and 1990, allowing the currency to more closely follow the depreciating US dollar than the rising German mark. The paper industry, which mainly traded in US dollars, was often blamed for demanding these devaluations to boost their exports. Various economic controls were removed and the market was gradually liberalized throughout the 1980s and the 1990s.

The monetary policy called "strong markka policy" (vahvan markan politiikka) was a characteristic feature of the 1980s and early 1990s. The main architect of this policy was President Mauno Koivisto, who opposed floating the currency and devaluations. As a result, the nominal value of markka was extremely high and in the year 1990, Finland was nominally the most expensive country in the world.

Koivisto's policy was maintained only briefly after Esko Aho was elected Prime Minister. In 1991, the markka was pegged to the currency basket ECU, but the peg had to be withdrawn after two months with a devaluation of 12%. In 1992, Finland was hit by a severe recession, the early 1990s recession in Finland. It was caused by several factors, the most severe being the incurring of debt, as the 1980s economic boom was based on debt. Also, the Soviet Union had collapsed, which brought an end to bilateral trade, and existing trade connections were severed. The most important source of export revenue, Western markets, were also depressed during the same time. As a result, by some opinions years overdue, the artificial fixed exchange rate was abandoned and the markka was floated. Its value immediately decreased 13% and the inflated nominal prices converged towards German levels. In total, the value of the markka had decreased 40% as a result of the recession. Also, as a result, several entrepreneurs who had borrowed money denominated in foreign currency suddenly faced insurmountable debt.

Inflation was low during the markka's independent existence as a floating currency (1992–1999): 1.3% annually on average. The markka was added into the ERM system in 1996 and then became a fraction of the euro in 1999, with physical euro money arriving later in 2002. It has been speculated that if Finland had not joined the euro, market fluctuations such as the dot-com bubble would have reflected as wild fluctuations in the price of the markka. (Nokia, formerly traded in markkaa, was in 2000 the European company with the highest market capitalization.)

Names

The name "markka" was based on a medieval unit of weight. Both "markka" and "penni" are similar to words used in Germany for that country's former currency, based on the same roots as the German Mark and pfennig.

Although the word "markka" predates the currency by several centuries, the currency was established before being named "markka". A competition was held for its name, and some of the other entries included "sataikko" (meaning "having a hundred parts"), "omena" (apple) and "suomo" (from "Suomi", the Finnish name for Finland).

With numbers, Finnish does not use plurals but partitive singular forms: "10 markkaa" and "10 penniä" (the nominative is penni). In Swedish, the singular and plural forms of mark and penni are the same.

When the euro replaced the markka, mummonmarkka "grandma's markka" (sometimes shortened to just mummo) became a new slang term for the old currency. The sometimes used "old markka" can be misleading, since it can also be used to refer to the pre-1963 markka.

In Helsinki slang, a hundred markkaa was traditionally called huge [hu.ge] (from Swedish hundra "hundred"). After the 1963 reform this name was used for one new markka.

First markka

When the markka was introduced, coins were minted in copper (1, 5 and 10 penniä), silver (25 and 50 penniä, 1 and 2 markkaa) and gold (10 and 20 markkaa). After the First World War, silver and gold issues were ceased and cupro-nickel 25 and 50 penniä and 1 markka coins were introduced in 1921, followed by aluminium-bronze 5, 10 and 20 markkaa between 1928 and 1931. During the Second World War, copper replaced cupro-nickel in the 25 and 50 penniä and 1 markka, followed by an issue of iron 10, 25 and 50 penniä and 1 markka. This period also saw the issue of holed 5 and 10 penniä coins.

All coins below 1 markka had ceased to be produced by 1948. In 1952, a new coinage was introduced, with smaller iron (later nickel-plated) 1- and 5=markka coins alongside aluminium-bronze 10-, 20- and 50-markka coins and (from 1956) silver 100- and 200-markka denominations. This coinage continued to be issued until the introduction of the new markka in 1963.

1st series

The new markka coinage consisted initially of six denominations: 1 (bronze, later aluminium), 5 (bronze, later aluminium), 10 (aluminium-bronze, later aluminium), 20 and 50 penniä (aluminium-bronze) and 1 markka (silver, later cupro-nickel). From 1972, aluminium-bronze 5 markka were also issued.

The last series of Finnish markka coins included five coins (listed with final euro values, rounded to the nearest cent):