Wednesday

23rd Jan 2019

In Finland, the euro is not the real problem

  • The current debate asks questions about the future of Finnish society (Photo: Tuomo Lindfors)

The Finns say theirs is a country of one truth. At one point, everyone was excited about start-ups and their ability to save Finland’s economic future, at another point it was the mining industry that would get Finland up and running.

Finland's GDP collapsed in 2009, but it quickly recovered for two years due to expansionary macroeconomic policy. However, the government has since tightened its spending, forcing GDP into negative growth for three years. Last year, the Finnish economy grew about 0.5 percent.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

  • Infrastructure is one area where economists believe more investment is needed (Photo: City Clock Magazine)

At the same time, Finland has suffered from the fall of Nokia. It made up some 20 percent of Finland's exports during its best years. In addition, exports to Russia have decreased drastically as a result of the economic troubles across the border.

For quite some time we have played the blame game. At some point it was the euro, the trouble of all troubles. When Finland had its own currency, it could devalue it and overnight exports were relatively cheaper. The traditional export sector, the wood industry, increased its competitiveness and the economy would be up and running.

Now it is history, say politicians. As a member of the eurozone, Finland has lost its independent monetary policy to Frankfurt, seat of the European Central Bank. According to politicians, this leaves us with two options: leave the eurozone or perform an internal devaluation by, for example, cutting labour costs.

No Grexit situation

Let's consider the probability of the first option. From the outside, it might seem that Finland is on the verge of leaving the eurozone, since we have a populist anti-EU party in the government, the Finns Party.

The situation is actually not so critical. Though, the parliament is supposed to discuss a citizens’ initiative about having a referendum on eurozone membership at some point this year.

The initiative was drawn up last summer by veteran politician Paavo Vayrynen, a former minister and current member of the liberal Alde group in the European Parliament.

It is an independent initiative without formal support from his own Centre party nor the eurosceptic Finns Party – both parties are in the government.

However, the initiative has exceeded the threshold of 50,000 signatures, so it has to be examined by parliament.

Yet, Finland is far from a situation similar to Grexit or Brexit.

It is doubtful that there will even be a referendum on euro membership despite the citizens’ initiative. Parliament can easily dismiss the initiative; it only has to discuss it, not take it further.

As mentioned, there have been no public motions to support the initiative. The majority of MPs do not feel it necessary or wise to leave the eurozone. Some say the whole initiative is a way for Vayrynen to promote his political career.

The discussion on leaving the eurozone was on more solid ground a couple of years ago when the euro crisis was acute. Economists such as Vesa Kanniainen, professor of economics from the University of Helsinki, had strong arguments supporting the idea.

However, as the euro crisis calmed down, so did the debate. Now the migrant crisis has taken centre stage.

Polarised Finns

What of the second option - internal devaluation? It is, in fact, already well under way.

The Finnish government has forced the trade unions and business groups early this year to agree on cutting labour costs mainly by transferring social insurance contributions from employers to employees and by increasing annual working time by 24 hours without extra pay.

The other option was a set of laws drafted by the government, the so-called forced laws that included no pay on the first day of sick leave and cuts on holiday pay.

The centre-right government believes cutting labour costs will increase competitiveness of the export sector and lead to more orders and more work. The government’s main aim is to stop Finland’s public debt from growing.

Concerns about domestic markets and purchasing power are voiced more and more strongly. Some economists are calling for infrastructure investment to speed up the economic recovery.

But it is unlikely such voices will be heard when the government discusses the 2017 budget next week. Finance minister Alexander Stubb has said there is a need for further budget cuts, which might lead to an increase in unemployment.

According to the ministry of employment and the economy, the unemployment rate was 13.7 percent in Finland in February and long-term unemployment continued to grow. At the same time Finland has seen a surge of racist attitudes fuelled by the migrant crisis.

Yet, sociology professor of Juho Saari from the University of Eastern Finland is less concerned with aggressive anti-migrant atmosphere than the polarisation of Finnish society between the “haves” and the “have-nots”.

“The wave of migrants caused a moral panic which was channelled in to a political party what is exceptional situation in Finland,” he said.

“This panic is likely to calm down. The problem is inflated unemployment and long-term unemployment which will cast a long shadow.”

According to Saari, the current government policy does not focus on tackling problems of these social groups. In addition to this, high costs of housing further reduce standards of living in these groups. Saari says this will have consequences.

“Trust in political system among these groups diminishes and when there is no trust, society cannot be reformed. Finnish society will see a division between 'us' and 'them', and when there is child poverty, it produces poor adults.”

Finally, the euro is not the issue but the future of the Finnish welfare state and society.

Chemnitz neo-Nazis pose questions for Germany

UN human rights commissioner urged EU leaders to condemn violence that recalled the 1930s, but the local situation in former East Germany does not apply to the whole country.

Former Malta opposition leader fears for his life

Simon Busuttil spent 10 years as an MEP before returning to Malta to lead the opposition. He now fears for his life amid probes into high-level corruption in Malta's government.

News in Brief

  1. EU hits Mastercard with €570m fine
  2. Romanian minister prepares to cancel corruption cases
  3. Sefcovic: no gas supply problems this winter
  4. Report: Commission warning on passport-sale schemes
  5. France summons Italian ambassador over colonial remark
  6. May U-turn on fee for EU nationals in UK
  7. French data watchdog gives Google €50m fine
  8. EU hits Russians with sanctions over Salisbury attack

Stakeholders' Highlights

  1. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  2. Nordic Council of MinistersSeminar on disability and user involvement
  3. Nordic Council of MinistersInternational appetite for Nordic food policies
  4. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  5. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups
  6. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”
  7. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  8. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  9. Nordic Council of MinistersState of the Nordic Region presented in Brussels
  10. Nordic Council of MinistersThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  11. Nordic Council of MinistersThe Nordic gender effect goes international
  12. Nordic Council of MinistersPaula Lehtomaki from Finland elected as the Council's first female Secretary General

Latest News

  1. France and Germany hope to revive EU with Aachen treaty
  2. May pushes defeated Brexit deal, offers no Plan B
  3. European Parliament targets 'fake' political groups
  4. What is fate of non-euro EU states after Brexit?
  5. Turkish NBA star takes on Erdogan
  6. 'Meme ban' still on table in EU copyright bill, says MEP
  7. Brexit power grab by MPs hangs over May's 'Plan B'
  8. Polish mayor's funeral marred by Tusk TV dispute

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic design sets the stage at COP24, running a competition for sustainable chairs
  2. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  3. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  4. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  5. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  6. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  7. International Partnership for Human RightsCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  8. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  9. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  10. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  11. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  12. Mission of China to the EUChina: Work Together for a Better Globalisation

Join EUobserver

Support quality EU news

Join us