Paper
Pekka Sutela
{
"authors": [
"Pekka Sutela"
],
"type": "other",
"centerAffiliationAll": "",
"centers": [
"Carnegie Endowment for International Peace"
],
"collections": [],
"englishNewsletterAll": "",
"nonEnglishNewsletterAll": "",
"primaryCenter": "Carnegie Endowment for International Peace",
"programAffiliation": "",
"programs": [],
"projects": [],
"regions": [
"Western Europe"
],
"topics": [
"Economy"
]
}
REQUIRED IMAGE
Other
Finland’s Approach
Finland sets the prospect of a European crisis against its own experiences two decades ago.
By Pekka Sutela
Published on Dec 6, 2011
What is Finland’s approach to the euro crisis?
Finland sets the prospect of a European crisis against its own experiences two decades ago. A domestic bubble burst and Soviet trade collapsed. The country was met with a banking crisis, production collapsed, and unemployment rose to unprecedented levels. The crisis was overcome with a basket of policies combining fiscal stringency, bank industry rehabilitation, and by taking on some debt. This path was politically popular, and generally Finland sees this as the path others should take now.
Finland’s economy is in modestly good shape. Banks are solid and direct exposure to the crisis countries is limited. The national debt-to-GDP ratio is only now reaching 50 percent of GDP. As the population is quickly growing older, there is little will to increase debt, especially to finance countries seen as unwilling to take the pills Finland took to fight its crisis. Finland does not support eurobonds. National central banks should be the lenders of last resort. Giving that role officially to the European Central Bank would run against traditional Finnish anti-federalist attitudes.
Finland’s economy is in modestly good shape. Banks are solid and direct exposure to the crisis countries is limited. The national debt-to-GDP ratio is only now reaching 50 percent of GDP. As the population is quickly growing older, there is little will to increase debt, especially to finance countries seen as unwilling to take the pills Finland took to fight its crisis. Finland does not support eurobonds. National central banks should be the lenders of last resort. Giving that role officially to the European Central Bank would run against traditional Finnish anti-federalist attitudes.
Read more
Finland was, for domestic political reasons, the only country demanding guarantees for financing Greece. Leading center-right politicians have now called for a greater role in European policymaking for the European AAA rated countries like Germany, France, and Finland itself. Others would become second-class EU members, and might wish to exit the eurozone if not the Union. This may indicate a shift in Finnish opinion in favor of a smaller, more Northern-based euro area. The eventual stronger Northern euro would create havoc in Finnish industries mostly dependent on exports outside the eurozone. If last-minute attempts to save the status quo fail, this may still be the preferred alternative. A return to sovereign currency has very little support among the population or decision makers.
About the Author
Pekka Sutela
Former Nonresident Senior Associate, Russia and Eurasia Program
Sutela was a nonresident senior associate in the Carnegie Endowment’s Russia and Eurasia Program, where his research focuses on the economies of Eurasia, especially Russia.
- The Underachiever: Ukraine's Economy Since 1991
- Russia’s Economic ProspectsArticle
Pekka Sutela
Recent Work
Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
More Work from Carnegie Europe
- Is the Radical-Right Threat Existential or Overstated?Commentary
Amid increased polarization and the influence of disinformation, radical-right parties are once again gaining traction across Europe. With landmark elections on the horizon in several countries, are the EU’s geostrategic vision and fundamental values under existential threat?
Catherine Fieschi, Cas Mudde
- Planetary vs International Security: Economic Growth at the CrossroadsResearch
Economic growth is at the heart of a dilemma between planetary and international security.
Olivia Lazard
- Europe and the Arab Gulf Must Come TogetherCommentary
The war in Iran proves the United States is now a destabilizing actor for Europe and the Arab Gulf. From protect their economies and energy supplies to safeguarding their territorial integrity, both regions have much to gain from forming a new kind of partnership together.
Rym Momtaz
- How Europe Can Survive the AI Labor TransitionCommentary
Integrating AI into the workplace will increase job insecurity, fundamentally reshaping labor markets. To anticipate and manage this transition, the EU must build public trust, provide training infrastructures, and establish social protections.
Amanda Coakley
- European Democracy Support Annual Review 2025Paper
European democracy support strategy in 2025 prioritized protecting democratic norms within Europe. This signals the start of a structural recalibration of the EU’s approach to democracy support.
- +6
Richard Youngs, ed., Elena Viudes Egea, Zselyke Csaky, …
