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 Malcolm H. Kerr Carnegie Middle East Center
- Unpacking Lebanon’s Gap LawCommentary
In an interview, Ishac Diwan looks at the merits and flaws in the draft legislation distributing losses from the financial collapse.
Michael Young
- Has Sisi Found a Competent Military Entrepreneur?Commentary
Mustaqbal Misr has expanded its portfolio with remarkable speed, but a lack of transparency remains.
Yezid Sayigh
- Arab Diaspora Business Communities in EgyptResearch
Arab diaspora business communities in Egypt often mirror the same systemic challenges facing Egyptian businesses.
- +4
Nur Arafeh, Yezid Sayigh, Qaboul al-Absi, …
- Saudi Arabia in Africa: Sound Economic and Geopolitical Strategy, or Resource Exploitation?Article
Largely characterized thus far by a single-minded focus on extractivism, Riyadh must commit to greater equitability in its approach to investment and development deals with Sudan, Ethiopia, and Eritrea.
Hesham Alghannam
- Destruction, Disempowerment, and Dispossession: Disaster Capitalism and the Postwar Plans for GazaArticle
Once Israel’s war in the territory is brought to an end, the foundational principles guiding reconstruction should be Palestinian self-determination, local agency, and sovereignty.
Nur Arafeh, Mandy Turner
