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 Endowment for International Peace
- The Iran War Isn’t the Only Challenge Facing Saudi Arabia’s Vision 2030Commentary
As the monarchy appears to question its grandest projects, the state could do with more critical debate than rote cheerleading.
Andrew Leber
- From Labor Scarcity to AI Society: Governing Productivity in East AsiaArticle
The debate over AI and work too often centers on displacement. Facing aging populations and shrinking workforces, East Asian policymakers view AI not as a threat, but as a cross-sectoral workforce strategy.
Darcie Draudt-Véjares, Sophie Zhuang
- Governing AI in the Shadow of Giants: Korea’s Strategic Response to Great Power AI CompetitionArticle
In its version of an AI middle power strategy, Seoul is pursuing alignment with the United States not as an endpoint but as a strategy to build industrial and geopolitical leverage. Whether this balance holds remains an open question.
Darcie Draudt-Véjares, Seungjoo Lee
- Is China’s High-Quality Investment Output Economically Viable?Commentary
China’s rapid technological progress and its first-rate infrastructure are often cited as refuting the claim that China has been systematically overinvesting in non-productive projects for many years. In fact, as the logic of overinvestment and the many historical precedents show, the former is all-too-often consistent with the latter.
Michael Pettis
- India’s Press Note 3 Gamble: Opening the FDI Door to ChinaArticle
On March 10, 2026, India’s Union Cabinet approved amendments to Press Note 3, a regulation that mandated government approval on all foreign direct investment (FDI) from countries sharing a land border with India. This amendment raises questions primarily about whether its stated benefits will materialize and if the risks have been adequately weighed. This piece will address the same.
Konark Bhandari
