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NO.1Northern gripes
The Finnsare being hard-nosed because they face their own hardship
IN THEhistoric heart of Helsinki, leviathan cruise ships can be glimpsed across theharbour ready for their next trip. Just two hours across the Gulf of Finland isTallinn in Estonia. Continue due south and a weary traveller will eventuallyreach Athens. If Greece is the awkward customer among southern Europe‘s debtornations, Finland is the stroppy partner among northern creditor nations. It hasinsisted on special terms on its contributions to euro-zone bail-outs sincemid-2011 by getting collateral on its lending. Government ministers eschewhigh-flown rhetoric about European unity: the foreign minister recently causeda kerfuffle by saying that Finland has contingency plans for a break-up of theeuro. From one perspective, it is hard to see why Finland is being soobstreperous. The country thrived for the best part of a decade after it joinedthe single currency in 1999. And although it suffered in the recession of2008-09 it has since made a robust recovery. Unemployment has come down from apeak of 8.7% in early 2010, to 7.5%. Helsinki‘s markets are thronged withshoppers and retail sales across the country have been perky. The recovery hasbeen sustained by strong consumer spending, supported by a sturdy housingmarket. The financial system is in decent shape.
Finland‘spublic finances are healthy, too, certainly compared with those elsewhere inthe euro area. Of the six remaining AAA–rated countries in the 17-strong zone,it is the only one not facing the risk of a downgrade, according to Moody‘s, aratings agency. Public debt is only about 50% of GDP, much lower than Germany‘s80%, and the government is running a deficit of about 1% of GDP this year, a paltryamount compared with those being racked up in Europe‘s debtor countries.
But fromanother perspective, Finland‘s performance looks disappointing. An alternativedestination from Helsinki on one of those monster cruise ships is due west toStockholm. Unlike Finland, Sweden chose not to join the euro. Until the crisis,that made little difference. Both countries did well; if anything Finland‘s performancewas stronger. But over the past five years their fortunes have diverged to thedetriment of Finland (see chart). The Finns suffered a much sharper recessionthan the Swedes, and Finland‘s recovery has been less ebullient. Moreover, theFinnish economy has stumbled of late: GDP fell by 1% in the second quarter inFinland, whereas it rose by 1.4% in Sweden. There were special reasons why theFinnish economy contracted—in effect, growth had been brought forward to thefirst quarter as consumers bought cars early to avoid a tax rise. But GDP isnow likely to expand by about 0.5% in 2012, says Markku Kotilainen of theResearch Institute of the Finnish Economy. In contrast, Swedish output willexpand by 1.3%, according to Robert Bergqvist of SEB, a bank.
Inanother telling comparison, Sweden continues to run a hefty current-accountsurplus (worth 7% of GDP in 2011) whereas Finland swung into deficit last yearfor the first time since 1993, a phenomenon noted with concern by ErkkiLiikanen, the governor of the central bank. And whereas Finland‘s public debtwas lower than Sweden‘s before the crisis, now it is higher. Some of thisreflects setbacks to Nokia, Finland‘s falling mobile-phone star (see article),whose share of Finnish GDP has shrivelled to an eighth of what it was at itspeak a decade ago. But there are other worries. Mainstay industries, such aswood and paper production, have also been doing badly. The Bank of Finlandargues that a crucial reason why exports have been doing badly is a loss ofcompetitiveness: unit labour costs have shot up by 20% in the past five years.The economy‘s longer-term prospects add to the gloom. In a survey of theFinnish economy published early this year, the OECD estimated that GDP wouldgrow by just 1.7% a year between 2016 and 2030. The bills for a rapidly ageingpopulation are coming due, as the bumper crop of babies born after the secondworld war retires.
Thecoalition government formed in mid-2011 and led by the conservative primeminister, Jyrki Katainen, has adopted measures to improve the structural budgetbalance by 2% of GDP in 2015. The fiscal tightening will be especially markednext year, with value-added tax on consumption rising by one percentage point.That is one reason why growth is expected to be a soggy sub-1% in 2013,according to Mr Kotilainen. But even with this dose of austerity, the ministryof finance reckons there is a ―sustainability gap‖ of 3.5% of GDP a year thatwill have to be closed to put Finland‘s public finances on a secure footing.
Alongwith further austerity, painful reforms are required. Finland needs to raiseits retirement age. And as the OECD urged in its report, it needs to improvepublic-service productivity. The government is starting to move in the rightdirection with its plan to reduce the number of local authorities, which areresponsible for crucial public services like health, but plenty more needs tobe done. As times turn hard at home, many Finns bristle at having to bail outwhat they
regard asprofligate euro-zone countries that have not played by the rules. Mr Katainen‘sdemands for collateral stem from a coalition agreement forged after theelection in April 2011, which saw the eruption of the anti-bail-out True Finns,now the biggest opposition party. Even so, he is keen to present himself as aconstructive negotiator rather than a troublemaker.
Anddespite the dislike for bail-outs, Finnish public opinion continues to favourthe euro, which is also backed by both business and the unions. One reason liesin another destination that the big cruise-ships visit—nearby St Petersburg. AsTeija Tiilikainen, the head of the Finnish Institute of International Affairs,points out, joining the euro had a security dimension, through binding Finlandmore closely into Europe and so providing a bulwark against Russia (still itslargest trading partner).
Finns maynot be dreaming of a future outside the single currency, but their reluctanceto help makes them a prime example of the ―rescue fatigue‖ now afflicting much ofnorthern Europe (including the Netherlands, which has an election of its ownnext month). That constraint is one reason why markets‘ sunny mood about theeuro crisis may not last far into the autumn.
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发表于 2015-8-1 16:30:59
