Increasingly vulnerable and keeping its distance

Published on 20 August 2012 at 13:02

The last member of the eurozone to benefit from a AAA rating from the three major ratings agencies, Finland has nonetheless begun to show signs of weakness. La Croixnotes that “the situation deteriorated in the course of second quarter with a one per cent decline in GDP”.

According to Finance Minister Jutta Urpilainen, the country could go into recession if the global economic slowdown continues. [...] Although Finnish state finances are in very healthy state, with a deficit of just 0.8 per cent of GDP, the country remains vulnerable to external shocks. Exports account for 40 per cent of GDP, of which 30 per cent is in trade with other members of the monetary union.

It is an unprecedented situation for Helsinki, which has resulted in an increasing wariness of the bailout mechanisms demanded by its eurozone partners. As the French daily points out, “In early July, Prime Minister Jyrki Katainen reiterated his opposition to the purchase of sovereign debt by the European Stability Mechanism (ESM).

La Croix cites an OECD expert who remarks that –

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The Finns are convinced they had to fight it out alone to restore the country’s public finances in the wake of the 1990s banking crisis. And today, they do not have the impression that Southern European countries are demonstrating the necessary initiative.

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