Economists: Finland's decision to join the Euro cannot be denounced just yet
Foreign Trade and Development Minister Väyrynen’s view is considered “slightly erroneous”
Paavo Väyrynen
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Jussi Mustonen
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Johnny Åkerholm
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Juhana Vartiainen, Head of the Research Division at the Swedish National Institute of Economic Research (Konjunkturinstitutet), does not consider Finnish Foreign Trade and Development Minister Paavo Väyrynen’s recent critical remarks against the common currency euro very surprising, especially now that the Swedish export industries are benefiting from the weakened Swedish krona.
The Finnish-born Vartiainen and other euro experts interviewed by Helsingin Sanomat understand that an economic crisis is bound to prompt criticism against the euro.
Väyrynen continued the reasoning that he started in the regional daily Itä-Savo in the Tuesday issue of Helsingin Sanomat, by saying that Finland would not have to suffer from the over-strong euro had it remained outside the eurozone the same way that Sweden chose to.
“Väyrynen’s criticism is understandable because he is close to primary production, where the strong euro is not seen as an advantage”, Vartiainen explains.
In Vartiainen’s view, Väyrynen’s way of thinking is nevertheless “slightly erroneous” because the positive and negative effects of both countries’ currency decisions manifest themselves in different ways at different times.
“In the long run there hardly is a significant difference whether one belongs to the euro area or not.”
According to Vartiainen, the Swedish exports industry has slightly suffered in the 2000s from being outside the euro system, but “in reality only very slightly”.
Apart from that, those Swedes travelling to other countries in Europe are in a slightly disadvantaged position as the krona brings on currency exchange expenses.
“These are small but persistent costs.”
Vartiainen emphasises that the exporting industries no longer benefit from the weakening of a currency as much as they did before, for the exported products also contain plenty of imported parts.
“Besides, the krona has not weakened as a result of deliberate policies in Stockholm, but because in uncertain times investors do not trust in small currencies.”
Vartiainen issues the reminder of a ticking time-bomb within the Swedish banks.
If the Baltic States resort to devaluation, the Swedish banks that have granted an enormous number of eurobonded loans to these countries will face problems even greater than their present ones.
According to the Confederation of Finnish Industries EK's chief economist Jussi Mustonen, from Finland’s point of view at least thus far the benefits of belonging to the euro area have outweighed the drawbacks.
This is because the euro has spared Finland from currency fluctuations and has kept the interest rates low.
“When it comes to the growth of standard of living, a better part of the time we have had the euro can be considered a real golden age”.
Mustonen agrees that in the longer term there is not much difference between belonging to the euro area and being outside of it.
According to Mustonen, Finland’s decision to join the euro system is now facing its first significant test.
Johnny Åkerholm, President & CEO of Nordic Investment Bank, agrees that the current economic crisis is the first proper test for the euro, but even he does not share Väyrynen’s sentiments.
“So far the euro has been a real blessing to Finland. It has given us economic latitude.”
“Besides, is Sweden economically somehow in a better shape than Finland? No it isn’t. The Swedish export sector could benefit from the current situation, but nobody is buying anything anywhere. And is it such a blessing that the Swedish population’s purchasing power weakens because of the weak krona?”
According to Åkerholm, now is the time to wait until the dust settles - to see how various countries come through this. He notes that the pressure to increase prices is enormous everywhere - especially in Sweden.
Helsingin Sanomat
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| 7.5.2009 - TODAY |
 Economists: Finland's decision to join the Euro cannot be denounced just yet |
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