Finnish economists share experiences about recession with Icelandic entrepreneurs

Jukka Koivisto

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”Those who can cope with an economic decline, get over with it and become strong. A recession involves creative destruction”, said Jukka Koivisto, the Vice President of the Confederation of Finnish Industries (EK), speaking to an Icelandic audience at a seminar in Reykjavik.
     
The purpose of the event organised at the Saga Hotel was to listen to Finnish companies’ experiences relating to the recession that hit here in the 1990s.
      EK’s Koivisto and Anders Blom, the CEO of the Finnish Family Firms Association, discussed the too rapid deregulation of the financial market, the overburden of debt, the devaluation of the currency, and the banking crisis.
      Just like we have in Iceland, one could hear people acknowledge with a quiet nod.
      ”Banks disappear, but we survive”, Blom encouraged the Icelandic entrepreneurs.
     
Finnish economists’ experiences of the depression are now much in demand in Iceland.
      Last autumn Director Jaakko Kiander from the Labour Institute for Economic Research delivered his speech to a full house in Reykjavik.
      Kaarlo Jännäri, the former Director General of the Finnish Financial Supervision Authority, has been commissioned by the Icelandic government to study the status of the country’s financial market.
      ”I am to evaluate the legislation controlling the financial market and to assess the operations of the central bank and the financial supervision authority, whereupon I am expected to recommend some measures to be taken. My report is due in March”, Jännäri notes.
     
In November, the International Monetary Fund (IMF) granted Iceland a loan of USD 2.1 billion. The loan terms stated that the country would have to hire external specialists.
      Having a thorough experience of the banking crisis, Kaarlo Jännäri was chosen to do the job. In the period from 1991 to 1993, Jännäri worked as the General Director of the SKOP-Bank (the Savings Bank Group of Finland) which eventually ended up in the hands of the Bank of Finland.
      For the time being, Jännäri is unwilling to comment on the contents of his task.
      ”At present, I am conducting confidential discussions with the various parties”, Jännäri says.
     
The advice given by Koivisto and Blom reflects the mistakes made in Finland during the last recession. They believe that it would now be important to pay serious attention to employment.
      ”It is vital to take care that people are not left outside the labour force”, says Koivisto.
      According to an economic forecast made by the Icelandic Ministry of Finance, the unemployment rate in the country will jump to 7.8 % in 2009 and to 8.6 % in 2010. Until today, unemployment has been nearly non-existent in Iceland.
     
However, some flickers of hope have also been spotted. The cheap Icelandic króna is good for the export industry. According to forecasts, the fishing industry will increase its export revenues by 5% and the aluminum industry by 9 % in the current year. However, cod and aluminum alone are not sufficient.
      Accord to Koivisto and Blom, Iceland should focus on information-intensive fields and diversify the structures of their economic system, as was done in Finland after the last recession.
      ”A large number of educated employees will lose their jobs in the banking sector. We will have to create something new and to utilize the education of our people”, considers Vilhjámur Egilsson, the director of an organisation representing Icelandic employers.


Links:
  The Confederation of Finnish Industries (EK)
  Finnish Financial Supervision Authority
  The Finnish Family Firms Association
  Labour Institute for Economic Research
  International Monetary Fund

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