Finland's Economic Winter: Permafrost

The European Union's only Nordic member is struggling to improve its poorly performing economy. Finland's economy was doing well before and after it joined the euro in 1999, but has ran into trouble in recent years. After the financial crisis in 2009 output plunged by nearly 9 percent. Short term data also suggests that 2016 will not be a good year either.

A number of things have caused Finland's economy to suffer. One of the biggest reasons has been the decline of Nokia. Nokia's rise propelled Finland's economy. Now its decline is hurting Finland's economy. Another major problem is that despite Finland's lagging economy wages have continued to rise at a rate faster than those of their trading partners. Meanwhile the workforce is shrinking yearly due to baby boomers retiring. Russia is also a heavy buyer of Finnish goods so the decline of the Russian economy has also affected Finland.

The good news is that Finland is able to find new sources of growth due to the innovative ideology among the youth. Finland has supported this ideology through  a $1.8 billion initiative to promote growth. However, soon Finland will have to experience spending cuts which will cause harm to their GDP due to the fact that government expenditure is 58% of GDP. The biggest change Finland is trying to make is to reform their labor market, so that wages are in better correlation to the economy. It also should be noted that is constrained from doing much through monetary policy due to the fact they are part of the Euro. Leaving the Euro would have hazardous results for the economy and is not a safe thing to do. I think the initiative for innovation will help diversify the economy and possibly help improve. No matter what Finland tries it is clear that they must do something in order to try and improve their floundering economy.