Mixed opinions about European Union’s ability to tackle the financial crisis

Finland
Finnish Institute of International Affairs
 
The financial crisis has not hit Finland as hard as some of the other European Union members. The Finnish Government has granted loans to some other member states and has also promised to finance Finnish banks.[1] Measures taken by the Union to tackle the crisis are in general seen as good although some consider them not sufficient enough.[2]
 
Remarkable or slow and cautious?
 
The EU was criticised in October for being disintegrated in responding to the financial crisis. First, the bank deposit guarantees were increased randomly in member states, and later the financial summit between larger member states instigated further disintegration between member states.[3] Finland’s Minister of Finance, Jyrki Katainen, disapproved of the larger member states making decisions between themselves.[4] Katainen also called for a joint decision on the bank deposit guarantees.[5] The Finnish Prime Minister, Matti Vanhanen, shared Katainen’s view and demanded more coordination between the member states after the debacle with the bank deposit guarantees.[6]
 
The Finnish Financial Minister, Jyrki Katainen,[7] and the Director of the board of the Finnish Central Bank, Erkki Liikanen,[8] both found the cooperation between the European and US central banks in lowering the interest rates as “remarkable”.
 
The resuscitation package that was resolved in December’s summit was seen mostly as positive. The Head of the forecasting group of “The Research Institute of the Finnish Economy”, Pasi Sorjonen, considered the resuscitation package successful[9] and Financial Minister Katainen thought the actions might boost the EU’s internal commerce and therefore improve Finnish export.[10] In some NGOs, however, the decisions made in the December’s summit have been accused of being watered down.[11]
 
The Commissioner for enlargement, Olli Rehn, claimed that the credibility of the EU is on the line after the summit in December. Rehn hoped that the member states will take the Commission’s suggestions seriously and act on them swiftly. According to Rehn, the common currency has really shown its worth during the crisis. It has brought a lot of stability to households in the Euro area, for example, the situation in Finland is a lot better now than during the recession in 1990s. The allure of Euro has not gone unnoticed in the countries outside the Euro area either,[12] and Finland is very interested to see if Iceland will apply to the EU[13] and how Sweden’s and Denmark’s relationship with the Euro will evolve.[14] The officials in Finland consider Finland lucky to be a part of the Eurozone,[15] but the Finnish anti-EU NGO, “Vaihtoehto EU:lle” (VEU, “Alternative for the EU”), claims the countries outside the Eurozone are actually better off. In their newsletter they say that Sweden actually benefits from not belonging to the Euro area.[16]
 
Esko Antola, the director of “Centrum Balticum”, thinks that the financial crisis has in no way integrated the Union further, contrary to what the leaders of the member states keep insisting. The director of the “Helsinki Center of Economic Research”, Otto Toivanen, believes that the uncertainty caused by the crisis has paved the way for those who wish to exercise national politics.[17] Jorma Ollila, the chairman of the board of “Nokia” and vice-chair of the EU reflection group, in a speech at the 90th Anniversary of the “Finnish Chamber of Commerce”, also criticised the European Central Bank (ECB) of acting too slowly and cautiously with lowering its interest rate. He also pointed out how the situation is even more difficult with regard to fiscal policy, as no heavier instruments than coordination between the member states exist.[18] Ollila also claimed that the Finnish Government’s resuscitation actions are not sufficient.[19]
 
Finns have faith in the EU
 
As a small and open economy, Finland is very dependent on the decisions of larger countries and the ECB. For Finland, the most relevant step the ECB should take is to defend free trade by keeping the nationalist and protectionist pressures at bay. Also, a substantial lightening of monetary policy in Europe is called for.[20] The CEO of the “Research Institute of the Finnish Economy”, Sixten Korkman, puts the blame on the European Central Bank for not reacting to the financial crisis quickly enough. Korkman praises the way the US has handled the crisis in resuscitating vigorously, and says the EU has not got the institutional prerequisites for joint actions.[21] Jyrki Katainen, Minister of Finance, takes a different view. He said that the EU’s actions have proved the Union’s ability to act – even if things have not worked out in a perfectly smooth way. If the EU is compared to the US as regards to consistency and effects of the decisions made, many of those who have criticized the Union need to now rethink their views.[22] According to him, the coordinated actions of the EU member states also support the Finnish exporting sectors.[23]
 
The Finnish public has a quite positive view of the EU’s ability to pull the Union out of the slump. In a survey, 72 percent of Finnish citizens were of the opinion that the Union is able to positively influence economic stability and growth – thus placing these issues as the most commonly mentioned area of positive influence. Actually, more respondents mentioned economic stability and growth as an issue which the Union is well positioned to influence than as an issue which they themselves were concerned about.[24]
 
Jyrki Katainen agreed with the European Commissioner for Economic and Monetary Affairs, Joaquín Almunia, that the most important thing now is to improve the availability of funding. According to him, resuscitation on its own is not enough to turn the economic trend. So far, Finland has done a lot better than some of the other member states. Katainen, however, warns about false optimism, Finland is running fast into debt and Katainen stresses that this is a genuine risk.[25]
 
Rising star G20, otherwise a foggy vision
 
Though it was generally stressed that it was too early to predict what the long-term effects of the crisis will be,[26] some assessments were nevertheless made.
 
Jorma Ollila, chairman of the board at “Nokia” and vice-chair of the EU reflection group, has high hopes of the role the G20 is taking, as well as of the policies G20 recommended in its Washington meeting, such as ensuring that demand keeps production from decreasing and refraining from protectionism.[27] Erkki Liikanen, director of the board of the Finnish Central Bank, and Raimo Väyrynen, director of the “Finnish Institute of International Affairs” (FIIA), agreed about the importance of the G20 and that it will endure in the future. Väyrynen[28] emphasised that the G20 meeting may have been an indicator of future institutional and regime changes, which will take the importance of the emerging economies more into account.[29]
 
With regard to the US, opinions were more mixed. While many Finns held the opinion that the position of the US will weaken,[30] Jorma Ollila said that the US may in the end recover from the financial crisis faster than the EU. The US has two assets: a growing population and growing productivity, which give it room for manoeuvre.[31]
 
Generally, China was seen as one of those power poles which will be least harmed by the crisis. Prime Minister Matti Vanhanen pointed out that demand is increasing in rising economies in the east while dwindling elsewhere. These economies will be able to change the parameters of comparison completely over the next decades. He even felt that the global economic developments will lead states into a competition between economic models.[32] Researchers, Matti Nojonen (the Finnish Institute of International Affairs), and Mikael Mattlin (University of Helsinki), predict that the financial crisis will increase the pressure on China to take a more responsible/leading role with regard to the international financial system faster than without a financial crisis. However, China is likely to remain somewhat reluctant to accept that role.[33]
 
Foreign Minister Alexander Stubb described the combined effect of the financial and Georgian crises as one of the three major turning points during the post-Cold War era. There are developments strengthening realism and power politics and yet the situation calls for multilateralism. The world can become either more multipolar or more multilateral, depending on how we let it develop. Of these two, multilateralism would be a much more benevolent environment; hence the current existing international institutions, should be strengthened.[34]
 
With regard to the EU, commentators were clearly less eager to say anything. However, one possible future consequence became debated very lively, namely the possibility that Iceland apply for the Union membership.[35]




[1] ”Suomen pankkitukipaketille ei vielä hintaa”, Helsingin Sanomat, 14 October 2008.


[2] ”Jaakonsaari: Elvytyksessä vahva liioittelun maku”, The Finnish Social Democratic Party webpage, available at: http://www.sdp.fi/fi/ajankohtaista/?a=viewItem&itemid=1194 (last access: 29 January 2009).


[3] ”Finanssikriisi säikyttelee EU-maiden katraan hajalleen”, Helsingin Sanomat, 7 October 2008.


[4] ”Suuret EU-maat ratkoivat finanssikriisiä keskenään – pienet jäsenmaat suuttuivat”, Helsingin Sanomat, 5 October 2008.


[5] ”Euroryhmä: Talletussuoja yhtenäistyy Euroopan Unionissa”, Helsingin Sanomat, 7 October 2008.


[6] ”Britannia tarjoaa omaa malliaan Euroopalle kriisin ratkaisuksi”, Helsingin Sanomat, 10 October 2008.


[7] ”Keskuspankit pistivät kaiken peliin estääkseen täyden talouskatastrofin”, Helsingin Sanomat, 9 October 2008.


[8] Erkki Liikanen, Governor of the Bank of Finland: Presentation at FIIA seminar, 11 December 2008, Helsinki.


[9] ”Etlan Sorjonen: Aika nerokasta”, Helsingin Sanomat, 27 November 2008.


[10] ”Saksa ja Suomi kitsastelevat”, Suomen Kuvalehti, 5 December 2008.


[11] ”Talven keskellä kylmenevää”, Suomen Kuvalehti, 22 December 2008.


[12] ”EU:n uskottavuus koetuksella”, Suomen Kuvalehti, 12 December 2008.


[13] ”Islannilta voi tulla EU-hakemus jo keväällä”, Helsingin Sanomat, 26 November 2008.


[14] ”Euro houkuttelee”, Suomen Kuvalehti, 7 November 2008.


[15] ”Kriisi muovaa Euroopan unionia”, Helsingin Sanomat, 21 October 2008.


[16] ”Mediakin jo myöntää: Ruotsi hyötyy kruunustaan”, Vaihtoehto EU:lle 3-4/2008.


[17] ”Kansallinen itsekkyys nousee EU:ssa finanssikriisin myötä”, Helsingin Sanomat, 25 October 2008.


[18] Jorma Ollila, chairman of the board of “Nokia”: ”Mikä on järkevää talouspolitiikkaa syvän taantuman kynnyksellä?”, speech at the 90th Anniversary of the Finnish Chamber of Commerce, 19 November 2008, Helsinki.


[19] ”Ollila: Suomi tarvitsee voimakkaampaa elvytystä”, Helsingin Sanomat, 20 November 2008.


[20] ”Finanssikriisi: Miten maailma on muuttunut?”, newsletter, The Research Institute of the Finnish Economy (ETLA), 29 October 2008.


[21] ”Etla: Eurooppa juuttuu pitkään ja sitkeään taantumaan”, Helsingin Sanomat, 25 November 2008.


[22] Jyrki Katainen, Minister of Finance: ”Talouden ja talouspolitiikan näkymät”, speech to the Finnish Economic Association, 25 November 2008, Helsinki.


[23] Jyrki Katainen, Minister of Finance: ”Talouden ja talouspolitiikan näkymät”, speech to the Finnish Economic Association, 25 November 2008, Helsinki.


[24] Survey conducted between 1-11 January 2009 by TNS Gallup Oy on behalf of the European Parliament’s Information Office in Helsinki and MTV3, available at: http://www.europarl.fi/ressource/static/files/dokumenttipankki/EU-2009-R... (last access: 10 March 2009).


[25] ”Rajusta velkaantumisesta tuli EU-maiden uusin pelko”, Helsingin Sanomat, 21 January 2009.


[26] See e.g. Jyrki Katainen, Minister of Finance: ”Talouden ja talouspolitiikan näkymät”, speech to the Finnish Economic Association, 25 November 2008, available at: http://www.vm.fi/vm/fi/03_tiedotteet_ja_puheet/02_puheet/20081126Taloud/... (last access: 30 January 2009).


[27] Jorma Ollila, chairman of the board of “Nokia”: ”Mikä on järkevää talouspolitiikkaa syvän taantuman kynnyksellä?”, speech at the 90th Anniversary of the Finnish Chamber of Commerce, 19 November 2008, available at: http://www.kokoomus.fi/jyrkin_sivut/paivakirja/?x206056=209800 (last access: 30 January 2009).


[28] Erkki Liikanen, governor of the Bank of Finland: presentation at FIIA seminar “Obaman valinnat”, 11 December 2008.


[29] Raimo Väyrynen, reseracher: Speech at FIIA seminar “Obaman valinnat”, 11 December 2008.


[30] See e.g. Matti Nojonen/Mikael Mattlin, reserachers: ”Kiinalle kasautuu yhä suurempi vastuu maailman vakaudesta”, Helsingin Sanomat, 13 November 2008.


[31] Jorma Ollila, chairman of the board of “Nokia”: ”Mikä on järkevää talouspolitiikkaa syvän taantuman kynnyksellä?”, speech at the 90th Anniversary of the Finnish Chamber of Commerce, 19 November 2008, available at: http://www.kokoomus.fi/jyrkin_sivut/paivakirja/?x206056=209800 (last access: 30 January 2009).


[32] Matti Vanhanen, Prime Minister: Speech at a Nordic summit, Helsinki, 28 October 2008, available at: http://www.vnk.fi/ajankohtaista/puheet/puhe/fi.jsp?oid=242699 (last access: 30 January 2009).


[33] See e.g. Matti Nojonen/Mikael Mattlin, reserachers: ”Kiinalle kasautuu yhä suurempi vastuu maailman vakaudesta”, Helsingin Sanomat, 13 November 2008.


[34] Alexander Stubb, Minister for Foreign Affairs: Speech at the FIIA seminar ”Europe’s Declining Power? Assessing the EU’s perfomance at the United Nations”, 16 December 2008; Alexander Stubb, Minister for Foreign Affairs: Opening speech at the Annual Meeting of Heads of Missions, 25 August 2008, available at: http://www.formin.fi/public/default.aspx?contentid=135322&nodeid=15149&c... (last access: 27 January 2009).


[35] ”Islannilta voi tulla EU-hakemus jo keväällä”, Helsingin Sanomat, 26 November 2008.