Finland

HEAD-EMU

Country Analysis

Finland


 

The probability of Finland joining EMU by the start date remains questionable. Finland is the perhaps the most enthusiastic European nation when it comes to EMU of all the Scandinavian nations. Finland joined the Exchange Rate Mechanism in October 1996 thus removing all remaining economic obstacles to early membership of EMU. Economic and fiscal conditions within Finland certainly meet the qualifications for membership from the beginning. The economy continues to post impressive growth with somewhat of a boom atmosphere. 1997 GDP growth may reach the 3.5% level up from 2.6% in 1996. The dark cloud in Finland remains its high unemployment and it is this issue, which poses the greatest resistance towards joining EMU particularly if Sweden does not meet the criteria.Sweden and Finland are closely connected economics much like Spain and Portugal. Both economies are similarly structured industrially and tend to often compete in the same world markets with similar goods. Nevertheless, there is a growing voice of decent within the political circles. The current government certainly favors 1999 EMU membership, but the anti-EMU Centre Party has been quite strong in recent elections. This reflects a distinct growing sense of mistrust about the entire European project for monetary unification. Therefore, even if the current government decides to join the single currency, such a decision must be ratified by parliament and not by referendum. Still, politically there is little chance of a change in government prior to elections in 1999.

 


1995 1996e 1997f
ERM Member N Y Y
Inflation 1.0 0.6 1.3
Budget Deficit / GDP 5.2 3.3 1.2
Debt / GDP 59.2 61.3 61.0
10Y Bond Yields 8.8 7.0 6.5
f=forecast e=estimate

 

© Princeton Economic Institute

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