The Finish economy has contracted quite significantly over the last three years – a trend that started with the 2008 financial crisis. The country’s export competitiveness has fallen 20% compared to the average of the Euro area. Despite so – Finish labour market has seen steady wage increases form a rigid system where every sector gets the same regardless of their productivity level or economic strength.
One of the most successful Euro area finance ministers – the former Swedish finance minister Anders Borg – was last year commissioned by the Finish government to research and make recommendations to what Finland needs to do. He delivered his report this week and has addressed the following measures as crucial:
1. Wages need to be re-figured in a way that makes Finland more competitive in the long term. Critical in this respect is that salary increases are set from business sectors’ competitiveness and not for the business community as a whole.
2. More workforce is needed – through work-related immigration – securing a better funding of the Finish welfare system in the future.
3. Productivity must be increased through much more emphasis on structural reforms.
The report concludes that it will take minimum a decade to restore Finland’s competitiveness.
Finland has general elections coming up this year the economy and immigration is set to be high on the political agenda.
The comparison to Greece might not be justified but there are similarities found to the points that the workforce has been better paid and the social welfare system has been too generous throughout the years when the country could not afford either.