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10 Aug 2012 12:39
Nokialand: The cellphone-maker used to be a symbol of modern Finland. (Markku Ulander, AFP)
Finland should be feeling on top of the world. Twenty years after a desperate banking crisis sparked a deep recession, this most northerly member of the eurozone was this week hailed as an example to follow by Mario Monti, Italy's prime minister.
The country punches above its weight in negotiations over bailouts for weaker members of the currency union, demanding special collateral deals in return for Finnish approval.
It stands distinctively in the eurozone, having the best Moody's credit rating – the only one worthy of AAA – with a stable outlook.
Vesa Puttonen, a professor at Aalto University in Helsinki, regards the rating agency's praise as a distinctly mixed blessing and compares Finland to a star performer in a failing school. "We're the model pupil in the classroom, but the class is doing really badly," he said, pointing out that Finland's current account was now in deficit for the first time since the dark days of the early 1990s and it was lagging behind Sweden, the big brother over the border who kept out of the euro, on several other measures too.
"Some of the economic fundamentals are going south," said Puttonen, warning that the Moody's blessing could be a curse if it prevented the Finnish public from thinking about pressing issues such as whether to raise the retirement age. "We lack a sense of urgency in Finland to deal with our problems."
Finland has not always taken a harmonious approach to the eurozone since the crisis began. Demands for collateral – protection against Finnish losses if a bailout failed – were an extra hurdle during the talks over Greece's second aid deal, although Moody's applauded the policy.
And the eurosceptic True Finns party has generated noise by fuelling speculation that the country could look for an exit door from the euro.
For Finns, though, the tough stance simply reflects disappointment that many members of the currency union it joined enthusiastically in 1999 have proved somewhat fickle. As the country's prime minister, Jyrki Katainen, put it this week, for Finns rules are rules, not a starting point for "creative interpretation".
Puttonen agreed. "We are honest, contract-trusting people. That's good, but it easily happens that we can be cheated by other people who do things differently."
And the repeated talk of "lazy southern Europeans" is beginning to grate. "We feel we are in the wrong club – and we are," Puttonen said.
Visitors to Helsinki were treated to a dose of decent summer weather this week. But at Kauppatori, the market square on the eastern edge of the capital, there were signs that the euro crisis storm clouds were casting a shadow.
Cost of bailouts
"We've been here 20 years and business is the worst it's ever been," said Iiri Rapp, standing behind a stall selling rugs, baseball caps, fluffy toys, flags and T-shirts to tourists. Rapp said Italians and Parisians, traditionally her best customers, had all but vanished. She blamed the euro crisis and was pinning her hopes for prosperity on things spinning out of control. "We're hoping they blow up the whole euro," Rapp said. However, she did not believe Finland should just go it alone.
Kauppatori is next to Helsinki's South Harbour, where barges carrying holidaymakers nip around much larger ferries going overseas. Across the square, Hannu Leskinen, another stallholder, argued that Finland had to remain in the euro because of its small size.
"People are very angry about the cost of the bailouts. But there's no point in stopping being a member, even though Italy may be next," Leskinen said.
Finland won independence only in 1917 after 100 years under the Russian thumb; for 500 years before that it was a Swedish territory. Its bigger neighbours have dominated it during much of its history – it fought the Soviet Union (twice) and Germany during World War II.
As Jan von Gerich, a global fixed-income strategist for Nordea, a financial services group, pointed out, Finland's commitment to doing the right thing meant it was the only country to meet its reparations bill after the war.
"We obey treaties. That is part of our culture," he said.
After tiptoeing around Russian sensibilities during the Cold War, taking a neutral position on key issues, Finland was plunged into deep recession once the Soviet system collapsed.
It slashed spending and, devaluing its currency, Finland returned to growth and was admitted to the European Union in 1995, the year it also enjoyed one of its greatest sporting triumphs, beating Sweden in the final of the ice hockey world championships in Stockholm (imagine England winning the football World Cup for the first time in a German stadium).
Over the past 15 years cellphone company Nokia has come to symbolise the power of modern Finland. But domestic pride has taken a knock recently following Nokia hitting trouble; last week came the announcement that the firm's last remaining Finnish factory would close.
"We used to think of ourselves as Nokialand. But now Nokia is struggling and we're not so proud of Nokia, after all," said Puttonen.
Von Gerich said Finland needed to develop new businesses to fill the hole that Nokia and the decline of traditional industries such as timber had left.
"People are desperately looking for new successes like Nokia, but I believe we need several small successes rather than one huge one."
Despite these problems, daily life in Helsinki appears very agreeable. In a central square that would be perfect for mass daily protests if relocated to Athens, a Latvian R&B band called Cehols was attracting a decent crowd, respectable tips and CD sales.
The lead singer said the group had come over from Riga and appreciated being funded in euros after "40kg" of loose change during a trip to Stockholm proved hard to deal with.
The group also had little time for talk of the euro crisis. "We're artists; we don't worry about that," said the drummer.
Over at Hotel Kamp, just a few well-drilled puck shots away, crowds swarmed this week for a glimpse of Bruce Springsteen, who was in town for a concert. One tourist, who had travelled almost 400km from the town of Kuopio to visit Helsinki, said she was starting to fret about the eurozone but was convinced Finland should remain in it. "I am a little bit worried, because now so many countries are in little crises."
But mention the words "eurozone crisis" to other Finns and you could be rewarded with little more than a confused, albeit friendly, smile. Von Gerich believed there was no chance of Finland leaving the eurozone in the short term, but said vocal criticism of the single currency would increase. "We might reach the point soon where an opposition party calls for Finland to leave the euro. It will get livelier."
For Elina, a 20-year-old waiter, keeping the coffee and croissants flowing at Kauppatori was a more pressing concern than fretting about the euro. She admitted, though, that some of her friends were a little worried about the situation and with reason. Although Finland is one of the few eurozone countries that have managed to drag its youth unemployment rate down recently, more than 17% of under-25s are still officially out of work.
Stroll through Helsinki and you can find some of those young people pounding the streets. Running has long been a passion thanks to Flying Finns such as Paavo Nurmi, winner of nine Olympic gold metals in the 1920s.
Nurmi's legacy and the Helsinki Games of 1952 remain an inspiration here, even if Finland's euro adventure is a more painful journey than imagined 13 years ago. – © Guardian News & Media 2012
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