Category Archives: Finland

(HT) Finnish Parliament approves terminating tax treaty with Portugal


“We must put an end to this grotesqueness,” Jari Myllykoski (Left Alliance) stated in voicing his approval for terminating the much-criticised tax treaty between Finland and Portugal.
“We must put an end to this grotesqueness,” Jari Myllykoski (Left Alliance) stated in voicing his approval for terminating the much-criticised tax treaty between Finland and Portugal.


The Finnish Parliament on Wednesday approved the termination of the tax agreement between Finland and Portugal.

The much-criticised agreement has effectively allowed Finnish pensioners to cash out their private-sector pensions tax free in Portugal, making the country a popular retirement destination for well-off pensioners.

“Finland has had it up to here with this issue,” Olavi Ala-Nissilä (Centre) stated in the Session Hall on Wednesday. “The main objective of both the government and the legislative proposal is that Finland will terminate the tax agreement, putting an end to the tax exemptions of certain well-off pensioners [living in Portugal].”

The Parliament’s Finance Committee has previously expressed its unanimous support for the proposal in spite of the fact that terminating such an agreement unilaterally would be somewhat exceptional.

Esko Kiviranta (Centre), the chairperson of the Parliament’s Tax Sub-committee, voiced his hope that the two countries will be able to ratify a new tax agreement by 1 January 2019.

“That way we at least wouldn’t end up in a situation where there’s no tax agreement between Finland and Portugal. This is still possible, if Portugal completes the approval process and notifies Finland of it no later than on 1 December 2018,” he said.

Finland and Portugal signed a new tax agreement in 2016, but the agreement has yet to even be submitted to the Portuguese Parliament.

Kiviranta also pointed out that the question is one of principle rather than money.

“The termination’s impact on pension revenues, which is where the impact would be the most notable, is estimated to be three to six million euros annually based on data from 2016. So it’s not that it’s a question of huge sums of money but rather of principles,” he explained.

The government’s legislative proposal has also been welcomed by opposition parties.

“We must put an end to this grotesqueness, unless of course we reach a solution through negotiations. I think that the memo that has been drafted based on the government’s proposal has been drafted outright excellently,” lauded Jari Myllykoski (Left Alliance).

“Also the Finns Party supports this proposal and is delighted that the government has for a change shown a little backbone when it comes to tax questions,” added Ville Taivio (PS).

+++ (BBG) $38 Billion Finnish Fund Moves Assets to U.S. as Europe Founders


One of the Nordic region’s biggest asset managers is adjusting its portfolio to reflect a lack of confidence in Europe and a growing faith in the prospects of a U.S. boom.

Ilmarinen, a Finnish pension fund that oversees about 36 billion euros ($38 billion) in assets, plans to adjust its investments so it’s no longer underweight the U.S., according to Timo Ritakallio, its chief executive officer.

The reallocation primarily affects “fixed-income instruments and real assets. Also equities, but to a lesser degree. But overall, the weighting toward U.S. assets will increase,” Ritakallio said in an interview in Helsinki. “We’re monitoring the geographic dynamic and are putting more focus on the U.S. market, and moving away from the euro zone.”

Europe Votes

Investors are starting to lose their nerve as Europe embarks on a series of elections that risk being shaped by voter anger after years of austerity, and on the back of a migrant crisis fed by the war in Syria.

While Austrian voters refused to give power to a populist, a weekend plebiscite in one of the euro zone’s biggest economies has rocked the region. Italian Prime Minister Matteo Renzi quit in the early hours of Monday after losing a referendum he’d called to push through constitutional changes. The outcome threatens to trigger a new wave of political and financial chaos for Europe.

In Europe, the issue is the “very poor outlook for the whole economy, because this 1-1.5% growth rate will continue for a long time,” Ritakallio said. “It has a very negative impact.”

In contrast, Ritakallio expects the dollar to continue appreciating next year, if the economic plans of President-elect Donald Trump pan out. The reality TV star has talked of a spending spree that has the potential to put American growth into turbo mode after years of Democratic measures generated GDP rates in excess of 2 percent and brought unemployment below 5 percent. All in all, Trump’s policies spell both faster inflation and greater instability, short term, Ritakallio said.

Hedge Funds

Pension funds like Ilmarinen are growing desperate for returns after years of ultra-low interest rates. Given the environment, outsourcing investment decisions to hedge funds is considerably less appealing than it once was, Ritakallio said.

“It’s more and more important to look at the cost level of different investment instruments,” he said. “Specifically, I mean very expensive asset managers like hedge funds. We only have 2 percent of our total assets in hedge funds.”

“In my view, the hedge fund industry probably will struggle next year again because their current cost structure is too high, from an investor’s point of view, given the low-return environment,” Ritakallio said.

(Reuters) EU soft touch on Portugal deficit risks credibility – Finnish FinMin

(Reuters) Portugal has got off too easy for not reducing its budget deficit, and the European Union’s soft line poses a risk to its credibility, Finland’s new finance minister Petteri Orpo said in an interview.

With signs of euro scepticism growing in the bloc, Spain and Portugal in July escaped being fined by the European Union for not reducing their budget gaps to below 3 percent of their gross domestic product.

“Spain does not have a government in place, so action against Spain with no responsible administration would not perhaps be very wise,” Orpo, who replaced Alexander Stubb as the finance minister in June, told Reuters in his office.

“But regarding Portugal, they do have a government, so I think it would be necessary, according to the growth and stability pact, to demand measures that will balance public finances.”

He said a suitable sanction could be to withhold money from the EU’s structural funds until sufficient reforms are under way.

“If there is no sanction at all, we will lose the credibility of the monetary union.”

Finland itself is struggling to get back to economic growth after a long period of stagnation, and the EU last year warned Helsinki about its rising debt and budget deficits.

“There must be some principles to hold on to, regardless of the fact that we are on the same path ourselves,” Orpo noted.

He said the Nordic country, known for its stiff opposition to bailouts during the euro zone debt crisis, must practice as it preaches and curb public debt growth along with the government’s 10 billion euro long-term savings plan.

Orpo, returning from his first European finance ministers’ meeting in Bratislava, also said he opposed proposed new fiscal stabilization tools for the monetary union.

“This is not the time to invent new tools which will surely face opposition in the member countries.”

(Reuters) Militarily neutral Finland in talks with U.S. on closer defense collaboration; minister

(Reuters) Finland, which has a long land border with Russia and maintained strict neutrality through the Cold War, is negotiating a defense collaboration agreement with the United States and aims to sign it this autumn, its defense minister said on Monday.

Jussi Niinisto told Reuters the framework agreement, coming at a time when Nordic states have complained of increased Russian military activity in the region, would not contain the obligations for military assistance that membership of the NATO alliance would involve.

“It would cover areas where we already work together, like military training, information sharing and research,” he said by telephone.

Finland, which has a border with Russia more than 1,300 kilometers (800 miles) long, joined a NATO summit dinner in July for the first time in a show of common purpose.

But Helsinki is aware any move to membership of the alliance would anger Moscow. Russian President Vladimir Putin has hinted he would move troops closer to Finland’s border if it joined.

Niinisto said Finland, long a part of the Russian empire, sought to sign the deal before the US administration changed as a result of November elections.

“It’s one of the reasons to have it done this autumn. But I’m certain we will continue to work together with either one of main candidates winning,” Niinisto said.

Concern about Russian military activity has grown especially in Finland, Sweden and the three former Soviet Baltic republics – Lithuania, Estonia and Latvia – since Russian forces occupied and then annexed the Ukrainian Crimea in 2014.

Russia denies it poses any threat to the Nordic countries and accuses the West of expansionist ambitions.

Finland maintained neutrality during the Cold war, allying itself neither to the Soviet dominated Warsaw Pact alliance nor NATO; nor did it join other Western blocs such as the EU

Sweden signed a similar collaboration agreement with the United States in June, and its parliament in May granted NATO more access to the neutral country for training exercises.

The Finnish government said in its recent defense policy review that it would monitor the security situation in the Baltic Sea region and maintain the option to join NATO.

+++ V.I. (BBG) Brexit Drama Scares Off Biggest Nordic Private Equity Fund EQT

(BBG) EQT Partners AB, the biggest private equity fund in the Nordic region, says it’s steering clear of Britain as the country prepares to hold a vote on its European Union membership.

“Our industry hates uncertainty and we haven’t opened a fund there since the vote was announced,” Thomas von Koch, EQT’s managing partner, said in an interview on Monday at the firm’s Stockholm headquarters. “The U.K. is on ice for us.”

Thomas von Koch.
Thomas von Koch.
Photographer: Ruth Corke/EQT

Though most polls indicate the U.K. will probably stay in the EU after the June 23 vote, EQT is preparing for the worst, von Koch said. The fund doesn’t have any equity investments in Britain, but owns debt from U.K. companies through its credit fund, the 50-year-old managing partner said.

The threat of a so-called Brexit is already prompting some companies to shelve initial public offerings that would have targeted London. Both the International Monetary Fund and the Organization for Economic Cooperation and Development have warned Britain against leaving the EU amid concern an exit would cause financial shocks beyond the U.K.

Bloomberg’s latest poll of polls shows the “leave” camp at about 41 percent, compared with 48 percent for “remain,” but calculates an 82 percent probability the U.K. will still be an EU member after the June referendum.

Should Britons defy the polls and vote to leave, it’s worth noting that Ireland would suddenly become the last English-speaking country in the EU, von Koch said. Luxembourg would also stand to benefit, he said.

“I think the Irish and the Luxembourg people have the champagne cooling. They are clearly the winners,” von Koch said. “I sincerely believe it would be a very stupid decision for the Brits, because it’s going to hurt.”

Investors face a universe in which two — once unthinkable — events may become reality. One is Brexit, the other is a President Donald Trump, von Koch said. An ABC News/Washington Post poll published on Monday showed Trump getting 46 percent support, compared with 43 percent who would back Hillary Clinton.

“People are sitting on the bench, waiting to see if Brexit happens and Trump becomes president,” von Koch said. “It’s an interesting world that causes lots of uncertainty.”

The U.K. government issued its starkest warning yet about the dangers of a vote to leave the EU in next month’s referendum, saying it risks causing a yearlong recession, sparking a decline in the pound and costing the loss of about half a million jobs. The pound is already down about 5 percent against the euro this year.

Leaving behind the “noise” of the Brexit vote and the possibility of a Trump presidency, the underlying strength of Europe is “underestimated,” von Koch said. He held up France, Italy and Spain as countries that investors would do well to look at more closely.

EQT has raised about 29 billion euros ($32.5 billion) in capital spread over 18 funds since being founded in 1994. EQT invests in equity, infrastructure and credit. It is expected to soon start a technology growth fund to broaden its appeal to investors.

(EurActiv) Le parlement finlandais débat d’une sortie de l’euro

(EurActiv) Le 28 avril, les députés finlandais ont discuté d’une sortie de l’euro, un débat déclenché par une pétition signée par 53 000 citoyens.

Ce débat initié par une pétition, procédure peu usitée, illustre le mécontentement croissant de la population face aux difficultés économiques rencontrées par le pays, frappé par un fort taux de chômage et une politique gouvernementale d’austérité.

L’initiative populaire réclame également un référendum sur l’appartenance à l’euro, mais une telle consultation ne peut avoir lieu que si la Diète donne son accord, ce qui paraît très improbable. La pétition va être présentée à une commission parlementaire et devra passer plusieurs étapes avant un vote de l’assemblée en séance plénière.

Indépendance de la politique monétaire

La pétition a été lancée par l’eurodéputé Paavo Väyrynen, huit fois ministre, qui agit en franc-tireur dans cette affaire. Aucun parti finlandais ne propose en effet de renoncer à la monnaie unique européenne, mais les députés eurosceptiques déplorent le manque d’indépendance de la politique monétaire et estiment que la Finlande aurait dû organiser un référendum avant d’adopter l’euro en 1998. C’est ce qu’on fait la Suède et le Danemark, qui ont voté contre l’euro quelques années plus tard.

« L’euro est très bon marché pour l’Allemagne et trop cher pour le reste de l’Europe, il ne remplit pas les critères d’une union monétaire optimale », a déclaré Simon Elo, député du parti eurosceptique des Vrais Finlandais.

L’économie finlandaise a crû de 0,5% l’an dernier après trois années de contraction. Cette stagnation s’explique par de nombreux problèmes, dont un coût du travail élevé, le déclin du groupe de téléphonie Nokia et la récession en Russie.

Avant 1992, la Finlande avait plusieurs fois dévalué sa monnaie, le mark finlandais, pour améliorer sa compétitivité à l’exportation, un outil qu’il ne peut plus utiliser avec l’euro.

Echec de la dévaluation interne

Depuis son arrivée au pouvoir en mai 2015, le gouvernement de droite, pro-austérité, essaie d’appliquer les recettes de la dévaluation interne (rigueur salariale et budgétaire), sans grand succès jusqu’ici.

Le gouvernement d’Helsinki reste officiellement attaché à l’euro et le ministre des Finances, Alexander Stubb, a déclaré au Parlement qu’une sortie de l’euro aurait plus de conséquences négatives que d’avantages.

+++ (JN) Finlândia discute permanência na Zona Euro nas próximas semanas

(JNO Parlamento finlandês vai discutir nas próximas semanas se o país deve ou não sair da Zona Euro. Em causa está a insatisfação sobre o desempenho económico do país de um grupo que fez uma petição ao Parlamento.

Escreve a Reuters esta quinta-feira, 10 de Março, que o Parlamento finlandês vai debater nas próximas semanas a permanência do país na Zona Euro. A iniciativa é fruto de uma petição com mais de 53 mil assinaturas e que exige um referendo sobre esta matéria.

Segundo a agência, é pouco provável que a iniciativa conduza o país à saída da Zona Euro – uma vez que um Eurobarómeto de Novembro revela que 64% dos finlandeses é favorável à moeda única -, mas reflecte a insatisfação face ao desempenho económico do país.

“Ainda não decidimos a data, mas um debate preliminar deverá ter lugar na sessão plenária [do Parlamento] nas próximas semanas”, adiantou Johanna Sarhimaa, secretária parlamentar, citada pela Reuters.

A economia finlandesa cresceu apenas 0,4% no ano passado, depois de três anos de contracção, com a economia a ser penalizada pelos custos do trabalho, pelo declínio da tecnológica Nokia e a pela recessão russa.

O governo de centro-direita está a trabalhar no sentido de equilibrar as finanças públicas e melhor a competitividade das exportações através de uma desvalorização interna, o que resulta no corte de benefícios dos trabalhadores.

Paavo Vayrynen, membro do Parlamento Europeu e autor desta petição, comparou o desempenho do país ao de países vizinhos que não integram a Zona Euro, como a Suécia, e que cresceram a um ritmo superior nos últimos anos.

“Devemos revitalizar a nossa economia saindo da Zona Euro e recuperando a nossa moeda, com uma taxa de câmbio que flutue livremente. Isto vai restaurar a nossa competitividade”, acredita o responsável, citado pela Reuters. “Se o Parlamento apoiar esta petição, eu instaria o governo legislar no sentido de convocar um referendo”, acrescentou.

(JN) Primeiro-ministro da Finlândia já não vai dar abrigo a refugiados

(JN – click to see) O primeiro-ministro da Finlândia, Juha Sipila, recuou na promessa de acolher refugiados na sua casa de campo por razões de segurança, anunciou esta terça-feira um responsável da segurança do governo.

“O primeiro-ministro decidiu que, nesta fase, ninguém será colocado na sua residência de Kempele, disse à agência France Presse o chefe da segurança governamental, Jari Ylitalo.

O primeiro-ministro, um antigo empresário que dirige o governo desde maio, prometeu em setembro, numa intervenção na televisão estatal, receber refugiados na sua casa de campo, em Kempele, cerca de 500 quilómetros a norte de Helsínquia.

Sipila afirmou na altura esperar que o gesto desse origem “a algum tipo de movimento popular que inspire muitos outros a partilhar o fardo desta crise de alojamento de refugiados”.

A Finlândia recebeu em 2015 um número recorde de refugiados, 32.000, sobretudo do Iraque.

A oferta de Sipila foi criticada por alguns setores como uma forma de atrair ainda mais migrantes para o país, mas, segundo Ylitali, o recuo baseia-se numa “avaliação de segurança”.

“Uma das principais razões foi o local ter-se tornado tão público e o assunto ter suscitado tanta atenção. Quais eram as hipóteses de uma família se mudar para lá e começar uma vida nova em paz?”, questionou o responsável.

+++ (BBG) The New Sick Man of Europe Has an AAA Credit Rating

(BBG – click to see) A chronically depressed economy, rising unemployment and an aversion to free-market reforms. Sound like a familiar European tale?

But it’s not Greece, Spain or Portugal. It’s Finland.

As the indebted and ailing countries in the euro region’s southern rim struggle out of their six-year crisis, some with more success than others, Finland is succumbing to its own.

Its economy, which has contracted every year since 2012, was the worst performer in the common-currency area in the first three quarters of 2015, according to Eurostat data. Its deficit is relatively higher than Italy’s, despite being ranked fourth in the European Union in terms of how much taxes and social charges it demands from its citizens, and its unemployment rate exceeds those of its Nordic neighbors.

Finance Minister Alexander Stubb has started referring to his country as the latest “sick man of Europe.”

“Finland has become an economy that runs on a deficit” and is “10 to 15 percent behind Sweden or Germany” in terms of competitiveness, Economy Minister Olli Rehn said in an interview this month. “That is why we must adjust.”

Declining orders from neighboring Russia, a weakening of the local paper industry and the collapse of Nokia Oyj’s consumer-electronics business have combined to undermine what was once one of Western Europe’s strongest economies.

Angry Birds

In 2008, Nokia’s share of the smartphone market topped 40 percent, paper exports were 22 percent higher, Rovio Entertainment Oy was laying the foundation for its successful Angry Birds video game and Finland was seen as a model in withstanding the global credit crunch.

Greece, Spain, Portugal and Ireland, on the other hand, were a year away from a crisis that required three bailouts totaling 581.5 billion euros ($630 billion) and dozens of all-night gatherings of officials in Brussels.

The World Economic Forum said in a recent survey that Finland has slipped from fourth to eighth place in global competitiveness. The country’s wage-bargaining system is the most centralized among 140 countries surveyed. Fixing that requires profound and rapid change, the government argues. The alternative is a slide into a “southern European-style” quagmire of weak growth and low employment, Rehn says.

Helge Pedersen, chief Copenhagen economist at Scandinavia’s biggest bank, Nordea, says Finland’s status as “one of the poorest performing countries of the euro area” is compounded by an aging population and a particularly tough stance on immigration. With baby boomers now beginning to exit the labor market, “the sand is rapidly flowing down Finland’s hourglass.”

To be sure, Finland isn’t about to need the kind of international bailouts that characterized the debt crisis. Nor are the measures Prime Minister Juha Sipila is proposing as draconian as what the southern countries went through.

Rehn said Finland’s adjustments will amount to “about 0.5 percent of GDP per year.” Portugal’s recovery, by contrast, required tax hikes and cuts worth “2.5 percent of GDP per year, while in Ireland the level was about 1.5 to 2 percent,” he said.

Niku Maattanen of the Research Institute of the Finnish Economy points out that while Finland’s ailment is declining productivity, Portugal, Spain and Greece suffered primarily from debt-driven growth.

“We are not on the brink of collapse in the sense of becoming dependent on how international investors see us,” Maattanen said.

Finland is one of the few euro-region countries that still get an AAA rating from Moody’s Investors Service and Fitch Ratings, though Standard & Poor’s took away the top grade in October 2014. At about 60 percent of gross domestic product, Finland’s public debt is less than half that of Portugal’s.

And yet, some analogies do hold.

Like its southern European partners, Finland is being asked to take on traditionally powerful trade unions as it attempts to boost competitiveness. Government plans to reduce social spending, cut the number of holidays and make it more expensive for workers to take sick leave have been met with strikes and protests.

Polarizing Risk

Antti Palola, head of the white-collar STTK, the country’s second-largest union, says there is a risk that Finland will turn into a “polarized” society where “those with permanent jobs are well off” and the rest are excluded from working life. Similarly, Lauri Lyly, head of Finland’s biggest trade union, SAK, says his organization will do what it can to “get rid of these initiatives,” which “affect people in an unfair way.”

The government is expected to push its pro-competition measures through parliament by June. While Sipila’s confrontational style has rubbed the unions the wrong way and his popularity is sliding in the polls, his coalition holds 123 of parliament’s 199 voting seats.

The leaders of Spain, Portugal, Ireland and Greece (twice) were thrown out of office as voters protested austerity. With national elections three years away, Sipila needs his reforms to work in time to avoid that fate.

(BBG) Finland Should Never Have Joined Euro, Foreign Minister Says

(BBG – click to see) Finland should never have signed up to the single currency union, according to its foreign minister.

With the northernmost euro member now set to become the bloc’s weakest economy, the question of currency regime continues to resurface as Finland looks for explanations for its lost competitiveness. Timo Soini, who is also the leader of one of three members of the ruling coalition, the anti-immigration The Finns party, says the country could have resorted to devaluations had it not been for its euro membership.

The comments come as a former foreign minister gathers signatures in an effort to force the government to hold a referendum on euro membership. While polls still show most Finns don’t want to go through the process of exiting the currency bloc, there are signs that a plurality of voters think they would be better off outside the euro.

Debate on the subject “will gather steam,” Soini, who rose to power on a platform of euro-skepticism, said in Helsinki on Tuesday. But he also warned that a referendum “wouldn’t provide solutions,” here and now, to Finland’s economic woes. “The fact is that Finland is a member of the euro area.”

The country has seen its economy sink following the decline of a consumer electronics business once led by Nokia Oyj and a faltering paper industry, with political efforts to create new growth motors so far failing.

Without the option of currency devaluation, the government has calculated that Finland needs to lower its labor costs as much as 15 percent to catch up with its main trade partners, Sweden and Germany. Finland’s economy has shrunk for the past three years and Nordea, the biggest Nordic bank, predicts further contraction in 2015. Finland will be the weakest EU economy by 2017, when it will grow at less than half the pace of Greece, according to the European Commission.

Some Finnish policy makers regret having joined the euro area.
Some Finnish policy makers regret having joined the euro area.

Soini also lashed out at the EU for failing to secure the region’s borders as millions of Middle Eastern asylum seekers try to find refuge in Europe. The so-called Schengen area for passport-free travel is at risk as a consequence, he said.

“Schengen will probably not be declared dead, but it probably won’t be followed anymore,” Soini said. He also warned that most refugees seeking asylum in Finland probably won’t meet the country’s criteria to be allowed to stay.

“If the influx of illegal asylum seekers isn’t brought under control in Greece, or in other countries, that will cause national states to take matters into their own hands,” he said.

(Reuters) Finnish parliament will debate next year leaving euro zone

(Reuters – click to see) Finland’s parliament will debate next year whether to quit the euro, a senior parliamentary official said on Monday, in a move unlikely to end membership of the single currency but which highlights Finns’ dissatisfaction with their country’s economic performance.

The decision follows a citizens’ petition which has raised the necessary 50,000 signatures under Finnish rules to force such a debate, probably the first such initiative in any country of the 19-member euro zone.

“There will be signature checks early next year and a parliamentary debate will be held in the following months,” said Maija-Leena Paavola, who helps guide legislation through parliament.

The petition – which will continue to gather signatures until mid-January – demands a referendum on euro membership, but this would only go ahead if parliament backed the idea.

Despite the initiative, a Eurobarometer poll this month showed 64 percent of Finns backed the common currency, though that is down from 69 percent a year ago.

But the Nordic country has suffered three years of economic contraction and is currently performing worse than any other country in the euro zone.

Some Finns say the country’s prospects would improve if it returned to the markka currency and regained the ability to set its own interest rates, pointing to the example of neighboring Sweden, which is outside the euro. The markka could then devalue against the euro, making Finnish exports less expensive.

“Since 2008 the Swedish economy has grown by 8 percent, while ours has shrunk by 6 percent,” said Paavo Vayrynen, a Finnish member of the European Parliament who launched the initiative.

“Now is a good time to have a wider debate whether we should continue in the eurozone or not,” said Vayrynen, a veteran lawmaker from the co-ruling Centre Party who is known for his opposition to greater European integration.


The center-right government is struggling to balance public finances and improve export competitiveness through “internal devaluation”, including cuts to workers’ holidays and other benefits, amid opposition from unions.

Before 1992, Finland devaluated its markka currency time and again to improve export competitiveness.

Finland remains officially to eurozone membership.

“Finland is committed as a member of Economic and Monetary Union to promote the stability of the euro area,” the governing coalition says in its government program.

However, some economists support the idea of ‘Fixit’.

A recent report by EuroThinkTank of Finland, a group critical of the euro, put the one-off cost of returning to a floating markka currency at as much as 20 billion euros, but said the move would make sense in the longer run.

“The exit would not be easy, but it must be viewed from the point of view of how it would help gross domestic product to grow,” said Vesa Kanniainen, a professor of economics at Helsinki University and a member of the group.

(FT) Finland faces biggest strike in decades over tough reforms

(FT) Finland is facing its biggest strike in decades as the fight between the unions and a government aiming to drag the Nordic country out of recession through tough reforms, heats up.

Unions representing more than 2.2m people — in a country of 5.5m — will strike on Friday in protest over government proposals to abolish two public holidays while reducing pay for overtime and Sunday working.


++ (BBG) The Untimely Death of Finland’s Economic Growth Hits Bond Market

(BBG) Investors looking at Europe’s southern periphery for signs of the next blow up in the euro region might do well to turn the map upside down.

Finland, the northernmost euro member and among the harshest critics of Greece, is emerging as another weak link. Its economy is one of the region’s worst performers, in part because of its failure to build a competitive labor market, and investors are beginning to shy away from a country that produced companies like Nokia Oyj and UPM-Kymmene Oyj.

Demand in a 3 billion-euro ($3.4 billion) 10-year benchmark bond sale last month was “disappointing,” according to Nordea Bank AB. Finland’s economy is set to contract for a fourth consecutive year, the government forecasts, prompting Nordea analyst Jan von Gerich to write last week “Oh my God, they’ve killed all the growth!”

“The fact that Finland is set to remain one of the laggards in the euro area as far as economic performance is concerned will probably gradually hit Finnish bonds much more than the impact seen so far,” said von Gerich. “The outlook for Finnish bonds is not positive.”

Finland was seen as haven during worst of euro region’s debt crisis and about 90 percent of its bonds are held by foreign investors.

The difference, or spread, between Finland’s 10-year benchmark government bond and German securities of a similar maturity has widened to 29 basis points from a single basis point six months ago. The yield on Finland’s 10-year bond has risen to 0.96 percent from 0.22 percent in March.

Von Gerich at Nordea, the largest bank in the Nordic region, said the gap could head toward the level of France, whose bonds trade at 44 basis points more than those of Germany, even with the protection of the European Central Bank’s intervention in the market through its quantitative easing program.

Prime Minister Juha Sipila has been a staunch ally of German-led austerity since his government came to power following elections in April, just as Greece was locked in talks over a new bailout package.

The self-made millionaire leader of the Center Party is cutting spending and raising taxes to avoid debt from swelling too much, even as key industries such as paper making and consumer electronics struggle and export demand from recession-plagued Russia slides.

Only Cyprus

Even before Sipila’s government last month forecast the economy would shrink this year, the European Commission had predicted that only Cyprus would perform worse this year.

Standard & Poor’s stripped Finland of its top credit grade last October, while Fitch Ratings reduced its outlook to negative in March, meaning it’s more likely follow S&P because of the sluggish economy.

Finland’s economy is “mired” in recession, making it less attractive than other countries considered the safest bets in the euro region, said Alan McQuaid, an economist at Merrion Capital in Dublin.

“Coupled with potential ratings downgrades in the coming weeks, point to under-performance against Dutch paper in the “core” space,” said McQuaid.
“We would be selling Finland and buying the Netherlands.”

Labor Costs

Some of the problems in the economy stem from an expensive labor market. Finnish costs per hour are about 20 percent above the EU average, Eurostat figures show. In the first quarter of the year, they rose by 0.7 percent, more than double the pace in the euro region as a whole, according to the Organization for Economic Cooperation and Development.

While Sipila, 54, wanted to try to reduce labor unit costs by 5 percent by 2019, talks broke down last month as unions resisted efforts to increase working hours without more pay. On Tuesday, he said two religious holidays will be converted into working days as part of his changes.

“Without big-scale reforms, it is hard to see the Finnish economy recovering its earlier vigor,” said von Gerich.

(BBG) Finland With Weakest EU Economy Set to Contract Fourth Year

(BBG) Finland is emerging as the European Union’s weakest economy because of its failure to build a competitive labor market, according to Finance Minister Alexander Stubb.

The economy of the northernmost euro member is set to contract for a fourth consecutive year, Stubb said at a conference of Finnish diplomats in Helsinki on Monday. He described the development as “worrying.”

The government has so far failed to persuade Finns to accept pay cuts it says are necessary to compete with its trading partners. Stubb warned that the nation’s economic plight isn’t only linked to market shocks but is structural, meaning only a program of reform can jolt the nation out of its sclerosis. Finland’s woes are compounded by Russia’s recession, with exports to the country’s eastern neighbor dropping 35 percent in the first five months of 2015, according to government data released Tuesday.

Aktia, a Finnish bank, estimates gross domestic product will contract 0.5 percent in 2015, after shrinking every year since 2011. Both exports and investments are seen contracting, according to the bank. Any reform program should target bringing about “quick relief” for an economy that has been hobbled by its lack of competitiveness, Aktia said.

Finland, which has stood shoulder-to-shoulder with Germany through the darkest hours of Europe’s debt crisis to advocate the wisdom of austerity, now risks seeing its own ratings tarnished by its economic decline. Moody’s Investors Service, which still rates Finland Aaa, said last week the country’s weak economic prospects were “credit-negative.” Standard & Poor’s stripped Finland of its top rating in October.

Improving Competitiveness

Prime Minister Juha Sipila said at a press conference in Helsinki Monday that the government is preparing a proposal to improve competitiveness that will be presented by the end of September. If the nation had its own currency, a devaluation would now be considered, he said.

“We have to live inside the euro area, I don’t have another option concerning the currency,” he said. “I don’t even think about other options, so now we must find the measures so we will be competitive inside the euro.”

P.O. (FT) Sick Finland ready for austerity medicine, says Alexander Stubb – Peter Spiegel


And to think that Finland was the hardliner of the hardliners during all this crisis…

From boom to bust…

Or as we say in Portuguese in a popular proverb:

“Pela boca more o peixe !”
(By the mouth dies the fish !)

Francisco (Abouaf) de Curiel Marques Pereira

Post Scriptum

There are plenty of fish of this sort in Europe…
I already pointed out overtime a few…