Tuesday, July 21, 2015

Finland: the cost of using the euro

NY Times reports that Finland’s economy has faced a number of shocks:  the collapse of its biggest trading partner (Russia); a decline in demand of its biggest export (trees); and the decline in demand for the product of its largest employer (Nokia).

 This has resulted in 11.8 percent unemployment rate and with contracting G.D.P. in each of the last three years. If Finland had its own currency, the markka, it would have fallen relative to the Eurozone, made its exports cheaper and its imports more expensive, which would have cushioned the shocks.
Suddenly other Finnish industries would have had a huge cost advantage over, say, German competitors, and they would have grown and created the jobs to help make up for those lost because of Nokia and the paper industry and Russian trade.

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