No sooner had I stepped out of the airport at 3:42 pm local time than a sudden gust of cold wind from the Ural Mountains east of Finland hit my facea quiet reminder that the tropical lands of India had been left far behind.
The three-day conference at the heart of Helsinkis city-square area sought to espouse the inherent economic strengths of the Finns and identify reasons behind why creativity and technology continued to be the bedrock of the economy.
However, as soon as the motley group of financial journalists came under one roofone Chinese, two Russians, two French, two Germans, one Japanese and two British among othersthe more serious question that troubled many, crudely read: How can the Finns afford to play the fiddle while Rome (or pretty much the whole of Europe) is burning (metaphorically, of course)
The dilemma and ensuing confusion was only natural. Consider this: the conference unfolded against the backdrop of grave uncertainties, with severe repercussions for the rest of Europe (and possibly the rest of the world too). While Greece looked all set to fire its PM George A Papandreou after he sought a referendum on the bailout package (at the same time considering pulling out of the EU altogether and reintroducing the drachma as its currency), things looked gloomy in the EUs third largest economy, Italy, as well(Silvio) Berlusconi is sitting on a three-legged chair, scoffed a journalist sitting by me.
Though these developments got front page news coverage across Finland, they did little to over-perturb or unduly unsettle the country. Our banks have adopted a more conservative lending approach than some of the other European countries, says Leena Morttinen, a leading economist at the financial services firm Nordea and a popular public face in Finland. She says a conservative approach, which has shielded its banks so far, has been possible only after the Finns learnt it the hard way.
The popular lore in Helsinkis financial circles goes somewhat like this: in the early 1990s, the Finnish banks were dealt a severe blow after a combination of lax regulation, high capital inflows and a sudden slowdown hit liquidity hard. This period saw the financial institutions non-performing assets steadily rise. Picture this: loan losses in Finland went up to 4.7% in 1992 as compared to a negligible 0.5% in 1989 (source: Richard G Andersons paper, Resolving a Banking Crisis, the Nordic Way). The crisis forced us to make some structural changes in our operations, Morttinen adds.
Today, banks in Finland have minimum exposure to toxic government bonds in continental Europe. Unemployment levels are nowhere close to their other European counterparts. While the average public debt to GDP among the EU countries is as high as 80%, Finlands debt to GDP stands at only 48.4%far behind Germanys 83.2%, Frances 81.7%, Greeces 142.8% and Italys 119%. In fact, the only country that is faring better than Finland is its Nordic partner Sweden, which has only a 40% debt-to-GDP rate (source: Nordea).
However, there is a but in the rosy story, after all. Being a part of the EU and sharing a common currency, Finland cannot and does not claim to be delinked. The longer the uncertainty and the crisis continue, the bigger the challenge would be for the Finnish companies to diversify their exports (a chunk of their present outbound shipments go to Europe).
The other, bigger challenge is from within: an ageing population. The Finnish society is currently considering a welfare model that seeks to increase the working age limit from 65 to 70. This will increase the number of years one contributes to social security by five and reduce the number of years one takes from social security by 5assuming one dies at the same age! At the same time, it is looking at ways to speed up the productivity of its workforce. While the former is a political issue that has been opposed by certain sections (over-burdening senior citizen is not cool, they say), the bigger challenge is how to increase individual productivity. The political establishment at Helsinki, too, is far from reaching a consensus on whether relaxing immigration norms can help solve the problem.
Finland will need to take action to improve productivity and lengthen careers.
If this is done, stable conditions will boost innovation, Morttinen says. Sensing the same, the government has already prepared an action plan. Finnish companies can get up to 50% of their R&D expenses paid for by the governmentthis, they say, would encourage innovation and help in increasing productivity among the Finnish companies.
No denying that Finland is at a cusp in its historical evolution as a nation. Which way it swings and how best it solves the immediate problems could become a model not just for its Nordic partners but for the rest of Europe as well.
With these thoughts, I dashed my way back to the airport to take the return flight to New Delhi. Couldnt help but reflect over the popular Finnish saying that holds so true for this Scandinavian country at this juncture: Ahkeruus kovan onnen voittaa, loosely translated as Diligence can vanquish hard luck.
The authors trip to Finland was sponsored by Finnfacts, an independent media service unit operating as an interface between international media and Finnish industry and business