Newspaper article The Christian Science Monitor

Collapse of Soviet Union Hits Finland Hard

Newspaper article The Christian Science Monitor

Collapse of Soviet Union Hits Finland Hard

Article excerpt

FINLAND - once known as the Japan of Europe - has sunk into a deep economic slump.

The downturn is worse than the Great Depression of the 1930s, says Heikki Salmi, the country's statistical office director.

Finland's troubles stem from the collapse of the country's main export market - the Soviet Union - and a world oversupply of forestry products.

Unemployment recently reached 18.8 percent of the labor force. Economic output has shrunk 10 percent since 1990. Foreign debt is expected to reach 53 percent of gross domestic product by the end of the year.

Finns, who number only 5 million, worry that government austerity measures could ruin their system of social security.

The decline has been rapid. In the 1980s Finland enjoyed the fastest growth rate in Western Europe, averaging 3.6 percent a year. In 1990 per capita gross domestic product was second only to Switzerland.

Moreover, recovery from what one Ministry of Finance official terms the worst economic crisis since independence 75 years ago is expected to be slow. That official, Sixten Korkman, predicts zero-growth at best this year.

A decade ago the Soviet Union accounted for one fifth of Finland's exports. As that market disappeared, Finland has been unable to find substitute export markets. Nowadays Russia - with which Finland shares a 1,270-kilometer (800-mile) border - plays only a minimal role in Finland's foreign trade.

Finland's public sector debt has skyrocketed during the past three years.

Tauno Matomaki, chairman of Finland's Central Federation of Industry, warns that without a credible crisis program, Finland will find itself at the mercy of the International Monetary Fund by mid-summer, as other sources of funding the budget deficit dry up.

"We have to be able to foresee a point in the mid-1990s, when government indebtedness no longer grows," Prime Minister Esko Aho says.

In 1992 Finland's international payments deficit (current account) was 22.8 billion markka ($3.8 billion), according to the Central Bank. …

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