Finland: Competitiveness, wage moderation and the Eurocrisis

Currently I am reading this, and it strings together a lot of issues I have been thinking about lately.

A quote (p. 16): “In economies with an export share of GDP far below 50% wage moderation strategies are counterproductive if there is no perspective of achieving a huge current-account surplus over an extended period of time and of raising export share beyond the 50% without retaliation from trading partners.”

Finland’s export share of GDP since 1992:

Finland got close to 50% between 2006-2008, but otherwise not. And there is certainly no perspective of achieving a huge current account surplus (not with Finnish Unit Labour Costs higher than in Germany at least!). Just to point it out, this means the relevance of the domestic sector for GDP growth is greater than that of the export sectors.

So, also for Finland, it would seem that (p.16) “Under normal circumstances, it would therefore be impossible to successfully emulate the strategy followed by Germany during the first ten years of EMU [i.e. wage compression].”

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One response to “Finland: Competitiveness, wage moderation and the Eurocrisis

  1. Pingback: Finnish Finance Ministry once more adjusts forecasts for 2014 | Arjen polku

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