Tag Archives: Jutta Urpilainen

“Vasemmistolaista ja oikeistolaista talousajattelua etsimässä”

“Vasemmistolaista ja oikeistolaista talousajattelua etsimässä” http://www.poliittinentalous.fi/vasemmistolaista-ja-oikeistolaista-talousajattelua-etsimassa/?utm_source=rss&utm_medium=rss&utm_campaign=vasemmistolaista-ja-oikeistolaista-talousajattelua-etsimassa

Niille, jotka ovat sitä mieltä, että Suomi on saavuttanut hyvän kompromissin

YLE uutisoi tästä lyhyesti näin, missä Suomen finanssiministeri mainitsee ne asiat hyvinä asioina, jotka Varoufakis alla kritisoi ankarasti.

“The Death of Direct Bank Re-capitalisation: Europe’s (newest) day of shame | Yanis Varoufakis” http://feedly.com/k/14bo3MK

UPDATED: Four Finnish guides to end the recession in Finland (in the context of the Eurocrisis)

This is a translation of my Finnish article of yesterday, explicitly meant for an international audience. Finland is still in some way one of the main architects of the austerity policies in Europe, and although the Finnish economy is not doing well, there doesn’t seem to be a change of course in the making, perhaps for much the same reasons as in Germany, but with an added dimension: the continuing decline of the Finnish economy helps the opposition Center Party and True Finn parties, both of which have rather confused ideas on the eurocrisis and a host of other issues. Although I don’t agree with the reasons, the True Finns want to do away with the euro (and a lot more of EU parts), which does not seem such a bad idea – apart from the fact that it would likely bring these two aformentioned right and center right parties to power. I haven’t dared to write this down on my blog before but in terms of politics the current government’s strategy re: the eurocrisis is very likely to bring about a backlash in the next elections, in which at least the Social Democrats (as represented by Jutta Urpilainen, Finance Minister) will take a very big hit, because the Euro isn’t saved by these policies and neither is the Finnish tax-payer spared (even though there is ‘collateral’).

To provide a bit of context: the three economists mentioned are, Seija Ilmakunnas, Olli Koski and Simo Pinomaa. Seija Ilmakunnas is with the Labour Institute for Economic Research. The institute missing here is ETLA (the Research Institute of the Finnish Economy). The latter two economists are from the Confederation of Finnish Trade Unions and the Confederation of Finnish Industries respectively. This means, although they are economists, they do at the same time represent labour market actors/lobbying organizations. The two organizations are (still) the key actors in Finnish industrial relations, but on many issues they have increasingly different views.

The context for the original article in the Finnish daily Helsingin Sanomat was that The Bank of Finland quite sharply revised its forecast downwards for 20132-2015. I would say, not a big surprise, but it rekindled the public debate about the Eurocrisis and the recession in Finland.

So, here is the translated article:

‘Four guides to end the recession’

In today’s Helsingin Sanomat there was an article named ‘Four guides to the recession.’ Four economists ponder what to do. The best guides is in my opinion that of Seija Ilmakunnas. Less great or bad guides (in that order) are by Olli Koski and Simo Pinomaa. I think the guides by these representatives of SAK and EK are less usefull because they are too political (i.e. also with a view to the collective bargaining rounds in Autumn). But at least Olli Koski does have some constructive ideas.

1. The first guide has been removed by request.

2. Seija Ilmakunnas

She has good ideas how to use stimulus funds. She also looks at the long term – what could be Finland’s important sectors. As she says, those cannot be determined ‘by decree’ but they have to develop organically through thorough fundamental research. Ilmakunnas takes the Finnish Cleantech-industry as a good example of this.

According to her, further economic integration is the natural course regarding the European Union, but I don’t see this as a realistic possibility in the (near) future. As long as the ideology of austerity reigns at the Commission and in Germany (and Finland and the Netherlands), no sensible economic policy regarding the longer term can be expected.

3. Olli Koski

Labour market politics is a stronger presence with this SAK-representative and the next EK-representative. The article begins with criticism against EK, which reduces his space for real arguments regarding the recession. He prefers a centralized incomes agreement (naturally). This is fine, of course, but it does not fundamentally relate to the eurocrisis, nor do I think it is realistic, because also SAK’s labour unions might have different wishes (exposed vs sheltered sectors).

Koski,  emphasises the importance of domestic demand, and is of course completely right that fiscal policy should not be tightened anymore. He also has sensible ideas where to use stimulus, but the use of stimulus funds for infrastructure and rent-apartments could probably also be used sensibly by  hiring more teachers, kindergarten personnel and nurses (or preferably making their positions more secure).

4. Simo Pinomaa

The representative of EK is in the last position here, because nearly all his comments show that he has not yet realized the Reinhart-Rogoff and Alesina-Ardagna have been thoroughly debunked. His central themes are ‘austerity’, ‘zero or negative wage-growth’, ‘budget deficit’. On the positive side he does acknowledge it would be a bad idea to tighten fiscal policy even more. But nonetheless he worries about debt in particular.

He also worries about Finnish competitiveness and argues for wage restraint, budget cuts etc. As a representative of EK I would most certainly demand the same, but it is politics rather than sensible economic policy.


I cannot indicate what the relative weight of these opinions is on Finnish politics/Finnish government. This is especially difficult since Finland has again a kind of rainbow coalition in which liberals, social democrats, greens, socialists and christian parties are all together. But the prime minister is from a pro-business party and the finance minister, although a Social Democrat, represents a rather tough line in economic thinking. I guess we have to see how it will play out.

‘Urpilainen: Palkka-ale on tie lamaan’

Yle Uutisessa.

Toivottavasti Urpilainen on samaa mieltä mitä tulee Kreikkaan, Espanjaan ja Portugaliin.


UPDATED: Greece, Eurocrisis and the on-going discourse of pain – Jutta Urpilainen edition

A few days ago, Jutta Urpilainen stated (in Finnish) that ‘the passionate budget cutters have crawled back in their holes’. She states that it is good that the Finnish government has agreed that ‘adaptive policy’ should be 50% cuts and 50% tax increases. Also she is proud of the Finnish contribution to the Eurocrisis-debate – ‘Finland has been the toughest.’

It is not clear to me if she prefers this 50-50 rule for distressed Eurozone members as well. Finland has been tough with Portugal, Greece and Spain (collateral for support for bailouts). If I have time I will try to find the answers the goverment gave to these questions. But it seems that the answer broadly speaking was ‘Trust us, we know what we are doing and there are no credible alternatives.’

So I don’t know what is the current state of Finnish official thought on the Eurocrisis is – there is curiously little news in the web!

Via the NY Times:

Finance ministers had been seen as likely to give tentative approval for the next tranche on Tuesday though the money is unlikely to be disbursed before December and a deal on debt reduction may require further talks.

Urpilainen repeated that Finland was ready to give Greece more time to reach its financing programme targets but said a restructuring of its debt was out of the question.

Who is she fooling? Who are the Germans, Dutch and Finnish governments fooling, and the ECB?

Yes – Greece should never have been in the eurozone, but neither should probably Italy have been. In the video in this post Yanis Varoufakis explains how Greece cheated itself into the eurozone – by imitating Italy. And seen from the other end, why is the goal for Greece a debt-to-GDP ratio of 120%? Because Italy has been there, and trying to set a stricter standard would cast doubts on Italy as well (and quite possibly, Belgium, although I haven’t seen much news on that country recently).

But why do European finance ministers insist on doubling down on the failed austerity policy? The IMF has by now admitted that the multipliers for the effects of contractionary fiscal policy are far greater than assumed, and there is no way austerity is going to a) reduce the deficit in the short OR long term and b) is no way to restore growth (see e.g. this important post on Spain by Edward Hugh).

So Jutta Urpilainen wants to give Greece more time. Great. What does it matter? Greece will never achieve its goals under current policy. Giving more time is akin to trying yet another round of blood-letting while the patient actually needs nourishing food and medicine. Giving more time to Greece increases the probability that Golden Dawn will grown in all-too-sure elections. With this policy road, Greece is on its way to becoming a failed state. A friend of mine was as a trainee in the Technical University of Athens, and nobody can do any research anymore because there is simply no money for reagents and equipment. How do you expect a country to recover when it is sucked dry?

The main problem lies in the refusal for debt restructuring. Urpilainen and other ‘strict’ masters of European finance still refuse to acknowledge that it is as much the fault of the banks who borrowed money to Greece (and Portugal, Spain) and caused bubbles to inflate, inflation to rise and wages to become uncompetitive relative to Germany. Where is the rule that when investing/borrowing money, you should assess the risk? Where have the German, Dutch and Finnish risk assessors been? The periphery did not suddenly become financially safe because they had the euro or the ECB set the interest rates!

The continuing refusal of debt restructuring will sooner or later spell the end for Greece in the Euro. Either through changes in politics in Greece (Golden Dawn as a major party) or simple economics there will come a sudden and expectedly unexpected default of Greece (ok, Greece has actually already defaulted once).

[UPDATE: see this transcript of the state of the Greek society]

When this moment comes, the question voters should ask their governments is:

Why did goverments cover up the bad risk assessments of banks? Germany borrowing money to Greece to buy German products is akin to a car salesman borrowing you money to buy his shiny car. This is risky and banks should have known better.

Anyway, the Urpilainen Road of Pain (Urpilaisen kipukatu, which is built also by Merkel, Rutte and Draghi) will just lead to more destruction. Greece is already a total wreck – what do you expect to still get out of it?

Oh and by the way – the new Dutch government has been scared the **** out of itself by calculations indicating that its austerity policies will affect the purchasing power of nearly all income groups up to 5 percent per year.   Given the export dependency of the Dutch economy and its totally calcified real estate market this is not a good development. Maybe they finally start to understand that austerity is just simply self-defeating?