“Euro membership is an economic detriment to Finland”, claims EU election candidate and member of Finnish parliament Kaisa Garedew from the Perussuomalaiset party (Finnish national conservatives). Although the matter can be viewed from multiple viewpoints, the claim, published by the party’s newspaper Suomen Uutiset on March 26, 2024, turns out to be mostly false.
Euro was introduced as an accounting currency in the euro area on January 1, 1999, and as physical banknotes on January 1, 2002. Of the 27 EU member states, 20 have since adopted the common currency. The proponents of the euro argue that a common currency makes business and investment in the euro area easier, cheaper, and less risky.
Finland has used euro from the beginning. However, there has been debate about the benefits of the euro in Finland from time to time. It’s really difficult to give clear-cut answers to claims about total benefits or costs of the euro, since the matter can been looked at from multiple different viewpoints.
That is why in our investigation, we decided to focus on the views of experts, namely economists. Even though also them brought up many different arguments, the expert opinion clearly leaned against Garedew’s claim.
Economists: the benefits with euro are bigger than the problems
According to a survey conducted by the website Ekonomistikone (economist information service) on November 27th, 2017, 64% of respondents agreed that the euro has been more beneficial than harmful to Finland so far. 53 economists participated in the survey.
Chart showing that 17 percent of the economists strongly agree and 47 percent agree with the claim that the euro has been more beneficial than harmful ot Finland. 13 percent of the respondents disagreed or strongly disagreed.
In addition to the survey, we interviewed three economists to get more in-depth information about the claim. The interviews were conducted with senior economist Aino Silvo from the Bank of Finland, Vesa Vihriälä, Senior Fellow at the University of Helsinki and former adviser to the EU commission vice president Olli Rehn, and Research director Tero Kuusi from the ETLA Research Institute.
Senior economist Silvo thinks that the euro membership is not an economic detriment to Finland. “Finland is a small country dependent on foreign trade, so it is definitely beneficial for Finland to be part of the euro area. It's better for a small country to be among other countries with whom we trade in common reference groups than to try to cope alone.”
Also Vihriälä thinks that the euro brings along economic stability. “When in a large currency area, the interest rate does not fluctuate due to market pressure, and stability is a good thing.”
This is something that the EU itself also promotes. According to the European Union website the euro is bringing economic stability to various parties and that the currency is beneficial to citizens, businesses, and the economies of euro area countries, facilitating price comparison and trade between countries.
However, we can assume that on EU sources, the euro is spoken about only positively.
Different viewpoints among economists
The economists find also downsides in Finland’s euro membership. According to Vihriälä, Finland probably should not have joined the euro immediately in 1999. He points at the economic problems that were caused by the collapse of the mobile phone giant Nokia in the early 2000s.
Vihriälä thinks that the recovering from the collapse would probably have been easier with own currency. It would not have prevented the collapse, though, since Nokia had anyway lost its competitive edge against Apple’s iPhones. Currently Finland is somewhat suffering from the euro because of Finland’s inflation rate, Vihriälä says.
“Finland's inflation rate is slower and functional development is slower than the euro area average. However, these are quite small problems compared to if we were to leave the euro area. The advantages of a common currency include reducing business costs and currency exchange-related risks. This facilitates exchange within the currency area and promotes economic activity, which is beneficial.”
Common currency can also help in managing common shocks, reminds Kuusi. The effect could be even enhanced by improving the functioning of the market. “If capital were to move more strongly between different countries, risks could be shared more. When crises occur, the impact on countries would not be as severe. The functioning of capital markets is one stumbling block in this scenario.”
Kuusi believes that one of the biggest disadvantages of the euro for Finland is the losing the possibility to fluctuate its own exchange rate. “Before euro, we could react to certain crises by weakening our exchange rate, which could in turn help the economy to recover.”
Of the Nordic countries, only Finland uses the euro
Finland became part of the European Union at the same time as Sweden in 1995. A third Nordic country, Denmark had been a member already from 1973. However, from the three, only Finland has adopted the common currency. Denmark, though has pegged its krone to the euro. According to Vihriälä, this has not had negative effects on Denmark's economy.
Recently support for the euro in Sweden has increased. According to a survey by the University of Gothenburg, at the end of 2023, there were nearly twice as many supporters of the euro as there were a year earlier. Vihriälä believes that at the expert level in Sweden, the preservation of its own currency is no longer seen as important as before. The exchange rate of Sweden's currency is also more volatile than Finland's.
Conclusion
Since it is very difficult to find clear cut answer to whether euro membership has been a detriment to the economy of Finland, we based our fact check on economists' assessments. In both the survey conducted by Ekonomistikone and our own interviews, most of the economists found the benefits of the euro greater than its downsides. According to them, Finland benefits from the euro particularly in trade and currency exchange within the euro area. The economists also brought up drawbacks, but most of them were about broader issues with the economy, not only the currency. Therefore, we conclude that the claim “Euro membership is an economic detriment to Finland” is mostly false.
RESEARCH | ARTICLE : Aaro Heiskanen, Jenna Kuntsi, Laura Manninen, Jaakko Servo, Julia Viskari – Haaga-Helia University of Applied Sciences, Helsinki, Finland
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