Comments on “Monetary policy in Finland: experiences since 1992”

The Finnish recession of the early 1990s left a heavy burden: the unemployment rate rose dramatically; public debt and net external debt increased rapidly, a banking crisis developed. The authorities ’ strategy for overcoming the problems was centred on the growth of the export sector. The markka was devalued and then floated in 1992. This export-led orientation was successful. The fall in the markka did not lead to inflation, owing to the weakness of the labour market and a prudent monetary policy. The recovery at first masked what the OECD called a “persisting dualism ” in the economy, with weak activity in domestically oriented sectors.1 In the meantime, domestic demand has recovered, however. Economic growth is largely without tension and above the west European average. If it continues unabated, we might expect consequences concerning interest rates or the exchange rate. Finland has made headway in fiscal consolidation, too. It is a good example of a country in which a policy of fiscal policy consolidation is in the country’s own best interests and does not primarily serve to meet the convergence criteria of the Maastricht Treaty. Without the consolidation of public finance, government debt would have run out of control. Furthermore, consolidation has helped to maintain a comfortable external position, which is important given the country’s high foreign debt. Unemployment has remained high, however. Finland is certainly not the only country facing difficulties on the labour market; the unsatisfac-tory situation in Germany is a case in point. In Germany, as in Finland, the expected rate of economic growth is not sufficient to bring about a substantial reduction in unemployment. Structural factors, such as over