Finnish parliament, pressured by weak economy, debates euro exit

Reuters News
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Posted: Apr 28, 2016 12:44 PM

By Jussi Rosendahl

HELSINKI (Reuters) - Finnish lawmakers on Thursday held a rare debate on whether the Nordic country should quit the euro after 53,000 people signed a petition to force the issue into parliament.

The petition, although very unlikely to lead to Finland's exit of the 19-member currency bloc, highlights the growing level of frustration over the country's economic performance amid rising unemployment, weak outlook and government austerity.

The initiative demands a referendum on euro membership, but this would only go ahead if parliament backed such a vote.

Although no political group has proposed a euro exit, some euro-sceptic parliamentarians cited lack of independent monetary policy as a problem and said Finland should have held a referendum before adopting the euro in 1998.

Nordic neighbors Sweden and Denmark voted against adopting the euro a few years later.

"The euro is too cheap for Germany and too expensive for the rest of Europe, it does not fulfill requirements of an optimal currency union," said Simon Elo, an MP from the co-ruling euro-sceptic Finns party.

The Finnish economy grew by just 0.5 percent last year after three years of contraction. The stagnation stemmed from a string of problems, including high labor costs, the decline of Nokia's former phone business and a recession in neighboring Russia.

This year, Finland's economy is expected to grow slower than in any other EU country, except Greece.

Some economists say the country's prospects would improve if it returned to the markka currency which could then devalue against the euro.

Before 1992, Finland repeatedly devalued its markka currency to improve export competitiveness.

Unable to use that tool, the current government is pushing a controversial plan for internal devaluation, including longer working hours, to lower unit costs.

The government remains officially committed to the euro and finance minister Alexander Stubb told parliament he believed a possible 'Fixit' would have more negative consequences than benefits.

"Our international position would probably weaken, our currency rate would become unsustainable... our country risk would be high and we would be likely driven into a situation where interest rates would increase," he said.

The petition moves next to a parliamentary committee and it would need to pass several stages before reaching a final plenary vote and a possible referendum.

According to a December poll by public broadcaster YLE, 54 percent of Finns supported remaining in the euro zone, while 31 percent wanted to leave. Asked whether Finland would do better outside the euro zone, 44 percent answered yes.

(Editing by Ed Osmond)