The Russians are gloating because Finnish politicians’ decision to abide by U.S.-led sanctions has hurt Finland much more than it has hurt Russia. Finnish farmers know this and they complain about it, but Finnish politicians ignore them.
Anyway this is from Sputnik, a news blog sponsored by the Russian government. It will help us clarify some aspects of economics. All the images are from Finland.
Finland’s national debt is reported to have exceeded the EU-norm of 60 percent of the GDP and reached as high as 63.1 percent, a level previously recorded only in the crisis years of the 1990s.
Clarification is needed here. If “national debt” means domestic debt, then it was trivial in the 1990s, since the Finnish government could create its own money out of thin air until it adopted the euro on 1 Jan 1999. If “national debt” means foreign debt (in foreign currency) then perhaps there was a problem, even before 1999.
Finland’s growing national debt has been a standing source of concern for European officials. According to the latest report from Statistics Finland, the national debt has exceeded EU limits, reaching 63.1 percent of GDP in March.
Runaway debt is unavoidable when a nation’s politicians surrender their monetary sovereignty, and when the nation has a trade deficit. Debt in turn creates a pretext for austerity, which includes mass privatization.
In 2015, Finland’s external debt was hovering at the critical level of 60 percent of the country’s GDP and was predicted to reach 62.6 percent in 2016. However, events moved faster than predicted: the rapid growth of the debt exceeded the forecasts of the European Commission and peaked at 63.1 percent as early as in March. At the end of 2015, Finland’s consolidated debt amounted to 130.7 billion euros, marking an increase of almost 9 billion euros over the year.
This again warrants clarification. Some countries have all internal debt. Other countries have all external debt. Most countries have a mixture of the two.
The USA does all its business, foreign and domestic, in US dollars. Since the dollar is accepted worldwide, the USA does not need to borrow or otherwise obtain foreign currencies in order to buy imports. Therefore the U.S. government has only internal debt, which consists of the interest the government agrees to pay (in dollars) for T-securities, which is about $285 billion per year (created out of thin air). People who lie about the “national debt crisis” pretend that the U.S. government has all external debt, when in fact the government has only internal debt, since it is all denominated in dollars.
At the other extreme are euro-zone nations, whose debts (if any) are all external, since euro-zone governments cannot create their spending money out of thin air. They can only get money by having a trade surplus, or else by borrowing. Therefore it makes no sense to speak of Finland’s “external debt.” Since Finland has a trade deficit, Finland has nothing but external debt.
Most countries are in-between, having both internal and external debt. Internal debt includes money that investors have deposited at the central bank by purchasing T-securities, plus the interest that the government pays on those deposits. (Just like the USA.) Internal debt is denominated in the country’s own currency, and is therefore trivial, since the government creates money to pay for it out of thin air. By contrast, external debt is foreign currency that the government has borrowed so that the nation can buy imports.
Thus, for most nations, internal debt is trivial, whereas external debt can cripple a nation if the debt becomes too high. The U.S. government has no external debt, since all debts are in dollars.
As I said, Finland’s skyrocketing external debt is unavoidable. That’s what happens when a nation (a) has a trade deficit, and (b) cannot create its money out of thin air.
In mid-March, Finland’s Finance Minister Alexander Stubb of the National Coalition Party, came under fire from the European Commission, which slammed the country’s poor economic performance and failure to keep the national debt within the specified limit.
Translation: The European commission and Finland’s Finance Minister Alexander Stubb are telling average Finns to get ready for more austerity. A lot more. The most lucrative public assets (e.g. highways, airports, seaports etc.) will be given to the rich.
Finland’s shrinking economy, unemployment, an ageing population, and the government’s highly unpopular austerity measures suggest that the bottom has not yet been reached. Fitch expects the general government debt-to-GDP ratio to continue to increase to 67.5 per cent by 2020.
Correct. If average Finns think they are suffering from austerity now, they haven’t seen anything yet. As I said, Sputnik is gloating about all this. Most Finns speak and read English (it is compulsory in all schools), and they read Sputnik, which wants Finns to know that the sanctions against Russia will continue to add to the pain of average Finns.
Despite the obvious all-European recession and anti-Russian sanctions, which have taken their toll on Finland’s economy in particular, many Finns blame the condition on the euro, regarding the European currency as the root of its troubles. As a member of the Eurozone, Finland has lost its independent monetary policy to Frankfurt, seat of the European Central Bank.
Those Finns are correct. Finland has lost not only its monetary policy, but ultimately its fiscal policy too. Monetary policy means interest rates. Fiscal policy means taxing and spending. Since Finland is a debt spiral, its fiscal policy is increasingly dictated by its debt obligations.
At some point this year, the Finnish parliament is supposed to discuss a citizens’ initiative on a referendum regarding Finland’s membership in the Eurozone. The initiative was engineered last summer by veteran politician Paavo Väyrynen, former minister and chairman of the Center Party and current member of the liberal Alde group in the European Parliament. Last year, the petition demanding Finland’s withdrawal from the Eurozone gathered over 50,000 signatures in record time.
Finland’s top-ranking politicians will resist this. They will cling to the euro, since it causes a growing debt load, which gives politicians a pretext to privatize public assets, and to crush workers. Remember that when Finland still had a strong economy, its labor unions gained a lot of power. The oligarchs allowed this, since they needed workers. Now that Finland’s economy is dying, Finland’s top-ranking politicians have a crisis that they can use to smash the unions. And the crisis is worsened by the sanctions against Russia.
According to Paavo Väyrynen, Finland has suffered greatly from its membership in the Eurozone, resulting in sluggish growth with several consecutive years of recession. Tuomas Malinen, postdoctoral researcher at the University of Helsinki, agrees that Finland should have stuck to its national currency, the markka. According to his article in the Huffington Post, the entire blame for Finland’s economic hardship rests with the euro. He argues, that Finland’s exports would have been 15 percent higher had the markka been preserved as the country’s currency.
The entire blame does not lie with the euro. When Finland had a trade surplus, its economy did great, despite using the euro. The euro only becomes a problem (and a deadly one) when a nation has a trade deficit.
So what should Finland do? It must do all four of the following…
 Dump the euro, which will halt the economic plunge. Average Finns would pay each other in markka, which the government could print in limitless quantity. Finland would still need to borrow in foreign currencies to buy imports, which means debt, but much pressure would be eased if Finland did #2…
 Stop participating in the sanctions against Russia, which are a reverse embargo. Finland’s politicians have cut the nation off from Russia, which had previously been one of Finland’s biggest trading partners, and which had accepted Finnish markka as payment for Russian goods. If Finland continues to participate in the sanctions, then even if Finland dumps the euro, there will be shortages in consumer goods, which will lead to inflation.
 Finland needs to diversity its economy more, and to develop some degree of self-sufficiency. If Sweden can do it, then so can Finland next door. (Sweden’s economy is strong even though Sweden never adopted the euro scam.)
 Finland (like Greece) must stop going further into debt to buy ultra-expensive weapons systems from the USA and Germany. Make Russia a friend, not an enemy.
Top-ranking Finnish politicians resist all four measures, because the politicians want average Finns to suffer. They want Finland’s economy to stay in trouble, because it creates a pretext for austerity, meaning crushed workers and mass privatization.
If there is a referendum, it will be rigged so that Finland keeps the euro. Already the corporate media outlets in Finland (owned by the rich, who want more austerity) are falsely claiming that most Finns want to keep the euro. It was the same with the (rigged) referendum on Scottish independence.
Predictably, the result of the Finnish referendum (if one is held) will be 49.5% for dumping the euro, and 50.5% for keeping the euro. Close votes like this make rigged referendums seem legitimate. If 95% of Finns want to dump the euro, then they will never believe a referendum whose results are 95% for the euro. Therefore the referendum is rigged to make it appear that slightly more than half of Finns favor the euro.
Evidently Finnish politicians are more corrupt than are Danish or Swedish politicians. Finnish politicians adopted the euro in 1998 without a referendum. Swedish and Danish politicians put the euro to an honest (non-rigged) vote, and the people wisely said no.
Veteran politico Paavo Väyrynen, who mounted the drive to dump the euro, now realizes that any referendum will be rigged. Also, a referendum can be delayed for years. Therefore, instead of a referendum, he wants a direct vote on the euro from government MPs, so the people can see exactly who is screwing them. But the politicians will resist this too. Politicians like the millionaire Prime Minister Juha Sipilä. They like austerity.
This is one reason why Finnish politicians allow a certain amount of refugees to enter Finland. As the economy dies, average Fins vent their wrath on refugees, not on the politicians who are screwing them.