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Is Finland a Victim of the Austerity Medicine It Prescribed for Europe?

Construction cranes in Helsinki, Finland, on July 11, 2013
Construction cranes in Helsinki, Finland, on July 11, 2013Photograph by Ville Mannikko/Bloomberg

Finland stood resolutely with austerity hawks in the debate over managing Europe’s debt crisis. But while that crisis is now easing, Finland’s own economy is ailing—and some are asking whether an overdose of austerity is to blame.

The economy has contracted for the past two years, even as Helsinki kept a tight lid on budget deficits and maintained the euro zone’s best-rated sovereign debt. This year doesn’t look much better, with the government forecasting 0.8 percent growth and unemployment expected to rise to 8.4 percent. The central bank warned this month that Finland’s debt load could double over the next decade, making the country one of Europe’s most indebted.