According to the Governor of the Bank of Finland, Russia’s isolation from the West, which has been caused by the international outrage over its attack on Ukraine, especially affects the economy and future prospects of Eastern Finland. Olli Rehn.
"The cruel and illegal war of aggression launched by Russia has greatly disrupted the European economy," he said, adding that high energy costs were taking away consumers’ purchasing power.
Rehn spoke with Yle before the symposium, which was organized in his hometown Mikkeli in the Etelä Savo region, in the eastern part of the country.
"The new iron curtain was created when Russia became isolated from the world economy, and it is especially reflected in the economy and future prospects of Eastern Finland." he said.
According to the Governor of the Central Bank, the effects of the situation on Finland should be taken into account, especially in terms of cross-border trade and energy.
As a result of the sanctions, Finland has had to look for alternative sources for liquefied natural gas (LNG), coal and electricity as a result of Russian cuts.
Energy solutions
"On the energy side, the situation in Finland is not as bad as in many other countries. In Finland, we have a lot of renewable energy and nuclear power. Efforts were made to ensure security of supply by using different energy sources and different production methods," he explained.
Regarding LNG, Finland improved its situation by establishing LNG terminals and planning to increase deliveries via the Balticconnector pipeline across the Gulf of Finland in Estonia.
According to him, the overall effects on trade are darker, as trade with Finland’s eastern neighbor was already halved in 2014, when Russia annexed Crimea.
However, before the latest Ukrainian attack, trade between Russia accounted for about five percent of Finland’s exports. However, according to Rehn, this number has dropped dramatically.
"It affects many industries in Finland." he said. "This applies especially to Eastern and Southeastern Finland. It is important to find solutions to the problems in these areas, including [solutions] from the state," he said.
The Finnish government has set up a working group to consider and deal with the region’s new economic situation.
Economy and security
The economy of Eastern Finland was already hampered by the Covid crisis, which stopped the flow of Russian tourists to the region almost completely.
"We need to strengthen trade with the rest of the world and think about how we can boost the economy of Eastern Finland by investing in education and business," he said.
Regarding households affected by Finland’s changed situation with Russia, Rehn said that tax breaks are not really a viable solution.
"In general, the view of economists is that in such situations general tax reductions are not very effective and are very expensive for the public purse," he said, adding that other targeted measures led by the government could be a more justified option to ease the financial squeeze experienced by consumers.
The central bank’s boss also said that Finland’s pending NATO membership will probably reduce the risk aversion often felt among foreign investors.
"In this sense, economy and security go hand in hand," Rehn said.
Source: The Nordic Page