Finnish economy continues to struggle

The Finnish economy continues to struggle with no end in sight. The promising reform plans of the new government have been dashed by the failure to reach a broad Society Pact meant to boost Finnish competitiveness. 

Though it is too early to doom the efforts of the government a failure, dismal Finnish economic performance is set to continue, with the cost of further ratings downgrades. Despite supportive ECB bond purchases, Finnish bond spreads are set to widen towards French levels.

There was a time not too long ago, when Finnish bonds were trading at the second lowest yield levels in the Euro area, higher only compared to Germany. The Finnish economic troubles from the past few years have already added pressure on Finnish bonds, and currently Finnish bond spreads are generally above the Netherlands, but below Austria. This is about to change.
"The Finnish GDP is about 7% lower compared to the highs in 2007, while this year is set to become the fourth in a row to see the economy contract. Any meaningful recovery is not expected in the next two years either", says Nordea Bank. 

While the Finnish economy still has potential to perform much better longer out, realizing the better performance would require serious reforms to the Finnish economy. Finland is the only country in the EU that realized negative y/y GDP growth in the second quarter of this year.