Economic Impacts of European Union Membership on Finland Price Levels and Foreign Trade
ECONOMIC IMPACTS OF EUROPEAN UNION MEMBERSHIP ON FINLAND PRICE LEVELS AND FOREIGN TRADE
ELCİN AGAZADE
European Union membership has an affect on countries both political and economical aspects. For countries who become an EU member, substential changes in economic indicators can be observed as change in economic structure, change in monetary policies, new interaction with different counrtries, new trade agreements. In this essay, I will evaluate the economical impacts of EU membership on Finland in terms of price level and foreign trade. Finland joined the European Union in the beginning of 1995. In the 90‟s before being a member of EU, Finland experienced a recession. GDP declined more than 11 per cent, unemployment rate increased from 3.4 to 18.4 between 1990 and 1993.
Finnish economic indicators before joining the Eu
YEARS
GDP, change in volume
Change in CPI
Unemployment % of labor force
1990 1991 1992 1993 1994 1995
-7.1 -3.6 -1.2 4.5 5.1 3.3
4.3 3.0 2.1 1.1 1.0 0.5
7.6 13.1 17.9 18.4 17.2 16.3
Source: Statistics Finland
EU Membership on Price Levels The Average price level in one country and the comparison between countries can be used to compute price competitiveness of the country in the world market. Price levels have been always an important indicator to determine a country‟s economic condition. Consumer price in Finland is higher than any OECD (Organization for Economic Cooperation and Development) countries before joining the EU. Food prices especially were really high and expected to decline when Finland becomes a member of the European Union. Finland had only low price level in 1993. The price level declined below EU level, because of the deviation in the beginning of 90‟s and floating of the markka (Finland‟s former currency).
It was believed that Finland needs to use its competitive abilities to recover this situation and since 1993 Finnish prices are always higher than EU average. It‟s recorded that 13 per
ELCİN AGAZADE
European Union membership has an affect on countries both political and economical aspects. For countries who become an EU member, substential changes in economic indicators can be observed as change in economic structure, change in monetary policies, new interaction with different counrtries, new trade agreements. In this essay, I will evaluate the economical impacts of EU membership on Finland in terms of price level and foreign trade. Finland joined the European Union in the beginning of 1995. In the 90‟s before being a member of EU, Finland experienced a recession. GDP declined more than 11 per cent, unemployment rate increased from 3.4 to 18.4 between 1990 and 1993.
Finnish economic indicators before joining the Eu
YEARS
GDP, change in volume
Change in CPI
Unemployment % of labor force
1990 1991 1992 1993 1994 1995
-7.1 -3.6 -1.2 4.5 5.1 3.3
4.3 3.0 2.1 1.1 1.0 0.5
7.6 13.1 17.9 18.4 17.2 16.3
Source: Statistics Finland
EU Membership on Price Levels The Average price level in one country and the comparison between countries can be used to compute price competitiveness of the country in the world market. Price levels have been always an important indicator to determine a country‟s economic condition. Consumer price in Finland is higher than any OECD (Organization for Economic Cooperation and Development) countries before joining the EU. Food prices especially were really high and expected to decline when Finland becomes a member of the European Union. Finland had only low price level in 1993. The price level declined below EU level, because of the deviation in the beginning of 90‟s and floating of the markka (Finland‟s former currency).
It was believed that Finland needs to use its competitive abilities to recover this situation and since 1993 Finnish prices are always higher than EU average. It‟s recorded that 13 per
References: Hannu Leinonen (1998)”The Finnish economy-ups and downs, and a bit of dust from the market” written for www.virtualfinland.com Kai Torvi (1998) “The economic impact of EU membership in Finland is mainly positive” written for www.virtualfinland.com Reino Hjerppe, Pekka Makela, Likko B.Voipio (1999): “Finland as a Member of European Union-First Experiences” Joakko Kiander, Antti Romppanen (2005) “Finland‟s First 10 Years in the European Union Economic Consequences” Ville Kaitila (2005) “10 Years of EU membership for Finland” Sinikka Salo (2006) “Finland- From crisis to a successful member of EU and EMU” from the seminar at Naradowy Bank Polski, Warsaw “Finland‟s trade policy programme” written for website: formin.finland.fi www.oecd.com www.ultida.com www.eurostat.com .