Image Courtesy : euobserver.com
Sanctions both by and against Russia are hitting the Nordic country hard and there are continuing doubts about whether the government can survive until elections in April. The Finnish economy is thought by some economists not just to be in recession but in a depression. The general approach is that they are between a rock and a hard place, but are expected to survive. Known in the eurozone as a cheerleader for austerity, Finland is now facing its own severe economic struggles. Almost everybody in Finland concedes the problems are not cyclical but structural with the twin declines of Nokia and the paper and pulp industry weighing heavily on both growth and unemployment.
The Russian import ban will mainly affect milk-based products from Finland, which make up a big part of the euro-zone member’s food shipments to its eastern neighbor, Kai Mykkanen, of the Confederation of Finnish Industries. The food ban would knock about 5% off total exports to Russia if it continued for a year, 0.5% point off Finland’s exports as a whole. This is not a catastrophe yet, but if this lasts more than 12 months, then there will be trouble.
Norwegian Salmon producers, including the world leader Marine Harvest, felt the brunt of sanctions imposed by Russia on agricultural goods from Europe on Thursday as their share prices plummeted on the Oslo Stock Exchange. Russia has been Norway’s biggest export market for fishery products in recent years but Moscow announced on 13th August that they would be placed on the sanctions list, effective immediately. Norway is not a member of the European Union but the Nordic nation announced it would join the 28-country bloc in imposing sanctions on Russia and has since been hit by the Russian counter measures targeting fish, beef, porc, poultry, dairy products, vegetables and fruit.
The European Union’s common agricultural policy includes possibilities for compensation and any recompense to European farmers for lost sales will be looked at in the longer term, according to European Commission. EU globalization funds, with an annual budget of $200 million, have also been used to help countries deal with job losses. Finland sent 10 percent of its exports to Russia last year, and imported 18% from the country. Its total trade volume with Russia of 14% even exceeded that of former Soviet states, and now euro members, Latvia and Estonia. The euro-area average trade with Russia in 2013 was 3.4%. About 5% of Finland’s goods exports to Russia are now banned, according to the Bank of Finland.