Financial crises in Denmark, Finland and Sweden: 1990-93 and 2008- compared
Department of Sociology University of Helsinki Helsinki, Finland
Financial crisis and a deep recession occurred in Finland and Sweden in 1990-93. It is interesting to compare the current financial crisis (2008-) in Nordic countries to the earlier experiences and lessons. The most important difference between these two is that the former was a specific Nordic one, while the current crisis is global in nature. The background is the process of globalization, the deregulation of financial markets being a central part of this process. In the Nordic countries, financial deregulation started in the mid-1980s, in Denmark somewhat earlier, and it was followed by an increasing destabilization of the economies, due to many mistakes made in national policy decisions. First, an overheating of the economies was experienced. Foreign debts of the households and enterprises multiplied. Second, when the international economy entered a recession in 1990, there happened a strong contraction in these economies, the bubble in asset prices burst and left the financial sector with a serious bad debt problem. A deep banking crisis occurred, and many banks needed state support. Due to this, the level of public debt increased and a structural long-term unemployment emerged. Today, these policies have been presented as prime examples of successful ways to hanadle the financial crisis; nothing could be farther away from the truth. The financial crisis 2008- hit also the Nordic countries. This time, the banking crisis is deeper in Denmark than Finland and Sweden; asset prices and housing prices have dropped in all three countries. Policy measures include 'packages' to strengthen banks' capital base in order to increase lending. The effect of these measures can be questioned, provided that the main problem is on the demand side. It is argued that in the Nordic healthy economies - low public debts, banks' financial sollidity, availability of enterprise financing - there are more options than elsewhere, but much depends on global developments.