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A 'Fixit'? Finland to debate leaving the euro zone

A 'Fixit' may be next
A 'Fixit' may be next

We've heard of a "Grexit" and "Brexit" to refer respectively to the threat of Greece and Britain leaving the euro zone and European Union. But now there's a "Fixit" – a Finnish exit of the single currency.

A 50,000 strong petition has forced Finland's parliament to debate whether to quit the 19-country euro zone, a senior parliamentary official told Reuters on Monday, as dissatisfaction mounts over how the country has fared since it joined the currency union.

Finland has seen a dramatic rise in euro-skepticism in recent years. In 2011, the True Finns party – a nationalist, anti-immigrant, anti-euro party won 19 percent of the vote, making it the third largest party in parliament.

In 2015 elections, the Finns party, as it is now known, gained 17.7 percent of the vote and joined the current coalition government of three center-right parties -- the Centre Party, the Finns Party and the National Coalition Party.

The Northern Lights in Finland.
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Finland is not alone in experiencing a growing backlash against membership of the euro. Political movements and parties in Spain, Italy and Germany have all campaigned against remaining in the single currency, particulary as economies fail to recover quickly from crises. In the U.K. too, which is outside of the euro zone, public opinion is wavering over membership of the broader 28-country European Union, with a referendum on EU membership expected in 2016.

Much of the public dissatisfaction with Europe or the euro zone has followed a period of intense economy crisis in the region, no less so in Finland itself where the economy remains in the doldrums and output remains at pre-crisis levels.

Finland's economy contracted 0.6 percent in the third quarter of 2015, putting the economy on track for its fourth straight year of contraction in 2015.

Following an analysis of Finland's economy, the International Monetary Fund (IMF) said in a report Tuesday that Finland was failing to recover from "a unique confluence of structural and cyclical shocks since 2007" such as the decline in exports, weak productivity growth and an ageing population.

"Exports have suffered due to the declines of Nokia and the paper industry, compounded by weak external demand, especially from the euro area and Russia," the IMF said in its latest report on Finland.

"Wage hikes in 2008–10 and weak productivity growth have hurt competitiveness. Rapid population aging is a further drag on growth."

As a result, the current account and fiscal balances have deteriorated, the IMF said, with the 2014 fiscal deficit breaching EU rules for a deficit no bigger than 3 percent of GDP.

While the IMF forecast that a "modest recovery" was projected to begin this year and gradually strengthen in 2016, "absent further reforms, growth is likely to remain much lower than pre-crisis." It also warned that downside risks "heighten the fragility of the recovery" citing weaker-than-expected growth in key trade partners as a potential drag on exports.

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