Lessons there to be learnt from Finland's bank crisis

[homecomer]

Lessons there to be learnt from Finland’s bank crisis

irishtimes.com/newspaper/fin … 33311.html

Interesting articles about Finland’s crisis of the early 1990’s. There seem to be many many similarities with Ireland’s current problems. Cheap and easy credit leading to property bubble followed by rapid turnaround in their fortunes, high unemployment, rapid drop in GDP, banking crisis etc etc.

One important difference: At that time Finalnd was not in the eurozone so they dropped their interest rates and devalued their currency by about 12% - thereby making their exports more competitive. Options that are, unfortunately, not open to Ireland at the moment.

Just wondering would their be a case to be made for Ireland leaving the euro, either permanently or for a few years to straighten things out - maybe returning at some stage in the future?

[Green_Bear]

From 1991-93, Finland’s real GDP declined by 12 per cent, the jobless rate soared from less than 4 per cent to almost 20 per cent, stock prices dropped by two-thirds and hundreds of companies went bankrupt.

Based on current trends 18% unemployment by 2010/2011 is very achievable in Ireland, all it takes is the unemployment rate to rise by about 2% to 3% each month.

[Pill]

“The financial industry is always short-sighted and always in denial,” he says. “They always think they’re very clever and have good risk-assessment, but they always repeat old behaviour patterns.”

Surely not our Comical and Desperate Dan?

[Green_Bear]

@Pill

Surely not our Comical and Desperate Dan?

They’re not the only ones wading shoulder deep in the Nile

Then, in June 1991, Bank of Finland forecasts showed that the GDP would drop 6 per cent. Trade with the disintegrating Soviet Union had collapsed, as had exports to western neighbours badly hit by recession.
“The government didn’t believe the figures I gave them. They said: ‘It can’t be that bad’,” Pylkkönen said. “The banks were very slow to react too, they didn’t realise for months how deep the crisis actually was.”

Fast forward to 2008, the government’s been told what’s coming down the line, which they have dismissed.
Is the minister surrounded by ‘yes men’ who tell him what he wants to hear? So far we know he has a poor grasp of the causes of the credit crunch and subprime crisis.

Minister Lenihan says his department’s predictions are not as gloomy.
'Well obviously any increase in unemployment is a very serious matter and certainly as a government we are factoring some unemployment into our assessment of how much social welfare we have to pay next year.
‘My department is drawing up its own forecast which is not a pessimistic as that forecast,’ he said.

independent.ie/business/iris … 73750.html

[Poacher]

Talking about the economic pressures Ireland faces today will not cause a banking crisis any more than talking about a fire drill will cause a fire. On the other hand, Kiander warns that not talking about possible economic pressures for fear of a psychological snowball effect only panders to an inherent weakness of the financial industry.

Obviously a doom monger - no doubt he single handedly talked Finland into its recession and banking crisis back in the day…