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Stubb: Russia’s economic dip poses risk for Finland

Finland's new Prime Minister Alexander Stubb. Here from his visit to Murmansk in 2009 as Foreign Minister when he declared the north to be the sexiest region in the world.

“If Russia’s economy drops by 3 percent, the Finnish economy will drop by half a percent,” says Alexander Stubb, Minister of European and Foreign Trade.

Location

As the U.S. and EU impose tougher economic sanctions on Russia, neighboring Finland fears ripple effects. The World Bank dramatically cuts Russia’s GDP outlook from 2,5 percent growth to a worst-case scenario with 1,8 percent shrink in 2014. 

Even the World Bank’s low-risk scenario is bad reading for Moscow. “The low-risk scenario assumes a limited and short-lived impact of the Crimea crisis and projects growth to slow to 1,1 percent in 2014 and slightly picking up to 1,3 percent in 2015,” the report reads.

The ruble is under increasing pressure, triggered by the ongoing deterioration of the current account and by higher volatility in capital outflows. 

Trading with Russia is historically more important for Finland than any other European Union member states. Also, if Russia’s economy deep-dives, the number of cross-border shoppers and tourists to Finland is expected to do the same dive. 

“We have been experiencing a financial crisis for many years now and there will continue to be challenges with regards to economic growth. Now there’s the Ukraine crisis on top of all this. This is the very reason why European integration was undertaken: with it we aim to avoid conflicts. Even though conflicts arise, they are not borne within the EU,” Alexander Stubb says to YLE.

Stubb underlines the importance of integrated economies between countries.

“As I have said before, money is the best peace mediator. When economies are tightly interwoven and dependent on one another, the threshold for conflict is considerably higher. That’s why all the walls that are between the EU and Russia need to be taken down so that we are dependent on one another and these types of conflicts are avoided,” the Minister for European Affairs and Foreign Trade says to YLE.