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Economic Impacts of European Union Membership on Finland Price Le...

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Economic Impacts of European Union Membership on Finland Price Levels and Foreign Trade

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  • October 19, 2010
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ECONOMIC IMPACTS OF EUROPEAN UNION MEMBERSHIP ON FINLAND PRICE LEVELS AND FOREIGN TRADE

ELCİN AGAZADE

European Union membership has an affect on countries both political and economical aspects. For countries who become an EU member, substential changes in economic indicators can be observed as change in economic structure, change in monetary policies, new interaction with different counrtries, new trade agreements. In this essay, I will evaluate the economical impacts of EU membership on Finland in terms of price level and foreign trade. Finland joined the European Union in the beginning of 1995. In the 90‟s before being a member of EU, Finland experienced a recession. GDP declined more than 11 per cent, unemployment rate increased from 3.4 to 18.4 between 1990 and 1993.

Finnish economic indicators before joining the Eu

YEARS

GDP, change in volume

Change in CPI

Unemployment % of labor force

1990 1991 1992 1993 1994 1995

-7.1 -3.6 -1.2 4.5 5.1 3.3

4.3 3.0 2.1 1.1 1.0 0.5

7.6 13.1 17.9 18.4 17.2 16.3

Source: Statistics Finland

EU Membership on Price Levels The Average price level in one country and the comparison between countries can be used to compute price competitiveness of the country in the world market. Price levels have been always an important indicator to determine a country‟s economic condition. Consumer price in Finland is higher than any OECD (Organization for Economic Cooperation and Development) countries before joining the EU. Food prices especially were really high and expected to decline when Finland becomes a member of the European Union. Finland had only low price level in 1993. The price level declined below EU level, because of the deviation in the beginning of 90‟s and floating of the markka (Finland‟s former currency).

It was believed that Finland needs to use its competitive abilities to recover this situation and since 1993 Finnish prices are always higher than EU average. It‟s recorded that 13...