Finland has recorded the second-highest unemployment rate in the European Union, overtaken only by Spain, according to the latest Eurostat figures.
In May, Finland’s jobless rate reached 9.9 percent, compared to 10.4 percent in Spain. Sweden followed in third with 8.3 percent. The EU average stood significantly lower.
A decade ago, high unemployment was concentrated in southern EU countries such as Spain, Greece and Italy.
That pattern has now reversed. Finland has moved into a position previously associated with the most crisis-hit economies of the eurozone.
The shift is not due to worsening conditions in Southern Europe, but rather improvements there.
“The situation is perverse, this is not something we’re used to seeing,” said Elina Pylkkänen, Under-Secretary at the Ministry of Economic Affairs and Employment.
According to Pylkkänen, Finland’s relative fall stems from multiple sources, but she highlighted the EU’s pandemic recovery package as a key factor.
While southern EU states received significant grants, countries such as Finland and Sweden were allocated far smaller sums. The total value of the recovery fund was €750 billion, with half distributed as grants.
“Southern countries have used the support to stimulate economic growth and employment,” said Pylkkänen.
Greece, whose current unemployment data were not included in the latest Eurostat release, had been second-highest last year. Finland now surpasses even that.
The European Commission designed the recovery fund to address the economic shock caused by the Covid-19 pandemic, with southern economies receiving the largest shares due to heavier GDP losses.
Meanwhile, Finland has been hit harder by the economic fallout from the war in Ukraine and sustained high interest rates.
Päivi Puonti, Head of Forecasting at the Research Institute of the Finnish Economy (Etla), said the European Central Bank’s policy responses to inflation, particularly interest rate hikes, have had a stronger impact in Finland than in many other EU countries.
“When the ECB sets its rates, they may not always suit Finland’s situation,” Puonti said.
Higher interest rates quickly affected Finnish borrowers, driving up housing costs and pushing the construction sector into a slump. While inflation affected the entire bloc, the response had disproportionate effects in Finland.
In contrast, the recovery funding allocated to southern countries helped stimulate job creation, contributing to falling unemployment levels across the Mediterranean.
“The recovery package treated Finland and the Nordic countries less favourably than southern Europe,” said Pylkkänen.
Sweden has also seen its unemployment figures rise. Both Nordic countries now rank among the EU’s top five for joblessness.
Youth unemployment also high
Finland’s youth unemployment is among the worst in Europe. In June, 23 percent of people under 25 were unemployed, making Finland the fourth-highest in the EU on that measure.
Only Estonia, Spain and Sweden had higher youth unemployment rates, with figures for Greece unavailable at the time of publication.
The statistics show a wider issue affecting Finland’s economy. Officials are concerned that both structural and cyclical factors are contributing to prolonged joblessness.
Domestic demand remains weak, the industrial sector faces global uncertainty, and investment has slowed. Analysts point to the cautious recovery of Finland’s export-driven economy as another reason for sluggish job creation.
Meanwhile, the US’s shifting trade policies continue to cast uncertainty over global demand, particularly in export-reliant economies such as Finland’s.
With youth unemployment rising sharply and overall jobless figures climbing well above the EU average, policymakers are facing increased pressure to propose more targeted interventions.
HT
