HELSINKI (AFX) - Bank of Finland Governor Matti Vanhala said the slowdown in the U.S. econmy is having a bigger-than-expected impact on the European economy.
In an interview in Sunday with newspapers Turun Sanomat and Aamulehti, Vanhala said the problems with the U.S. economy are not caused by a temporary cyclical downswing.
Households in the U.S. are weighing their purchases more carefully than before, and the confidence of companies in achieving growth rates such as those during the past few years has waned.
The most troubling aspect of the situation is that households and companies in the U.S. are more indebted than in Europe, Vanhala said. "All of this will have a very strong impact in Europe; probably more than most forecasts assume," Vanhala said.
Nevertheless, Vanhala said he does not expect Finland to go into recession as a result.
But the difficulties should be borne in mind, and there is no guarantee Finnish unemployment will be reduced.
But despite these problems, Finnish consumers should not be worried, he said.
"If the rate of economic growth were to slow down to about 3 pct, that would still be quite good. But unfortunately the size of economic changes are often underestimated during cyclical swings," Vanhala said.
The structure of the Finnish economy is today much stronger than it was ten years ago, when the economy plunged into a serious recession.
Vanhala also said that due to Finland's membership in European economic and monetary union, the country's currency and interest rates are not subject to the same kinds of pressure as most other small countries.