By the Blouin News Business staff

Can cleantech lift Finland out of recession?

by in Europe.

A branded flag flies at the Port of Helsinki in Helsinki, Finland, on Monday, July 29, 2013. Getty Images

A branded flag flies at the Port of Helsinki, Finland’s capital. Getty Images

Fiskars just gave a black eye to the Finnish government’s efforts to boost competitiveness and revive the economy. On Wednesday, the consumer products firm announced it will be closing a ceramics plant in Helsinki and laying off 130 workers, in favor of switching production abroad.

The country’s economic situation is grim, and not improving. According to Finnish newspaper Helsingin Sanomat, the Ministry of Finance’s newly-finalized, yet-to-be-published economic forecast estimates that the economy will contract by 0.2% in 2015, down from a June estimate of 0.3% growth for the year. 2015 will thus be the country’s fourth consecutive year of recession. Key industries such as paper making and consumer electronics are suffering, and export demand from neighboring Russia (hit by Western sanctions and mired in its own recession) is declining.

“A total of 480,000 people,” or nearly 17% of Finland’s workforce, “are already without a job if we also take into account people covered by the variety of employment services,” said Mika Kuismanen, head of forecasting at the Ministry of Finance. Exacerbating the increase in long-term unemployment among the 25-54 year old segment, demographics are also working against the continuation of Finland’s generous welfare state — the population is aging from a baby-boomer bulge that is not being replaced by an equal amount of younger workers.

The government is mulling over the idea of issuing a “basic income” to all unemployed people — without the need to work — as a simplification of the complex social security scheme, an idea supported by 80% of Finns. Ohto Kanninen, of the Tank research center, proposes testing the idea by paying 8,000 people from low income groups four different monthly amounts, perhaps from about $450- $785. If it doesn’t discourage people from actively seeking full employment, then it could be scaled up around the country. But with so many unemployed, the big question left unanswered is how will the government pay for it?

In response to all of these woes, the government is cutting spending and raising taxes to avoid a ballooning of debt. It is also getting creative about cost-saving solutions to jumpstart competitiveness, although the public is not always pleased with them. The most contentious will surely be the government’s recently announced plan to eliminate two national holidays and cut public-sector workers’ generous benefits. Their annual entitlement of paid days off will be trimmed from 38 to 30, saving the budget some $717 million. Their first day of sick leave will now be unpaid, and afterwards only at 80% of normal salary, saving another $344 million. Furthermore, overtime and Sunday pay will also be cut, as the government hopes to reduce overall labor costs (which are 20% higher than in Germany). Finland’s powerful unions rejected these “coercive measures” as unconstitutional, and threatened action.

One bright spot, however, is Finland’s rapidly growing cleantech sector, which employs approximately 50,000 people, and is expected to add another 40,000 jobs by 2020. The Finnish Ministry of Employment and Economy coordinated the Global Cleantech Summit 2015 in Helsinki, which ran from Tuesday through Thursday. The Summit aimed “to catalyze linkages between all interest groups to form international roadmaps and potential business partnerships,” with some success. Finnish firm KPA Unicon, which in August signed a deal worth about $11 million to supply a power boiler to a South African steel mill, said at the Summit that its next subsidiary was likely to be in South Africa, whose chronic grid blackouts make for good business opportunities in on-site power generation.

A spike in interest from foreign firms and officials for Finnish cleantech exports might just be the thing to boost the economy, without any domestic outcry.