Governor Erkki Liikanen Bank of Finland Is there a Finnish or Nordic Model? Can the Nordic Model rescue European values? Brussels, Belgian Financial Forum, 15 February 2008 Governor Erkki Liikanen Bank of Finland

Can the Nordic Model rescue European values? Are there common European social values? Variety of European social models The challenges to all social models: Globalisation and ageing of population: The Nordic Model and Finnish experiences Conclusions: Is a social model based on European values an asset or a liability in the modern world? Can the Nordic model offer some solutions to the challenges?

European social models by André Sapir The Mediterranean Model: low equity and low efficiency Rather low coverage of unemployment benefits Very strict employment protection regulations The Continental Model: high equity and low efficiency Generous unemployment benefits Relatively strict employment protection legislation The Anglo-Saxon Model: low equity and high efficiency Relatively good unemployment insurance Very low strictness of employment protection legislation The Nordic Model: high equity and high efficiency Generous and comprehensive unemployment benefits Quite low strictness of employment protection legislation

Demographic change: Ageing of the baby-boomers

Demographic change: Ageing of the baby-boomers 7 7

Demographic change: Ageing of the baby-boomers 8 8

Demographic change: Ageing of the baby-boomers 9 9

Demographic change: Ageing of the baby-boomers 10 10

Demographic change: Ageing of the baby-boomers 11 11

Demographic change: Ageing of the baby-boomers 12 12

Demographic change: Ageing of the baby-boomers 13 13

Demographic change: Ageing of the baby-boomers 14 14

Demographic change: Ageing of the baby-boomers 15 15

Demographic change: Ageing of the baby-boomers 16 16

Demographic change: Ageing of the baby-boomers 17 17

Demographic change: Ageing of the baby-boomers 18 18

Demographic change: Ageing of the baby-boomers 19 19

Demographic change: Ageing of the baby-boomers 20 20

Demographic change: Ageing of the baby-boomers 21 21

Demographic change: Ageing of the baby-boomers 22 22

Demographic change: Ageing of the baby-boomers 23 23

Demographic change: Ageing of the baby-boomers 24 24

Demographic change: Ageing of the baby-boomers 25 25

Demographic change: Ageing of the baby-boomers 26 26

Demographic change is here! 20829

The social contract Net contributions to the public sector over the life cycle or as a function of age

The Nordic “cluster” Similarities in the systemic interrelations between the key institutions and policies labour market institutions the design of welfare state policies with regard to new technologies, research and development, environment Combination of collective risk sharing and openness to globalisation Comprehensive and mostly mandatory systems for pooling and sharing labour market and other risks Social contract: net contribution to the public sector over the lifetime of a representative citizen.

Results of OECD PISA studies in years 2000, 2003 and 2006

Need for reform in the Nordic model Work careers could usefully start earlier Labour force participation were to be raised and unemployment reduced The effective retirement age should be increased further Pension costs must not be allowed to become an excessive burden for young age cohorts We must strive for higher productivity also in public services

Thank you