1. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 1 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

2. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 2 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?

3. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 3 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

4. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 4

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6. 6 Demographic change: Ageing of the baby-boomers

7. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 7 Demographic change: Ageing of the baby-boomers

8. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 8 Demographic change: Ageing of the baby-boomers

9. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 9 Demographic change: Ageing of the baby-boomers

10. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 10 Demographic change: Ageing of the baby-boomers

11. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 11 Demographic change: Ageing of the baby-boomers

12. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 12 Demographic change: Ageing of the baby-boomers

13. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 13 Demographic change: Ageing of the baby-boomers

14. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 14 Demographic change: Ageing of the baby-boomers

15. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 15 Demographic change: Ageing of the baby-boomers

16. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 16 Demographic change: Ageing of the baby-boomers

17. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 17 Demographic change: Ageing of the baby-boomers

18. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 18 Demographic change: Ageing of the baby-boomers

19. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 19 Demographic change: Ageing of the baby-boomers

20. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 20 Demographic change: Ageing of the baby-boomers

21. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 21 Demographic change: Ageing of the baby-boomers

22. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 22 Demographic change: Ageing of the baby-boomers

23. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 23 Demographic change: Ageing of the baby-boomers

24. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 24 Demographic change: Ageing of the baby-boomers

25. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 25 Demographic change: Ageing of the baby-boomers

26. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 26 Demographic change: Ageing of the baby-boomers

27. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 27 Demographic change is here! 20829

28. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 28 The social contract Net contributions to the public sector over the life cycle or as a function of age

29. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 29

30. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 30 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.

31. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 31

32. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 32 Results of OECD PISA studies in years 2000, 2003 and 2006

33. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 33 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

34. SUOMEN PANKKI | FINLANDS BANK | BANK OF FINLAND 34 Thank you