Nokia's woes cast doubt over Finnish model

Troubles at Finland's Nokia Oyj aren't just bad news for the company, its staff and shareholders. They're also a warning sign for the small Nordic country's welfare model. Just as Nokia's sure touch with well-designed, consumer-friendly products seems to have deserted it, fears are growing that Finland, whose reputation for innovation rested largely on the handset maker's success, m ay be losing its competitive edge. While Finland remains one of the few triple-A rated countries in the euro zone, its reputation as an egalitarian society with a stellar education system belies worries about a decline in once-mighty export manufacturers and a rapidly ageing population. For the 5.4 million Finns, the message is stark: prepare for tougher times, later retirement or lower pensions. And for government, the need is to encourage business growth beyond traditional mainstays like forestry while balancing social commitments with economic realities. On Tuesday Finland reported a second straight monthly current account deficit. For 2011 as a whole, it posted a deficit of 1.3 billion euros ($1.7 billion) due to slower export growth. "It's useless to dream of achieving the same levels that we had between the booming years of 2001 and 2007," said Handelsbanken economist Tuulia Asplund, referring to the years of strong industrial growth. Economists expect the economy to contract or barely expand this year. Many forecast growth of just 1 or 2 percent in the next few years - not bad compared with some more troubled European economies, but not enough to alleviate strains on the pension system in one of the region's fastest-ageing societies. With its baby-boom generation retiring and living longer, and without Norway's oil or Sweden's diverse and internationally successful corporate sector, Finland's welfare model looks particularly vulnerable. Nokia's downfall has hit business activity as well as national pride. At its peak, Nokia accounted for 4 percent of Finnish GDP and supported a myriad of companies as suppliers. Today it contributes closer to 1 percent, according to analysts. Electronics maker Elcoteq, which lost the bulk of its business when Nokia switched to cheaper Asian suppliers, filed for bankruptcy last October. Software firm Digia Oyj, another Nokia supplier, reported a 45 percent fall in first-quarter profit.