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"A new recession is possible"

The President of Finland's largest financial services group, Reijo Karhinen of OP-Pohjola, says that the European debt crisis could lead to a new recession. Aktia Bank CEO Jussi Laitinen also sees the situation in the eurozone as gloomy.

OP-Pohjolan pääjohtaja Reijo Karhinen.
OP-Pohjolan pääjohtaja Reijo Karhinen. Image: Yle

OP-Pohjola's Reijo Karhinen said on Wednesday that prospects in the financial sector could change quickly as a result of the debt crisis. He called on political decision-makers to take a firmer hand in returning market confidence.

"The situation is grave, and an alternative to be reckoned with is that we have a recession coming. At the same time, it must be remembered that many basic matters are in good shape," noted Karhinen.

"But, the markets are sensitive and they can turn quickly. The impacts then on the financial sector and on macro-figures would be significant and disadvantageous, he added.

However, Karhinen went on to say that one should not panic over the Italian situation and market reaction to it.

Everything and everyone suspect

Aktia Bank CEO Jussi Laitinen commented that at some stage the eurozone crisis will have to come to an end.

"But what kind of end, that's a good question. This crisis is now spreading globally. America is under suspicion, soon France will be, Finland, whoever. When mistrust gets such a tight grip, it has to be brought to an end at some stage," said Laitinen.

The Aktia Bank CEO believes that the crisis has already spread worldwide.

"The international investment markets and financial markets now find everything and everyone suspect."

Mistrust fuels crisis

Concerning the debt position of Italy, Laitinen pointed out that most of the country's debt is held by domestic investors. What is fueling the crisis is mistrust.

There have been some suggestions that an alternative for heavily-indebted Greece would be to withdraw from the common currency. Jussi Laitinen says that every country should consider if it would do better alone or as part of the eurozone.

"If, for example, Finland were to break from the eruo, momentarily the markets would imagine that all is well. Our own currency would be of exceptionally high value, because every investor would seek this kind of safe haven. A strong currency would very quickly cut the possibilities of our export industries to sell their products and in that way transfer this recession to us, as well," explains Jussi Laitinen

Sources: YLE

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