2000, 32 %, of the total workforce in finland had achieved tertiary education, while the eu15 average was 24 %. educated labour force has fostered innovation and increased the innovation absorption capacity. supply of science and technology graduates has helped to maintain the salaries of researchers and engineers in the itc - cluster moderate, in spite of strong demand. strong current account and international diversification of investment portfolios the growth of the ict industry is reflected in the current account, which has been in surplus since 1994. the emergence of large current account surpluses is a marked difference with the past. besides competitive open sector and strong growth of exports, the current account surpluses reflect a rather subdued growth of domestic demand after the crisis of the early 1990s. the corporate sector adopted a more cautious investment policy line by reducing its debt exposure and increasing its buffer stocks. the general government sector has been in surplus for years. as a consequence of international diversification of investors'portfolios, non - residents'holdings of shares in the finnish stock exchange rose to over 70 % of the total market capitalisation in 2000. this greatly reduced the exposure of the finnish economy to the ict asset price bubble at the turn of the century, as the main ownership risks were born by foreign investors. prudent fiscal policy as to economic policies, after the crisis in the early 1990s there was a clear need to adopt policies which would be compatible with the free movement of capital across national borders. broad support has developed for stability oriented fiscal policy as a basis for more long - term stable economic development. in line with this, public finances were consolidated. in recent years fiscal policy has been effectively based on explicit policy rules such as spending limits covering the whole electoral term. as a result of prudent fiscal policies, the general government sector is in surplus. the surplus ratio is on the level of 2 – 3 % and is expected to remain so. established social dialogue established social dialogue has been helpful in the implementation of some reforms. recently a major pension reform was agreed between employees, employers and the government. in the reform, which has already been implemented, two early - retirement schemes were abolished. there will be a longevity coefficient linking pensions to life expectancy, and benefits will be calculated on the basis of the whole lifetime income and not the last working years only, as earlier. this has improved the stability of the financing of the pensions, but challenges still remain. collective wage agreements play a relatively prominent role in shaping the relationship between employee and

erkki liikanen : the case for structural reforms of banking after the crisis speech by mr erkki liikanen, governor of the bank of finland and chairman of the highlevel expert group on the structure of the eu banking sector, at the european commission, brussels, 2 october 2012. * * * changes in banking in the run - up to the crisis in the years preceding the financial crisis that started in 2007, global financial institutions had grown ever bigger in size and scope and their organisational complexity had increased. their leverage had strongly risen and their average debt maturity had shortened. behind these trends were forces that intensified competition in banking, driven by technological development. an entire shadow banking sector had developed, comprising a chain of non - bank institutions which were able to provide similar financial intermediary services as traditional banks. in this environment, regulatory reforms were partly a response to the changes and allowed banks to cope with the increasing pressure from non - bank competitors. banks sought for economies of scale and scope and strived to take advantage of diversification benefits from multiple sources of income. commercial banking had increasingly moved away from customer relationship - based banking where loans are granted and then held until maturity to the “ originate and distribute ” model where granted loans are pooled, then securitized and sold to investors. this shift in the business model increased traditional banks ’ connections to the shadow banking sector. the expansion of banks ’ balance sheets partly reflected the growing global imbalances, supported by the accommodative monetary policy stance in the early 2000s. regulation, supervision and market discipline failed to counter the developments in the financial sector. the basel capital requirements on banks proved ineffective in restraining the strong growth in banks ’ leverage and balance sheet size. for example, the basel rules effectively allowed banks to lower their capital requirements by means of securitizing loans. this is an important reason for how and why banks became strongly connected with the shadow banking sector. the increasing complexity of structures and products, as well as the financial sector ’ s increasing interconnectedness and growing size, led to reduced transparency of bank balance sheets. this should logically have rung alarm bells among investors, especially among banks ’ uninsured debt holders, but the opposite seems to have happened : the markets rewarded bank size by charging lower debt margins from the biggest institutions. this suggests that there was a perception among market participants that the biggest financial institutions enjoyed an implicit public guarantee ; in other words, they had become too big or