Political Economy of the Nordic Country Crises
All political parties within the Finnish government were committed to resolving the crisis, although exactly which policies to implement were a matter of debate. Policy makers were surprised by the depth of the crisis, particularly as policies to balance the budget by raising taxes and reducing expenditure exacerbated matters. The Finnish government, however, was committed to ensuring stability of the banking system, confirming this policy formally within the parliament in January 1993 (Sandal 2004). This policy was set in place through 1998.
Swedish authorities also held broad political support for crisis resolution measures, even though the Social Democratic government of 1982-91 had laid the groundwork for crisis through deregulation in the 1980s, and the center-right government of 1991 basically inherited the resulting problems. The state guaranteed that all banks would meet their obligations as required. This blanket guarantee was held from 1992 through 1996. The bank support agency, the Bankstodsnamnd, was set up as an independent body and made transparent to the Social Democratic opposition. The body worked closely with the Riksbank, the Finansinspektion (financial supervisory authority) and the National Debt Office (Jonung 2009).
While Norway did not announce blanket guarantees, as did Finland and Sweden, the state maintained political support for emergency measures. Norway provided emergency liquidity support to individual banks. The Financial Supervisory Authority of Norway (FSAN) had been created before the crisis arose, and had yielded to pressure to maintain low levels of bank supervision (Steigum 2011). After the crisis, the FSAN was given more resources for expansion and set up a new program for macroeconomic surveillance. Thus began Norway’s program of “active risk-based supervision,” with cooperation among the FSAN, Ministry of Finance, and Norges Bank.