The worldwide recession hit Finland harder than most other OECD countries. Export volumes fell by almost a third from their mid-2008 peak, reflecting the dominance of incomesensitive capital goods and exceptional exposure to hard hit markets such as Russia. The well supervised and prudent financial sector has weathered the crisis well, although there was some inevitable slowing in credit growth. A significant fiscal stimulus and monetary loosening by the ECB have cushioned the downturn. Recovery has been slow, potentially dampened by deteriorating competitiveness due to an appreciating exchange rate, large industry-level bargained wage increases and slowing productivity growth. Centrally co-ordinated wage deals with more room for local flexibility could deliver more competitive wage outcomes, while in the longer term potential output would be boosted by reforms to higher education. Fiscal consolidation should start once the recovery takes hold.