VESA VIHAVAINEN is worried. Merivaara, his Finnish-based hospital bed-making business, is struggling — just like the economy that Finns once held up to debt-laden Greeks as a model of what national thrift can achieve.

    Weak sales mean Merivaara has had to lay off staff as Finland fails to find an exit from a two-year recession. That spiral of lost jobs and income is also wrecking the country’s cherished reputation for sound public finances.

    Finland’s school-masterly advice, prominent in a chorus of northern European criticism when eurozone debtors asked for bailouts, may come back to haunt its policymakers as they struggle to agree on reforms from taxes to pensions.

    While southern Europe starts to win back investors after years of donor-imposed job losses and welfare cuts, Finnish welfare costs and taxes have risen as jobs are lost. Government levies as a share of gross domestic product (GDP) have jumped to a European Union high, piling costs onto the private sector.

    Finnish exports, investments and retail sales are all tumbling and firms are putting out profit warnings.

    “The Finnish economy has drifted into the same reference group with Italy and France,” the EU’s top economic official Olli Rehn said, referring to the two big eurozone economies whose finances linger outside the bloc’s fiscal limits.

    “We have no time to lose,” said Rehn, a Finn, last month.

    But with parliamentary elections in a year’s time and Prime Minister Jyrki Katainen due to step down next month, serious cost cutting looks unlikely for now.

    “We would need a brave government to implement the needed reforms,” Danske Bank economist Pasi Kuoppamaki said.

    Finland’s GDP is still about 5 percent below its 2007 level, a bigger lag than the eurozone average and well below its main export competitors, Sweden and Germany.

    The economy shrank 1.4 percent last year, and on Monday, the European Commission forecast it to grow 0.2 percent this year and 1 percent next — the second-weakest in the eurozone on both counts, beating only bailed-out Cyprus.

    The Netherlands, another debt-crisis hardliner, also has seen economy contract, but its struggles are smaller than Finland’s and has returned to export-led growth.

    In the eurozone, only Malta and Estonia are less competitive than Finland on pricing. Companies such as Merivaara produce less, but labor costs have not fallen nearly as much.

    While Finnish leaders are worried, about half the deficit trimming has been achieved by raising taxes. Government revenue as a share of GDP rose to 56.3 percent this year, the highest in the EU and more than 10 percentage points above the EU average.

    “The question is: How can Finland finance a public sector of this size, and the answer is: ‘It really can’t, at least if it wants the economy to grow,’” Nordea analyst Jan von Gerich said.(SD-Agencies)