HELSINKI - Finland's image as an island of fiscal virtue in an ocean of European profligacy has eroded to the point that many ask if it can keep its stellar credit rating.
Fitch confirmed Finland's top "AAA" rating on Thursday, but warned that it could be lowered in future, in case for example of a "failure to tackle the trend decline in potential growth".
The Nordic eurozone member has long prided itself on the extremely strict fiscal management that has allowed it to avoid ever breaking EU fiscal rules.
The budget deficit has consistently remained below three per cent of gross domestic product, while public debt has been held within 60 per cent, as required by the Maastricht Treaty.
Strict fiscal management has allowed Finland to remain the only country in the eurozone with a "triple A" rating and a stable outlook from all three major credit rating agencies Standard and Poor's, Moody's and Fitch.
Even Luxembourg and Germany, the eurozone's other two paragons of fiscal virtue, can no longer boast that.
Finland lost its top rating in the 1990s but regained it in 2002. Since then, the ratings agencies have regularly praised the country for its well-functioning political system, based on a tradition of political consensus and moderate spending.
A struggling economy
But the economists have their doubts if Finland is really as strong as it used to be.
"The rating agencies have been lagging behind," warned Aki Kangasharju, the chief economist at Nordea Bank Finland, telling AFP that in his view Finland no longer deserves the highest rating.
"The country's industrial base has collapsed in a way never seen before, and the tradition of political consensus is in tatters," he said.
Two pillars of the modern Finnish economy, the forest industry and electronics, are in serious difficulties.
A drop in the demand for paper, caused by a growing conversion away from traditional print media towards electronic media, has forced many factories to close down.
Meanwhile, the dramatic decline of Nokia from the position of global leader in mobile phones has broken the momentum in a sector that had been driving growth for more than a decade.
Finland's exports were virtually stagnant last year from the year before. But wages still rose 3.5 per cent in nominal terms, draining competitiveness.
"There is no area that could be an engine of growth," said Fitch analyst Enam Ahmed.
He justified the "AAA" rating with a reference to its finances, which he described as "robust," saying they "give Finland a certain margin to absorb unexpected shocks."
The credit ratings sector's optimism may not last if the economy continues to sink.
Gross domestic product is expected to contract in 2013 for the second consecutive year, after dropping 0.8 per cent in 2012.
Unemployment is at a relatively high level, especially as the workforce shrinks. Population ageing is among the fastest in Europe.
Finland is gradually sinking deeper into debt. In September the government said the country would cross the EU threshold of 60 per cent in 2014, while as late as 2011 the public debt was only 49 per cent of GDP.
Helsinki tried to respond with a government plan in August to put more Finns to work.
The retirement age was to go up, time spent at university was to go down, and incentives to enter the job market were to be boosted for the unemployed and young mothers.
In its statement Thursday, Fitch said a failure to address obstacles to future growth could contribute to a future downgrade.
"Addressing labour market rigidities and measures to improve the country's competitiveness would lift long term growth prospects, thereby supporting the ratings," it said.
The government has promised more detailed measures by late November.
"The situation is open-ended. There are no details on a number of reforms," said Juhana Vartiainen, head of research at the government's National Institute of Economic Research.
The political outlook is not ideal for asking the Finns to sacrifice more.
In polls, the parties of the left and right forming the coalition government have been challenged by the Finns Party, populist and eurosceptic, which constantly criticises austerity.
Finland was quick to prescribe austerity to struggling southern eurozone countries at the the height of the debt crisis, but Finns find it bitter medicine themselves and the financial sector is beginning to doubt the commitment to fiscal rectitude.
For Nordea Bank's Kangasharju, the promised changes are still "nothing but rhetoric," leading him to worry that the negotiations could "distort the reform".