That's the good news.

Ex-Finnish prime minister Esko Aho was a keynote speaker at the Irish Management Institute conference at Druid's Glen last week.

Speaking separately to the Sunday Tribune, Aho said that European social values would have to adapt to support a culture that embraced flexibility, risk-taking and mobility to foster research and innovation.

Otherwise, multinational companies would continue, and accelerate, their flight from high-cost European centres.

"Globalised European companies don't need Europe, but we need these companies, " he said.

As foreign multinationals begin to take a hard look at operations located in Ireland as well as other high-cost European locations, Aho's native Finland may have benefited, ironically, from its failure to attract foreign direct investment.

"Until the 1990s we had a rather restrictive policy. We did not want to have foreign companies invest in Finland, " he said. EU membership meant that these restrictions had to be dismantled, however. His government attempted to attract investors in the early 1990s, after the collapse of the Soviet Union saw Finnish exports fall dramatically from resource-based sectors and hit hard the former province of the Russian Empire with its 5.6m citizens. But they failed. "We tried to get companies to invest in Finland. It played a role but it is very difficult to say if it was having a positive impact, " he said.

Finland didn't realise it at the time but its decision ten years earlier to double its spending on research and development was about to pay off. Throughout the 1980s, the country built on its longstanding educational tradition and grew its R&D spend to 3.5% of GDP. It used a combination of tax incentives and grants until around 1990, when the incentives were abandoned in favour of grants. At the same time, Finland became the first country in Europe to liberalise its telecommunications market, creating an extremely competitive home market in telecoms, which helped Nokia begin its ascent to become the world's biggest maker of a technology most people hadn't even dreamt of yet.

Research spending was ramped up, with about onethird coming from the government through agencies not dissimilar to Enterprise Ireland, one-third spent by Nokia and the other third from the rest of the indigenous private sector.

But it was the crisis caused by the implosion of the Soviet Union, the malaise of European markets and the collapse of a Finnish bubble that saw the economy shrink by 7% in 1991.

"The first phase was very negative, obviously. But in the longer term it forced us to move resources from old sectors to the new ones. It forced mobility, " he said.

Mobility is his key prescription for what ails European productivity and innovation . . . meaning more flexibility in labour markets and making it easier for researchers to move between academia, industry and government.

Making difficult choices now can help people prepare for their future needs, Aho says. But politicians generally don't focus on what may be required in 15 or 20 years.

He points to healthcare as the key example, as the cost of caring for an increasingly sick and elderly European population, including in Finland, will destroy the chance of future economic growth and hasten European decline.

"The perfect example of where this paradigm chage has not yet happened is healthcare. You ask politicians anywhere in Europe what we should do and what do they say? More taxpayers money for that sector. We have to pay more for that service. More nurses. We have to question that." Instead what is needed is to radically reform institutions and infuse the healthcare sector with lots more technology, he said.

Aho isn't sure, however, that democratically-elected politicians will be able to make the necessary changes without being in the midst of a crisis.

"I'm not optimistic, " he says. "Only a crisis situation can promote the change required. It's difficult to sell to the electorate."

Asked if the French election may be a test case, in which conservative presidential contender Nicholas Sarkozy promises to institute many of the reforms Aho sees as necessary, the exprime minister remains enough of a politician to sidestep the question.

Ireland should intensify its efforts to ramp up its R&D spend, Aho argues, though he cautions that it will be difficult to copy Finland's success. "No-one understood in the early 1980s how important R&D and the new technologies would be. If we started five years later we wouldn't have had the boom in the 1990s."

He doesn't discount that this may involve some luck, but adds: "You have to be lucky but those are lucky who have been working hard."