Finnish government heads towards turbulent times

By Jarkko Juselius

Economic indicators in Finland are finally showing signs of improvement: inflation is low and the business world feels confident about the future. In spite of these good prospects, Prime Minister Paavo Lipponen's "Rainbow Coalition", which is approaching the half-way point in its term of office, seems to be heading towards its most difficult period. The Finnish nightmare, the second highest unemployment rate in the EU, is not showing no sign of relenting, and possible membership in the EMU divides opinion inside the political parties.

The Social Democrats (SDP) won the 1995 parliamentary elections by promising to regenerate the economy and reduce unemployment by half. The government was formed by the SDP, the conservative Coalition Party, the Left Alliance, the Greens and the Swedish People's Party. The government began by agreeing budget cuts of 21 billion marks, which invaded areas sacred to the trade union movement, including unemployment benefits. The cuts were substantial: this year the total budget is about 200 billion marks.

According to forecasts, the economic growth rate in Finland this year will be about four per cent, with inflation under one per cent. Unemployment, however, is a totally different story. Recent figures revealed that unemployment is approximately at the same level as when Lipponen's government was formed. According to the Ministry of Labour, 19 % of the workforce are without work.

Just before Christmas the internal divisions of the left-wing parties and the Greens started to intensify. In addition to unemployment, the main government party, the SDP, was rocked by a poor showing in the October Euro-elections and local elections. The SDP voters stayed at home. The main opposition force, the Centre Party, was the most successful vote-catcher in the Euro-elections and got an excellent result in the local elections as well. The local elections in Finland are the half-way tavern where the parties normally check their direction in view of the parliamentary elections to be held in two years' time.

As the labour market players are preparing for the autumn's negotiations on wages and salaries, unemployment, incomes policy and taxation become all tied in together. All the research commissioned by the government points out that to reduce unemployment, the current high rates of taxation should be lowered. The main government parties will thus be fighting over who will be the beneficiaries. The left-wing parties want to lighten the tax burden of small and middle income wage-earners. The conservatives would like to do this for everyone. The political autumn will certainly be hot.

What makes the wage negotiations even more difficult is the fact that the other main issue, the possible Finnish participation in the third stage of the EMU, will have to be decided during the first half of 1998. Wage-earners have demanded guarantees against possible turbulence in the economy. The usual medicine for improving the competitiveness of the Finnish forestry industry has been a devaluation of the mark once in every ten years. The EMU would make this impossible. The trade unions want to make sure that their members are not the only people paying the bill for future recessions.

Another big debate this spring will be security policy and a possible membership in NATO. The defence policy committee chaired by Lipponen will publish its recommendations in March. Already there are voices demanding a clear stance on NATO membership. The foreign policy decision-makers, under the leadership of the President, Martti Ahtisaari, have repeatedly assured that Finland has no need to join NATO. The official Finnish line is military non-alignment, based on a credible defence capability. This line has allowed collaboration with NATO in a Partnership for Peace programme. The arrangement is regularly praised in official speeches.

Several prominent commentators have, however, predicted future membership of NATO. The most notable among these was the veteran diplomat and writer Max Jakobson.

These arguments and developments form the background when Finland prepares for the super-year 1999. Finland will then hold parliamentary, EU and local elections as well as the first round of the following year's presidential elections. In July 1999 Finland will begin its six-month stint as the chair of the EU. The EU Summit will take place in Finland in December, just before the turn of the millennium.

Jarkko Juselius is a political correspondent working for the radio news desk at the Finnish Broadcasting Company. He spoke at the Finnish Institute Study Day on Finnish Society in December.

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