EU country briefing: Finland

The following article is a part of a series of brief country profiles for the EU-28 ahead of the European elections in May.

Finland joined the EU together with its neighbour Sweden in 1995, turning away from its former foreign policy of  Finlandisation, in which it was forced to accept certain measures of Soviet influence on their domestic governance and foreign policy to maintain sovereignty.

The country’s accession came after a confirmation referendum a year earlier in which 57% of Finnish citizens voted in favour, although many rural provinces voted against. Like Sweden, it did not join NATO. Its EU membership also meant that the EU now shared a 1,340 km border with Russia.

In 2001, the country also became part of the Schengen area. Moreover, it belonged to the first group of countries adopting the Euro – unlike its neighbours Sweden and Denmark.

Finland has a population of around 5.5 million people and it will elect 13 Members of European Parliament (MEPs) to the European Parliament (EP) this year.

The country has a notable Swedish minority, although their share declined from 12.9%  in 1990 to 5,2% in 2018. Swedish is also Finland’s second official language.

Nowadays, two out of three Finns consider EU membership a positive thing, while only 8% reject it, which is close to the EU average (61/10). Most citizens (81%) also feel as EU citizens, and most (82%) also support the Euro. However, only 39% of people voted in 2014’s EP elections.

Economy

Finland returned to positive economic growth rates after experiencing economic recession between 2012 to 2014 amidst the Euro crisis and a slumping of its exports, along with Nokia’s decline. Nokia, once one of the few global tech giants of Europe, was taken over by Microsoft in 2013.

Therefore, the average economic growth was just 1.5% between 2014 and 2018, despite recent growth rates of 2.7% in 2017 and 2.3% in 2018.

However, the economy is forecast to slow down (again) to 1.9% in 2019 and 1.7% in 2020 due to the current global uncertainty and economic slowdown of Finland’s main trading partners (notably Germany). Economic risks including a shrinking workforce, weak labour productivity growth and mounting household debt.

Nonetheless, some industrial branches, notably the Finnish game industry, are booming and attracting talent from all over the world: its one of the fastest growing in the global gaming market with an average growth rate of 45%.

Finnish GDP amounted to almost €224 billion in 2017, 1.7% of the EU’s total (excluding the UK). Finns were on average (€35,900) significantly richer in 2017 than the EU’s average (€27,700) – although this is below its pre-crisis (2008) performance (€37,300). Likewise, in purchasing power standards (PPS), Finland’s GDP per capita in 2017 (109% of the EU average) was below 2008’s (121%).

The unemployment rate is still recovering in the country, standing at 7.4% in 2018, which remains above the EU average of 6.8%. These trends were magnified in the youth unemployment rate, which was still 17% in 2017 (coming down from 22.4% in 2015), above the EU average of 15.2%.

Political context and direction

Finland was part of Russia as an autonomous Grand Duchy from 1809 to 1917 (after centuries of Swedish rule), before securing independence in 1917. While the country resisted occupation during WW2 – notably during the legendary 1939-1940 Winter War – it lost circa 10% of its territory to the Soviet Union (USSR).

Despite Finland’s shared long borders and troubled history with its big eastern neighbour, Finland managed to stay independent during the Cold War in exchange for close economic and political ties with the USSR.

Crucial here was the Agreement of Friendship, Cooperation, and Mutual Assistance of 1948 (YYA Treaty) with the Soviets, which included a mutual defence clause and prohibited Finland from joining organisations considered as hostile to the USSR.

While the YYA Treaty was abolished in 1991, relations since then have been both warm and cool, fluctuating with time.

Finland soon joined the EU in 1995 and anchored itself in Western institutions. It, however, had not joined NATO but instead has a wide-ranging and enhanced partnership with the Alliance while maintaining a rather cautious and distanced relationship with Russia.

The Republic of Finland has a unicameral parliamentary system with Prime Minister (currently caretaker Juha Sipilä) as the main political figure. The Finnish Parliament (Eduskunta) plays a strong role in decision-making on EU matters, compared with many other member states.

The prime minister shares power on defence and foreign policy with the President, since 2012 Sauli Niinistö, who won a resounding second term in 2018 with 62.7% of the vote in the first round. He is seen to guarantee stability amidst increasing tensions between the West and Russia, continuing to maintain the country’s cautious relations with the Kremlin.

The Finish president’s powers were limited in 2000, stripping back many prerogatives. This followed earlier reforms enacted in the 1980s, following the long rule of the influential Urho Kekkonen, who was the country’s president for decades (1956-1981) – and was favoured by the Soviets.

In Finland’s multi-party democracy, no single party came close reaching an absolute majority, forcing constant compromises across the political spectrum to form viable coalitions.

Post-independence, the dominant political parties have long been the centre-left Social Democratic Party (SDP) and centrist-agrarian Centre Party (KESK) – until 1965 known as the Agrarian League, followed by the liberal-conservative National Coalition Party (KOK).

Initially banned, the communist Finnish People’s Democratic League (SKDL) became one of the main political parties in the post-war era. It was part of many coalition governments and even ended first in 1958’s parliamentary elections. It declined at the end of the 1970s and especially in the 1980s and was pushed away from the centre of power.

The SKDL dissolved definitively in 1990 at the end of the Cold War. Its successor party, the socialist Left Alliance remains a persistent presence in Finnish politics as a second-tier party, hovering circa 8-9% in recent elections.

KESK and the SDP have competed mostly for first place, joined by the pro-business National Coalition Party, which won national parliamentary elections in 2011 under Jyrki Katainen’s leadership, who became Prime Minister (2011-2014), and later EC Vice-President (2014-).

Another KOK heavyweight, Alexander Stubb took over, but lost 2015’s national parliamentary elections and was ousted from leadership in 2016. He recently made a failed bid to become the Spitzenkandidat of the European People’s Party (EPP) the party is part of.

The Green League broke through in 1983’s elections, and saw their support increase over time, with ups and downs. Its biggest success was in this year’s elections, where they ended fifth with 11.5% of the vote.

Another strong force is the right-wing Finns party. The party (before known as the True Finns) emerged from the Finnish Rural Party, a second-tier party in the 1970s/80s. After the Finns entered parliament in 1999, its support increased, before its surge in 2011, when it ended third in parliamentary elections. It gained significant support opposing financial bailouts for Greece.

Ever since, Finland’s stance on further EU financial integration and solidarity has been tough. In 2011, the Finnish government demanded state assets as collateral for a financial bailout, while the opposition Finns demanded Greek islands. The hard stance has been attributed to the country’s own relative economic hardship.

While the Finns lost some support after the 2011 election, they came in second at the 2015 national parliamentary elections. Its success and relative moderation (particularly over the Euro crisis) earned it a place in government, together with KOK and KESK. KESK won those by promising to fix Finland’s economy, led by the technocrat and millionaire businessman Juha Sipilä.

Governing with the Finns was complicated. While it promised to block a new Greek financial bailout deal, Finns party leader Timo Soini ultimately refrained from blocking such a deal.

However, following a divisive leadership election, the more far-right immigration hardliner Jussi Halla-Aho took over in 2017. This prompted a government crisis, as both KESK and KOK did not want to continue governing with the Finns, led by Halla-Aho.

Timo Soini resolved the crisis by creating a relatively more moderate parliamentary faction called Blue Reform (SIN), which was joined by half of the Finns parliamentary group and upheld their support for the coalition.

The end of Sipilä’s ruling coalition was characterised by its inability to agree on healthcare reforms, which prompted the government’s collapse. The same issue brought the government close to collapse already in 2015.

Sipilä’s government was characterised by its economic reforms and austerity, but also made headlines with a pioneering basic-income experiment, although the preliminary results of the experiment were ambiguous and some experts saw it ultimately as a failure.

The prolonged economic recession played a continued important role in Finnish politics. In 2016, Finland was still dubbed Europe’s sick man in 2016, following the triple whammy of Nokia’s fall, the forest industry decline and the decline in trade with Russia.

Finland’s recent political scene has been more fragmented following April’s national parliament elections that saw SDP (17.7%) win by a knife-edge, followed by the Finns (17.4%) and KOK (17%). KESK to fourth place, with the lowest support (13.8%) since independence.

The Finns, which struggled following the 2017 party-split, regained momentum over a staunch anti-immigration campaign and by providing a sceptical voice on costly policies combatting climate change that resonated with the public. On the other hand, this also favoured the Greens that surged to 11% of support.

The question of how to reform the welfare state was also a central issue, benefiting the SDP. Its leader, Antti Rinne, is expected to become the country’s next prime minister. He plans to increase social spending and increase efforts on climate change, although the recently started government formation process has still a long road ahead.

On 8 May, Antti Rinne confirmed that five parties began coalition negotiations: the SDP, KESK, Greens, Left Alliance and Swedish People’s Party. This means that they would have a majority of 117 out of 200 seats. The inclusion of KESK was a surprise, given its historic defeat.

While the Finns ended second, they are not expected to become part of the future coalition. The problem with the Finns – as Antii Rinne said it – is that they hold too different and rightist values compared to the SDP. Moreover, KOK expressed its reluctance of entering the same government with the Left Alliance.

Nonetheless, as EP elections near, its unlikely a coalition will be formed before that.

Predictions

Finland is a specific case as it just held national parliament elections on 14 April.

Therefore, no big shifts in support are expected, mainly because the government formation process is expected to last far beyond the EP elections. Nonetheless, if the past electoral trend continues over the issues of climate change and immigration, both the Finns and Greens could perform (even) better.

However, if a similar result is reached, the distribution of MEP seats could be as follows: The social-democrat SDP would win 2-3 MEPs for the Progressive Alliance of Socialists and Democrats (S&D); the right-wing populists Finns would win 2-3 MEPs for the Europe of Nations and Freedom (ENF), which is expected to become part of Mr. Salvini’s alliance and the liberal-conservative NCP/KOK could also gain 2-3 MEPs for the European People’s Party (EPP).

However, this is based on a potential result in which they would again each gain between 17-18% of support. A small increase here or there for any of those parties would allow them to reach a third MEP seat, whereas a small decrease would see them lose one.

The parties that follow are the centrist agrarian KESK, the Green League and the socialist Left Alliance, with 14%; 12% and 8% of support respectively, resulting in 2/2/1 MEPs respectively. For the Centre Party, these would go to the Alliance of Liberals and Democrats (ALDE); for the Green League to The Greens/European Free Alliance (Greens/EFA) and for the Left Alliance to the European United Left–Nordic Green Left (GUE/NGL).

Other parties, including the Swedish People’s Party (SPP) that promotes the interests of the Swedish minority or the smaller Christian Democrats do not poll high enough with 5% and 4% respectively to win a MEP seat now.

In any case, turnout will be important and stood at 39% in 2014. Any party that manages to mobilise their electorate more than before, especially the current top three, could see them win the elections. It could be an important symbolic victory for any party to end up first. Yet, such an outcome is hard to predict given the comparable levels of support for the SDP, Finns and KOK.

Robert Steenland works as an evaluation and research consultant in EU policies, as well as an analyst in EU politics.  He holds a double degree master in European Governance.

Jasmin Päri works as a Social Insurance Specialist at Kela, the Social Insurance Institution of Finland. She has a Master’s degree in the History of Science and Ideas and she specialises in history of democracy.

Daniel Matthews-Ferrero is a Marie Curie PhD researcher in the POLITICO programme at the University of Aberdeen, focusing on contemporary Western European populism. He holds a Master’s degree in European Interdisciplinary Studies from the College of Europe.

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