| Population size | 5.4 million (1 January 2012) |
| Area | 303,892 km² |
| Capital | Helsinki |
| GDP | EUR35,173 per person (2011, at current prices) |
| Currency | Euro (EUR) |
| Corruption level (Transparency International Corruption Perception Index 2012: 100-90 = very clean, 0-9 = highly corrupt) | CPI: 90 (2012) |
| Current government | Conservatives (Kokoomus), Social Democrats (SDP), Left Party (Vasemmistoliitto), Greens (Vihreät), Swedish People’s Party (RKP), Christian Democrats (Kristillisdemokraatit) |
| Three largest cities | Helsinki (595,000), Espoo (252,000), Tampere (215,000) |
| Baltic Sea coastal regions | Northern Ostrobothnia, Central Ostrobothnia, Ostrobothnia, Satakunta, South-West Finland, Uusimaa, Kymenlaakso, Åland |
By Kimmo Elo
The current government term has been overshadowed by the global financial crisis and the sovereign debt crisis in the Euro zone. The economic recovery has been relatively slow and the government has remained focused on maintaining fiscal balance. However, the government’s activities are overshadowed by internal quarrels, especially between the Prime Minister’s party, the Conservatives, and the Minister of Finance’s party, the Social Democrats. The Baltic Sea Region (BSR) has been, is and will be one of the most important regions for Finland in Europe – both in economic and political terms. From a Finnish perspective, the integration of Russia in BSR co-operation has been the most important, if not the exclusive goal of the whole BSR co-operation. In this regard, the upcoming Finnish presidency of the CBSS in 2013-2014 is of interest. Considering the future, a much stronger involvement and commitment of the Finnish government towards the region is necessary. The government could benefit from a far stronger co-operation with actors participating in different BSR networks and from a national think-tank capable of providing high-quality policy analyses on the BSR.
Government
The Finnish national elections in April 2011 broke decades-old dominance by three catch-all parties – Conservatives (Kokoomus), Social democrats (SDP) and the Centre Party (Keskusta) – in the Finnish party system. Since then, the ‘True Finns’ (Perussuomalaiset), led by Timo Soini, has established itself as the fourth biggest party. Together these four parties accumulate almost 3/4 of electoral support.
The ‘True Finns’ continued their triumphal political march in the local elections in October 2012. Although the Conservatives succeeded in defending their position as the largest party by taking 21.9% of all votes (2008: 23.4%), the ‘True Finns’ took 12.3% of all votes (2008: 5.4%), thus exhibiting the greatest gains relative to the last election cycle. In fact, all parties except the ‘True Finns’ lost share in the local elections relative to the last election. Currently, the ‘True Finns’ are present in a majority of Finland’s municipal councils.
Against the background of a steady and stable support between 15-18% for the ‘True Finns’ in national opinion polls, the presidential election held in January/February 2012 was rather exceptional. The popular chairman of the ‘True Finns’, Timo Soini, had to resign himself to 9.4% and fourth place. In the second round, the favourite representing the Conservatives, Sauli Niinistö, competed against Pekka Haavisto, the candidate of the Greens, who surprisingly took 18.8% of all votes in the first round. In the second round, Niinistö took 62.6% of all votes and became the 12th president of Finland.
Policies
The Euro crisis has made the internal tensions and discrepancies of the contemporary ‘six-pack’ government evident. Minister of Finance Jutta Urpilainen, representing the SDP, is in favour of public investments and tax increase, especially for the well-to-dos, whereas Prime Minister Jyrki Katainen has pressed for budget cuts together with stricter control of expenditures. The real fiscal policy has been an attempt to square off the circle by implementing both budgetary cuts and Keynesian methods of economic resuscitation.
The rise of the ‘True Finns’ has also had significant impact on Finland’s EU policies, since the party has succeeded in profiling itself as the spokesparty for all EU critics. For the ‘True Finns’, EU policy is a matter of principle. As a reaction to the overall rise of Euro-scepticism in opinion polls, the government has begun to prioritise national interests in its European policies. Finland has also moved closer to the ‘Nordic bloc’ around Germany, which has pressed for stricter fiscal control and budget cuts. However, the government has had difficulties defending its EU policies, especially vis-à-vis the harsh criticism of Timo Soini on financial support to crisis countries in the southern EU. Although Soini also overestimates Finland’s possibilities to influence certain decisions, the government has argued disharmoniously in many situations.
More generally, the smooth adaptation to the policies of the ‘Nordic bloc’ reveals a fundamental problem of Finnish EU policies: Finland’s influence on the EU’s decision making in general, and the Eurogroup’s in particular, is quite weak. Traditionally, Finland has sought to compensate for its small size (and influence) by joining or supporting (expected) winning coalitions. The closest partner has been Germany. In the current situation, however, Germany’s unpopularity has made it a politically not unproblematic partner, creating a new problem for the Finnish government. Supporting Germany’s initiatives for stricter fiscal control and extended rights for the Commission not only bears the risk of losing popularity among EU member states, but also could feed domestic populist Euro-critical forces. Since leaving the ‘Nordic bloc’ is not an option for Finland, the Finnish government has tried to present EU-level developments as being in line with Finland’s national priorities and goal-settings, but also with opinion polls.
Economic situation and anti-crisis strategies
Both the EU in general and the BSR in particular have been the most important trade areas for the Finnish export-oriented economy. Seven of Finland’s top ten trade partners are EU countries. Four of these trade partners – Sweden, Russia, Germany and Estonia – are BSR countries. Further, almost half of Finnish export and import is directly linked to the BSR and up to 70% of direct investments in Finland come from other BSR countries.
Such a trade structure underlines the economic importance of the BSR for Finland. Taking the relatively small volumes of Finnish exports into account, the high share (almost 60 %) of intra-EU trade is a double-edged sword. On the one hand, this trade has brought certain stability and steady growth during the last decade. On the other hand, economic problems in the EU, especially in Finland’s most important export partner Germany, cannot be easily compensated for.
Finland was severely hit by the global economic crisis in late 2008. Its GDP in 2011 was 2.9% lower than in 2008. The largest decline occurred in 2009 (-7.2%), and since then GDP has been slowly recovering. In 2012, however, GDP contracted by 0.2%. The unemployment rate has also grown from 6.4% (2008) to 8.7% (January 2013). The Finnish government has tried to smooth the economic crisis with targeted fiscal political measures. The price of these measures is an increase in the national debt rate from 33.9% (2008) to 53.0% (2012). From 2009 to 2011, the Excessive Deficit Procedure (EDP) deficit of Finnish government decreased from -2.5% to -0.6%. In 2012, the EDP deficit changed slightly, to -1.9%. Despite these relatively positive fiscal figures, structural reforms are still needed in order to create a sustainable basis for government finances.
The intra-governmental quarrels also overshadowed the budget preparation negotiations in March 2013. In these negations, the government agreed on ‘adapting measures’ amounting to EUR600 million, consisting of EUR300 million in budget cuts and EUR300 million in tax increases. Since then, the so-called ‘tax package’ expected to boost national economic growth and to guarantee fiscal stability has been subject to harsh criticism from both inside and outside the government. In order to boost the domestic economy, the government plans to cut the corporate tax rate by 4.5 percentage points, from 24.5% to 20%. In order to compensate for the estimated one billion euro loss in corporate tax incomes, the government plans a significant increase in taxes on alcohol, tobacco, sweets and electricity. Additionally, dividends being currently exempted from taxes will be taxed according to the capital tax rate. Not only experts disagree about the expected impact of these measures. The plan to tax dividends in particular has made ideological fault lines in the government visible, since this reform favors bigger non-exchange-listed companies.
Finland and the Baltic Sea Region
The Northern Dimension Initiative (NDI) as the wider and the EU Strategy for the Baltic Sea region (EUSBSR) as the narrower framework continue to form the backbone of the Finnish BSR policies. Within this framework, the main motivation remains both economical and environmental. Considering environmental aspects, the Finnish government is committed to closer macro-regional co-operation in the BSR – including Germany, Poland and Russia – as the only effective way to rescue the badly polluted Baltic Sea.
Considering concrete BSR policies, one must admit that the results have been quite modest. The national BSR policy exists as a wide framework only, whereas regional, sub-regional and local actors should be responsible for concrete measures and actions. Consequently, Finnish BSR policies are carried out by non-governmental actors being rhetorically actively and receiving only modest financial support from national and local governments. The political link between these non-governmental actors and the government has remained relatively weak.
Officially, all Finnish governments have been supporters of the work of the most important macro-regional organisations: HELCOM, Baltic Development Forum (BDF) and CBSS. Currently, the intergovernmental CBSS seems to be gaining in importance for the Finnish government. An obvious reason for this is the upcoming Finnish CBSS presidency. In June 2013, Russia will hand over the CBSS presidency to Finland. Finland will then host the next Baltic Sea States Summit in summer 2014 in Turku. Simultaneously, Turku will host the BDF summit. Both summits could strengthen Turku’s status as Finland’s most important hub for the BSR. It remains to be seen, however, whether this enthusiasm will last beyond or, like in Germany in 2012, diminish after the CBSS presidency.
This strong role of the CBSS in the Finnish BSR policy is consistent with Finland’s wider EU policy. In the EU, Finland counts on the strong supporters of intergovernmentalism and subsidiarity. This, in turn, at least indirectly supports the very idea of the EUSBSR, which is not to create any new institutions, but to foster co-operation between existing ones. However, intergovernmental organisations are known for their consensus-seeking. Conflicting vital national interests might result in a deadlock, so they are seldom taken on the agenda.
One crucial weakness of the current Finnish BSR politics is the missing link between academic research and political actors, especially when policy analysis is considered. What is needed is a think-tank capable of producing independent, high-level policy analysis on BSR issues. In this respect, mostly due to its relatively long experience with BSR issues, Centrum Balticum located in Turku counts among the most promising institutions. However, this would require a strong investment in ‘thinking’, i.e. Centrum Balticum should shift its focus, currently on Russia, back on the BSR, invest in building its own research staff and abandon the concept of just being a platform and forum for external actors. Taking the focal importance of the BSR for Finland into account, investing in such a think-tank would be a wise strategic decision.
Outlook
Currently, the Finnish BSR policy is not overflowing with concrete issues. Finland might have respectable goals and priorities for the future of the BSR, but as long as there is no region-wide commitment of all partners involved, Finland is left alone. The central problem is Russia’s still weak commitment to co-operation and developing and fostering co-operation in the BSR. In this respect, the Russian presidency of the CBSS has been rather disappointing. It remains to be seen whether the Finnish CBSS presidency in 2013-2014 can turn over a new leaf in this respect. Because it is not realistic to expect any quantum leap forward during the Finnish presidency, Finland should avoid abstract manifestations and focus on achieving concrete and joint small steps. Due to its economic, political and cultural dependencies, it is in Finland’s own interest to remain active in the region and to develop more uniform regional co-operation. In a wider European context, the EU decision making system, the whole region would benefit from a closer co-operation. This co-operation should build on an active exchange between governments and the dense network of non-governmental actors and organisations, bringing together both people and knowledge.