Finnish Elections: Coalitions will be key

The liberal Centre Party (KESK) is likely to become the biggest party, garnering 20-25% of the vote. The key question, therefore, is who it will go into coalition with to form the new government. The two most likely options are:

  •  A “red soil” coalition: KESK in coalition with the Social Democrats (SDP) and the Greens. However, agreeing on economic policy could be a struggle in this combination.
  • A centre-right coalition: The National Coalition Party (KOK), led by current Prime Minister Alexander Stubb, would be the most natural partner for KESK. However,  Stubb’s party has hit its lowest levels of support in fifteen years and may only muster 16% of the vote. This means that KESK leader Juha Sipilä may also have to rely on the eurosceptic Finns Party – a party combining patriotic rhetoric with traditional Nordic welfare polices. The Finns are likely to fall short of the 19% they got in the last election, but they have been surging in the final part of the election campaign: in a poll published yesterday, they were on 16.7%.

Four areas for Europe to watch

1. Reviving the Finnish economy: As we’ve noted previously, the undiversified Finnish economy –  Nokia, trees and metals – was hit hard by the crisis, leaving it with one of the worst growth rates in Europe. Though it may depend a bit on the final coalition agreement, the new government is likely to pursue a series of spending cuts as a key priority.While there is a broad acceptance on the need for economic reform and measures to boost competitiveness, it remains unclear over how committed each party is to pushing through tough changes to overhaul the country’s economic structure. The manner in which Finland chooses to tackle the twin challenges of an ageing population and declining demand for exports, will be an testing ground for traditionally strong European economies – including Germany – who may find themselves in similar situations in the not too-distant future.

2. EU policy: Finland remains a pro-EU country, largely due to the 1,340 km border it shares with Russia. However, Finnish politicians really aren’t keen on bailouts: they share the German belief in austerity – but do not have the same sense of moral obligation to Europe. Remember, it was the Finnish government that demanded collateral from the Greek government in the wake of the first Greek bailout – an issue that took months to resolve. Sipilä himself has said, “we won’t support continued aid for Greece.”

However, the new Finnish government may have to ask its parliament to approve precisely that – and  that will be particularly hard for any coalition featuring the Finns to swallow. Ultimately, however, it’s unlikely that Finland will veto a third Greek bailout on its own accord (Finns MP may be given permission to abstain in any such vote, for example.) Helsinki will likely following Berlin’s line on the issue.

3. Immigration: Finland accepts the absolute minimum levels of immigration under international obligations: only one tenth of the number of asylum seekers Sweden takes in, for example. Sipila has flirted with the idea of increasing labour migration from outside the EU, suggesting that employers should be more flexible on Finnish language requirements. The question is whether he can follow through in government.

4. Rebels in government: If the Finns Party becomes part of the ruling coalition, it will be second time since the onset of the crisis when a so-called “anti-establishment” party becomes part of the “establishment” – or at least enters the ruling coalition (the first being Syriza.) During the last few years, the Finns Party has sought to moderate its image and policies, with its leader Timo Soini even saying, for instance, that “Finland does not have too many immigrants” – a statement that he could make safely.

Nevertheless, the new Finnish government is likely to be forced to make some unpopular choices given the state of the economy, and Soini may be forced at the very least, to compromise over Europe. Therefore, the Finns may fall victim of the “Lib Dem effect,” becoming the party that is seen as having sold out in power. Soini’s strong desire to enter government may thus actually weaken the Finns party in the long-term.

In contrast – in Denmark – the anti-establishment Danish People’s Party (which could become the second largest party in the country’s election this later this year), is likely to resist the temptation to enter government, choosing instead, to maximize its influence as kingmakers in parliament (as it was doing between 2001 -2011.) With the dynamic of “the establishment” versus “the rebels” continuing to dominate politics across Europe, the contrasting fates of the Finns and Danish People’s Party will surely hold lessons – wherever you stand.