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Country Commercial Guides
FY 2000: Finland
CHAPTER III: POLITICAL ENVIRONMENT
Nature of Political Relationship with the United States
Relations between the United States and Finland are excellent and free from bilateral disputes except for occasional minor trade disagreements, now largely subsumed by the broader U.S.-EU trade relationship. The U.S. cooperates with Finland in various international organizations such as the UN, OSCE, and OECD. Finland's 1995 accession to the European Union (EU) has added a new dimension to U.S.-Finnish relations. Both countries share a deep interest in the stable political and economic development of Russia and the Baltic States. This shared interest is reflected in the U.S. Northern European Initiative (NEI) and the EU's Finnish-inspired "Northern Dimension" program, both of which aim at developing the Nordic-Baltic-NW Russia region.
Finland remains militarily nonaligned, but is an active participant in NATO's Partnership for Peace program and in the NATO-led peacekeeping mission in Bosnia. In addition, Finland plans to take part in the NATO-led peacekeeping operation in Kosovo.
Major Political Issues Affecting Business Climate
Finland took the historic step of joining the EU in January 1995. A new parliament was elected in March 1999. The president, the governing coalition, the opposition, and the Finnish public hold firmly to Finland's current policy of military nonalignment. Public debate about possible Finnish membership in NATO, which began in 1996, continues. One of the key issues for Finland's EU Presidency (July-December 1999) will be Kosovo reconstruction. In 1998 Finland's parliament easily approved a government motion to have Finland enter the first round of the EMU. EU membership for the Baltic States is a Finnish priority.
Social Democratic Prime Minister Lipponen's broad, five-party coalition continues to face high unemployment (10.3% according to the Ministry of Finance) and is trying to prune but preserve the welfare state. Cooperation between Social Democrats and Conservatives may prove difficult during Lipponen's second term due to respective losses and gains in the March 1999 parliamentary elections.
Nevertheless, the Lipponen government's budget cuts have generally gone well. Government, labor unions, and employers reached broad, tripartite income policy agreements in 1995 and 1997, helping to dampen inflation and preserve prospects for continued economic growth. The government hopes to do the same in 1999. Finland's high unemployment rate has declined slowly but steadily from a peak of 18.2% in 1994 to the current 10.3%. Another challenge for the government is finding a consensus on how to meet increased energy since the government includes a Green Party strongly opposed to expanding the use of nuclear energy.
Brief Synopsis of Political System, Schedule for Elections and Orientation of Major Political Parties
Finland is a parliamentary democracy, headed by a strong president. However, the country's new constitution will considerably reduce presidential powers. The president is elected for a six-year term and has primary responsibility for foreign and security policy. The Prime Minister is head of government and has responsibility for domestic affairs. However, Finland's accession to the EU has blurred the line between foreign and domestic policy. The president of Finland is Martti Ahtisaari, who took office in March 1994. He has decided not to run for re-election in January 2000.
Parliamentary elections are normally held every four years; the most recent election was in March 1999. Social Democratic Party chair Paavo Lipponen continues as Prime Minister for a second consecutive term. Lipponen's government is composed of a broad "rainbow" coalition of parties with the Center Party in opposition. Nine parties are currently represented in the 200-member unicameral legislature: the Social Democrats (51 seats), the Center Party (48), the Conservative Party (46), the Left Alliance (20), the Swedish People's Party (12), the Green League (11), the Christian League (10), the True Finns (1), and the "Reform Group" (1). The governing coalition consists of the Social Democrats, the Greens, the Left Alliance, the Swedish People's Party, and an independent minister of agriculture.
Principal Political Parties
Social Democratic Party (SDP): The SDP is an urban-based party with close ties to labor unions. Despite its Marxist origins a hundred years ago, the SDP of today is supportive of the market economy and individual rights. At the same time, it is also supportive of the Nordic welfare state. Under its chairperson PM Paavo Lipponen, the party strongly supported Finnish entry into the EU in 1995 and into the Economic and Monetary Union (EMU) in 1999. The SDP has, for the past few years, attempted to lower the high unemployment rate and cut the budget deficit while retaining the core of the welfare state.
Center Party: Formerly called the Agrarian Party, the Center Party pursues the interests of farming and rural communities. The Center was strongly divided over Finnish accession to the EU and the EMU. As the party with the widest geographic support, the Center's challenge is to appeal to urban and suburban voters in southern Finland. Left outside the government for the second consecutive time after the March 1999 elections, party chairperson and former Prime Minister Esko Aho has decided to run in the January 2000 presidential election. Many consider the Center to be the true "conservative" party, especially on social issues.
Conservative Party: The largely urban-based Conservative Party (Kokoomus) would not, by U.S. standards, be termed "conservative". The party re-entered government in the 1980's after a twenty-two year hiatus. It gained seven seats in the most recent parliamentary elections, a larger gain than any other party. Under the leadership of its chairperson, deputy PM and Finance Minister Sauli Niinisto, the party has favored fiscal restraint, deregulation, and lower taxes. However, like the other major political parties, the Conservative Party is strongly supportive of the welfare state. The Conservatives strongly support Finnish EU membership and draw support from business sector and from other professional and white-collar employees. Even though individual Conservative leaders and the party's youth organization have advocated Finnish NATO membership, the party backs the government's posture of military nonalignment.
Left Alliance: A conglomeration of socialists, ex-communists, and disenchanted Social Democrats, the Left Alliance also draws support from the trade unions. A strong leftist tradition, combined with workers' concern that the Social Democrats are too centrist, helps maintain Left Alliance support. Dynamic young chairperson Suvi-Anne Siimes, elected in the spring of 1998, has attracted greatly needed young voters. Siimes' academic training as an economist and her non-doctrinaire approach to politics have been important for her success and that of the party. However, cooperation with the Conservatives and Social Democrats within the Lipponen government has been difficult, mainly because of the hard-line faction that still exists in the Left Alliance.
Swedish People's Party: The party draws its support from Finland's small (six percent) Swedish-speaking minority. It is generally center-right and supportive of EU membership. The party has been at home in both socialist and non-socialist governments, using its swing vote to protect Swedish-speaking community interests. Prominent party officials have advocated Finnish membership in NATO, though this is not currently a party-wide position. Among the advocates of NATO membership is Elisabeth Rehn, now a UN special envoy in Bosnia. Rehn came in second in the 1994 presidential elections and is now leading all polls for the upcoming (2000) presidential elections.
Green League: The first green party to serve in government in Europe, Finland's Greens stress social and environmental issues. They couple opposition to nuclear energy with a moderate approach to key issues such as forestry, taxation, and the welfare state. They have strong appeal to young, urban voters and especially women. Nine of their eleven MPs are women.
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Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
