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by Euro Reporter
2014-12-07 11:10:33
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Economic chill set to make Finland the sick man of Europe

Which of the Eurozone’s 18 member states will be the weakest performing economy in 2015? Italy, which has recorded no economic growth since 1999? Cyprus, which is still reeling from its financial sector collapse in 2012-13? Or some other hard-pressed southern European nation? No. In all probability, the sick man of the Eurozone will be Finland. The Finnish economy is in its third consecutive year of contraction. Any growth in 2015 will be not much bigger than a snowflake. The country will hold a general election in April. The question is whether the dark outlook will benefit The Finns, a populist-nationalist party which was known as the True Finns when it shocked Europe by coming third in the 2011 election with 19 per cent of the vote. The case of Finland is a striking example of how prejudices and oversimplifications fail to capture the complex economic realities of the Eurozone. After the Greek debt crisis erupted in 2009, pundits divided the region into two parts: a northern bloc of creditor countries supposedly characterised by economic efficiency, fiscal rigour and respect for the law; and a southern bloc of debtor states supposedly distinguished by economic weakness, profligate public finances and artful rule-bending.

Geographically and culturally speaking, Finland is as northern as they come. Even more than Germany, Finland insisted on tough conditions for the European component of Greece’s EU-International Monetary Fund financial rescue. Meanwhile, its own economy was sliding into trouble. Now output is shrinking, business confidence is low and – horror of horrors – public debt is going up. Alexander Stubb, prime minister, suggested in August that Finland, like Japan in the 1990s, was in the middle of a “lost decade”. When Finland lost its triple-A credit rating from Standard & Poor’s in October, he told Finns that their “golden era” – lasting from 2000 to 2008 – was over and that they needed “to build a new Finland”. Some causes of Finland’s difficulties are easy to identify. One is the decline of Nokia, the mobile phone company that contributed about a quarter of Finland’s economic growth between 1998 and 2007. Another is the slump in Finland’s pulp and paper industry. Finland’s manufacturing sector lost 76,000 jobs in the six years up to 2012 – a big number for a nation of only 5.4m.

A third factor is the accelerating economic weakness of Russia, driven by falling oil prices and symbolised by its tumbling rouble. Russia is Finland’s largest trading partner, but Finland has signed up to EU sanctions imposed on Moscow over its actions in Ukraine. According to Finland’s central bank, a 25 per cent fall in Russian imports amounts to a 0.9 percentage point drop in Finnish economic growth. But there are other factors at play. Finland’s image as a lean, mean economy, innovative and internationally competitive, is deceptive. Its public expenditure is one of the world’s highest – equal in 2013 to 57.8 per cent of gross domestic product, according to Eurostat, the EU statistical agency. In the private sector, companies that were a roaring success a few years ago – such as Rovio Entertainment, maker of the Angry Birds mobile phone game – have found it hard to fend off competition and have started to lay off staff. It all points to electoral defeat for Mr Stubb’s centre-right National Coalition party. In contrast to 2011, however, The Finns are struggling to exploit the government’s unpopularity. A November 21 opinion poll placed the party fourth with 16.2 per cent of the vote, well behind the opposition liberal Centre party, one of Finland’s traditional parties, on 24.5 per cent. Unlike in Greece, Spain and even France, Finland’s mainstream politicians seem to be holding back the populist tide. This is no small achievement. It offers hope that, once the April 2015 election is out of the way, Finland will lay the groundwork for a new “golden era”, making sure that it keeps its well-deserved reputation for creativity and cool-headed competence.

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Finland votes to legalize same-sex marriage

The Finnish Parliament on Friday narrowly approved a citizen's initiative to legalize same-sex marriage. Gay couples in Finland have been able to enter into registered partnerships since 2002, but until now the country was the only one in the Nordic region to not allow same-sex marriage. Finland is now the 12th European state to do so. In the vote, 105 members of parliament supported the legal amendment while 92 opposed it.
The measure will end the distinction in Finland between same-sex unions and heterosexual marriages and give such couples equal rights to adopt children and share a surname. "Finland should strive to become a society where discrimination does not exist, human rights are respected and two adults can marry regardless of their sexual orientation," centre-right Prime Minister Alexander Stubb said in an open letter before the vote.
Most opponents argued that all children should have the right to a father and mother. "This is a question of the future of our children and the whole society, and such changes should not be made without thorough evaluation of their impact," Mika Niikko of the nationalist Finns party said before the vote.

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Finland approves Russian-backed nuclear plant

Finland has approved the building of a controversial Russian-backed nuclear power plant, strengthening energy ties between Helsinki and Moscow at a time when many western capitals are seeking to isolate Russia over its intervention in Ukraine. Finnish lawmakers on Friday voted by 115 to 74 in favour of the government’s decision to approve a plan submitted by a Finnish-Russian consortium Fennovoima Oy to build a new nuclear power plant on the northwest coast of Finland at an estimated cost of between €4 billion ($4.9 billion) and €6 billion. Russian nuclear power company Rosatom holds a 34% minority stake in the group and will raise finance for the new plant. Despite the large vote in favour, Fennovoima’s reliance on Russian backing has stirred unease among some Finnish politicians and the public at large, many of whom see the deal serving Russian geopolitical interests at a time of heightened tensions. Eyebrows are also likely to be raised in other European countries.

Ville Niinistö, the leader of the Greens of Finland, which opposes nuclear power on principle, said Russia can use Fennovoima to create a perception, especially before its own people, that Moscow hasn’t been isolated because of its Ukraine policy. Earlier this autumn, Mr. Niinistö withdrew his party from the Finnish government in protest over the project, leaving the administration with a razor-thin majority in Parliament. Fennovoima received an initial approval for the project in 2010 but has struggled to attract funding as doubts over nuclear power’s profitability and safety have grown. The project was floundering before Rosatom’s entry in late 2013.  Despite Rosatom’s backing, Fennovoima’s future remained doubtful until this week when the Finnish energy utility Fortum Oyj said it would take up to a 15% stake in Fennovoima, ensuring the project will meet a 60% indigenous ownership requirement set by the Finnish government.

Fortum’s investment is contingent on the utility getting a majority ownership of a sizable number of hydropower plants in Russia as part of an asset swap involving Rosatom and the natural gas giant Gazprom . When the European Union decided to apply new economic sanctions against Russia in September, Finland, along with some other EU members, publicly called for delays to their implementation in the hope that the Ukraine crisis would show signs of easing. Finland’s problem is that the vote can be seen as helping Russia’s interests even if it is simply driven by commercial considerations, said Arkady Moshes, a scholar of EU-Russia relations at the Finnish Institute of International Affairs in Helsinki. “The context and the timing of this deal allow a very critical interpretation of it in Finland and even in other European countries,” said Mr. Moshes. Russia has been perceived as trying to increase its influence in Europe through energy, and according to Mr. Moshes both politics and business shape Rosatom’s export efforts. “It would be inconceivable that such a large company would be immune to political motives,” he added.

 


          
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