The man set to become Finland’s next prime minister has the potential to prevent his country from wrecking EU plans to aid Portugal and shore up the euro — but it will be a daunting task and it won’t be pretty.
To do this, Finnish Deputy Prime Minister Jyrki Katainen may need to offer cosmetic concessions on European finance, tougher immigration rules and attractive Cabinet jobs to enable the Euroskeptical True Finns — the real election winners — to say they are not abandoning their principles to enter government.
“I believe it is possible to find formulas that satisfy everyone so that they don’t lose face,” said Risto Uimonen, an independent political columnist and author.
Such a deal could involve Katainen’s National Coalition agreeing to the government asking Brussels for changes to the way the eurozone’s bailout fund works, without threatening to torpedo it altogether. Katainen begins talks this week to form a new government after his party emerged on top, with 44 out of 200 seats in parliament. The True Finns scored stunning gains in Sunday’s election and have nearly as many seats, with 39.
The prospect of a Finnish administration including the True Finns has rattled markets worried over the fate of the Portugal package. The Finnish parliament, unlike others in the eurozone, has to approve all requests for EU bailout funds.
Political analysts said that the True Finns cannot be left out of the new government after voters made the populist party the third-biggest in parliament, unless the True Finns themselves walk away from the negotiating table.
One way to appease Timo Soini — the plain-speaking, popular leader of the True Finns — would be to give him and other party members significant Cabinet posts.
Katainen has promised that any changes sought by Finland to a planned bailout for Portugal, which has yet to be finalized, would not be large. He said the government would maximize Helsinki’s voice in international affairs.
However, given the depth of public feelings on the bailout issue, not just among True Finn supporters, Cabinet jobs are unlikely to be enough.
“Finland could say that it will try to negotiate changes in the Portugal package or in the permanent support fund,” Uimonen said. “Later the government could say that Finland’s power was not sufficient [to achieve that].”
“That would give everyone a chance to have their say and those who have supported the aid package would not have to give up either,” he said.
Still, analysts said Katainen would not budge on the main principle of support for Portugal and the European Financial Stability Facility (EFSF), the bailout fund that Soini also opposes.
“I don’t think the prime minister’s party will back down on this,” said economist Sixten Korkman of the Research Institute of the Finnish Economy (ETLA). “Either the True Finns will have to back off on this one or not be part of the government.”
The Social Democrats (SDP), who are also seen as partners in the next coalition, do not oppose aid altogether, but have demanded that private investors, banks and indebted countries themselves bear more liability for reckless lending.
Uimonen said that the True Finns could conceivably come round to a position closer to that of the SDP.
“At this stage, I believe that Timo Soini is willing to compromise and he has been quite moderate in his remarks after the election,” he said, adding that Soini would not easily pull out of the government negotiations.
Tuomo Martikainen, an emeritus professor at Helsinki University, said one idea being mooted was to keep Finland out of the bailout plan.
However, Finland has long prided itself on its EU credentials, and politicians inside and outside the country would be wary.
“The danger is that other European countries could also start demanding the same as the Finnish government in regard to aid to Portugal,” said Martikainen, a political scientist.
Slovakia managed to pull out of paying its share of last year’s ad hoc rescue for Greece, arguing that it was poorer per capita than the Greeks.
However, Finland is much wealthier than Portugal by that measure, and as one of only six AAA-rate eurozone sovereigns, its presence in the bailout fund is politically vital and financially important.
Consensus is needed among euro members on making changes to the temporary EFSF as well as the permanent European Stability Mechanism (ESM), which is due to replace it.
Regardless of how the ESM and the EFSF are handled, Korkman said: “What you cannot avoid is Portugal.”
A decision from the Finnish parliament will be needed on Portuguese aid in the middle of next month.
“That could become a watershed for which parties take part in the next government because it may need to be taken before the new government is formed,” he said.
Analysts said Katainen has few bargaining chips that stack up well against Soini’s awkward main campaign demand, namely that Finnish taxpayers should not have to foot the bill for nations such as Greece and Portugal.
However, one chip that matters to the True Finns is immigration, although the numbers are slight by European standards.
The True Finns have been called xenophobic, although they say they only want to put Finnish citizens first. Either way, the party is keen to have tighter restrictions on how immigrants can bring family members to Finland.
That on its own may not be enough, but throw in a Cabinet post or two, and some changes in language by the EU and analysts say Katainen has a fighting chance.
“The True Finns can get a lot of satisfaction as part of a package deal — good ministerial positions and concessions on various things that would satisfy their clientele,” Korkman said.
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