Wednesday, March 21, 2007

Race to the Finnish

Incumbent Prime Minister Matti Vanhanen is expected to retain power after last weekend’s election in Finland. Vanhanen's Centre Party took top spot in the parliamentary elections with 23.1% of votes, followed closely by the rightist National Coalition Party (NCP) with 22.3% and the leftist Social Democrats with 21.4%.

The NCP is the big mover, up almost 4% and ten seats since the last election in 2003. Between them, the Centre Party and the NCP hold 101 of the parliaments 200 seats which would them a wafer-thin majority were they to form a coalition. But negotiations for the formation of a government will take a while as horse-trading between the prospective partners begins in earnest.

The main loser in the election is the Social Democrats who lost 90,000 votes and eight seats. The result will most likely see a centre-right coalition which means the Social Democrats will be excluded from government for the first time since 1995. The defeat is a body blow for the party that has supplied Finland’s previous two presidents Mauno Koivisto and Martti Ahtisaari who is now the UN’s chief negotiator in the Kosovo peace talks.

While the Social Democrats have dominated the ceremonial role of president, the Centre Party has locked in the more influential role of Prime Minister in recent times. The incumbent, Vanhanen, has been in the role since 2003. Matti Vanhanen was born in 1955 in the central Finnish city of Jyväskylä. His father Tatu was a professor of political science at the University of Tampere who co-authored the controversial book “IQ and the Wealth of Nations” which argued that differences in national income correlate with differences in average national IQ. Matti is also educated in political science but moved into politics rather than education.

Vanhanen was elected to parliament in 1991 and used his interest in ecological issues to gain places in influential committees on the environment. He was appointed defence minister in early 2003 during the brief reign of Finland’s only ever female PM Anneli Jäätteenmäki. Although she narrowly won the election that year, Jäätteenmäki was forced to resign shortly afterwards after a scandal over leaked documents and lying to parliament. She breached the official secrets act by leaking details about a meeting between George Bush and the former Social democrat Prime Minister which suggested Finland might weaken its neutral position in the Iraqi war.

Vanhanen was immediately appointed the new Prime Minister. Although a novice in the cabinet, he was chosen to fill the role precisely because he was a cleanskin with a low profile and no association with Jäätteenmäki. Although apparently an unwilling Prime Minister Vanhanen made a strong impact by lowering the highest tax rates, cutting back on licensed drinking hours (he is teetotal) and encouraging Finns to have more children. His public profile was greatly enhanced by Finland’s presidency of the EU in the second half of 2006.

Finland’s economy is booming and the country ranks high in international surveys on competitiveness. Vanhanen’s government has brought down Finland’s high unemployment rate to 7.6%. The country of 5.3 million has made a strong recovery since the severe recession of the early 1990s mainly due to the cessation of trade after the collapse of the Soviet Union. Finland joined the EU in 1995 and successfully joined the euro currency zone in 2002.

Finland depends on the success of its dominant company. The country is the home of the telecommunications giant Nokia, the world’s largest manufacturer of mobile phones with 36% market share. Founded as a paper mill company in the small town of Nokia, its success dates back to the mid 1970s when it became a shareholder in Televa, a government-controlled company that developed digital telephone exchanges. Finland began deregulating its market and modernising its telecommunications networks with new digital technology at an early stage. The payback was quick. Nokia now accounts for half of the market capitalisation of the Helsinki Stock Exchange. The company continues to grow and in 2006 achieved net sales of 41 billion euros, 20% up on 2005.

As well as sorting out his political allies, Matti Vanhanen will rely on Nokia to continue this phenomenal growth to underpin Finland’s success globally.

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