Finland under the rainbow
The second government headed by Paavo Lipponen, 58, has been nicknamed "the Rainbow", because, it contains the same broad range of colours from the political spectrum as his first. "Such a broadly-based government is really unique in composition in the whole world," says Lipponen, clearly satisfied with his arrangement. "True, there are other examples in Europe showing that the old political middle line can be crossed; in other words, that social democrats and Christian democrats - or conservatives of that ilk - can find each other. Without exception, the results of such cooperation have been good."
Paavo Lipponen has led the Social Democratic Party since 1993 and formed his first rainbow coalition in 1995. Its unprecedentedly broad political base immediately prompted astonishment and doubts: many wondered whether traditional political opponents could fit under the same roof. The Prime Minister vigorously defends the arrangement: "In a way, it was a situation akin to war, one in which we had to pull ourselves up out of recession and make difficult decisions. Broad political cooperation, to which the labour-market organisations also made their respective contributions, had the effect of reducing conflicts. The government composition took shape in a new Europe as it were, and also in a period of severe economic crisis. It had a task that transcended the old domestic-policy wrangling. The starting point was healthy."
The Social Democratic Party lost a considerable amount of ground in the 1999 general election, but retained its position as the biggest in Parliament. On the other hand, the (conservative) National Coalition Party, which had also been in government, won nearly as many seats as the Social Democrats lost, so the framework for continuing with the same alliance remained intact. Lipponen's second government has 140 of the 200 parliamentary seats behind it: (Social Democrats 51, National Coalition 46, Left Alliance 20, Swedish People's Party 12 and the Greens 11). The opposition comprises the 48 deputies of the Centre Party, which gets most of its support in rural areas, the Christian League's 10 and a couple of one-man parties.
Paavo Lipponen agrees with the view that political disputes are largely resolved within the government. If the parties across the spectrum from conservatives to socialists reach unanimity on a matter - that's it. "In a clear majority parliamentarism the opposition's role is in any case different from what it used to be . Irrespective of whether the opposition is big or small, it is the majority that decides. Yet it would be unwise to disparage the opposition. Its strength lies in alternatives, not parliamentary seats. If the opposition (i.e. the Centre Party first and foremost) has a strong alternative, it will be a serious challenger at the next election."
Economic prospects clear and stable
The Prime Minister and the Minister of Finance, Social Democratic leader Paavo Lipponen and National Coalition chairman Sauli Niinistö are the powerful duo who have led Finland for five years. Smaller partners in the government coalition have tried to raise their own profiles from time to time, but in tight spots the government ranks have remained well closed. However, some political observers point out that Lipponen's second government no longer has the same mission as in the early years, when the flames of different political ideologies were subdued in order to achieve what was perceived as a common goal.
Even the severest critics have to admit that the government's policies have been consistent. And results have been achieved: in July 1999, the prestigious Wall Street Journal praised the economic policy over which Paavo Lipponen has presided. Thus the Prime Minister, often criticised for his tendency to grumpiness, has every reason to smile. "If we look at the growth figures, employment, the balance in the economy and its competitiveness, things are going relatively well for Finland. Unemployment has dipped to 10 per cent, below the EU average, and is continuing to fall. A growing proportion of the working-age population is in jobs. However, there is still a lot to be put right in the aftermath of the recession and that calls for measures over a very long period."
Lipponen believes that credit for this positive development is due to the good and long-term cooperation between the various parties in his governments. "It has been possible to resolve difficult issues on a broad basis, which is a unique situation in Europe. Our positive decision in relation to EMU (which the government worked determinedly to achieve) was closely linked to our transition to a new era. Now we enjoy a clear and stable outlook on the economic side. The competitiveness of our business sector has been safeguarded, at the same time as wage-earners' net income has risen even more than had been expected. Companies can plan their operations and consumers can be confident that interest rates will not suddenly soar to astronomical heights. As recently as the early 90s one could sometimes hear it said that the only ceiling was the sky, but now interest rate changes are talked of in terms of fractions of one per cent."
The Euro will strengthen
Finland has been participating in economic and monetary union (EMU) from the start. A great many Finnish companies have already adopted the Euro as the currency in which they conduct their international trade. Citizens are becoming increasingly familiar with the future single currency, because retail prices have been marked in both markkas and Euro since the beginning of 1999. The eleven participating countries will drop their national currencies altogether in 2002.
Lipponen sees monetary union as a stability-increasing factor and believes that the Euro as a currency will gain strength relative to the US Dollar. "The interest level has been historically low, because inflation has been minimal and growth slow. Now with growth seemingly accelerating it will still be possible, nevertheless, to adhere to the goals that we have been striving for through cooperation in financial policy; in other words, balancing public finances. Thanks to this and structural reforms, the Euro will certainly strengthen. We are on the right track, but Europe is still really behind the United States in many respects. There are still a lot of subsidies in our structures and also too much unnecessary red tape."
Taxes finance the welfare state
The Nordic welfare state is an internationally-known concept. The Finnish version of it has been built up over many decades. Now Paavo Lipponen sees his government's task as being to preserve the prosperity that has been created. There is broad agreement on that goal, but political differences arise when the best means of achieving it are being sought; in other words, when the question is: who will pay for it all? In the Prime Minister's view, Finnish taxes are high on the international scale and could be lower.
"But yet services must be available to all - and that presupposes that enough taxes are paid," he points out. "Our welfare state is based on society providing services. We also have a very advantageous social insurance system. In many other countries, governments cut taxes and people look after their own social security. In my assessment, the Finnish system is worth preserving, although it needs to be reformed to allow for changing times. Thus the tax rate will be kept somewhat higher than in countries with a different system."
He adds. "Tax rates can be misleading when people have to pay for their services and social security in other ways. In the United States, for example, it is all different from Finland. In this country, we spend 7 per cent of GDP on health care, but the figure in the United States is nearly twice that - and yet citizens do not have equal access to services. Equality is very specifically the foundation on which our welfare state has been built."
Northern Dimension part of Union policy
During Finland's term at the helm of the EU in the second semester of 1999, it seemed that the Northern Dimension so dear to the Finns' hearts was at least partly buried under the debris of bigger current problems like the crisis in Kosovo. However, Prime Minister Lipponen emphasises that the Northern Dimension - like the Southern and Transatlantic ones - has consolidated its position as an aspect of EU policy. The Union is also enlarging eastwards more purposefully than earlier on the basis of decisions reached in Helsinki.
The Northern Dimension has advanced in stages. First of all a lot of work had to be done within the Union to define its interests in the North. Finland's underlying premise from the very beginning was that the framework would have to be the Union as a whole rather than one catering for cooperation between a few northern members.
"This means looking at the Union's strategic interests in above all energy supply, where it is becoming very dependent on sources in north-western Russia, " Lipponen explains. "The next stage is to draft a work programme and of course that must be done with our cooperation partners, above all Russia. It must be remembered that Russia only recently adopted a stance in which she has herself sought a partnership with the Union. Thanks to the decisions taken as part of Agenda 2000, we now have more instruments - i.e. money - for this cooperation.
"Looking at it over the long term, what we are working towards is a European energy network, in which gas plays an important role. One of the central goals inherent in the Northern Dimension is to build a new gas pipeline through Finland to Central Europe. But we cannot assume that a spade will cut into the ground the very moment we in Finland or Europe want it to. Big projects like that demand time and patience. But now that positive attitudes already exist on both sides, the network will eventually be built," says a confident Lipponen.
One of the decisions that emerged during the Finnish Presidency was to extend the European Investment Bank's coverage to Russia, an important step given that the crucial factor in most projects is finance. Now, for example, planning for a road bypass of St. Petersburg (route 18) is under way and financing is being arranged; a bypass of Viipuri (between St. Petersburg and the Finnish border) is already under construction.
Environmental projects are very important. As Lipponen assesses it: "The Russian government has taken environmental matters much more into consideration than used to be the case and is carrying out investments in this sector. A large wastewater treatment plant to the north-west of St. Petersburg is the most important from Finland's perspective."
Holding the EU Presidency for the final six months of the twentieth century did a lot to raise Finland's international profile. The favourable development that the economy has enjoyed is likewise attracting notice abroad. At the same time as things are going well for the republic, however, its citizens' interest in politics is waning. The voter turnout in the spring 1999 parliamentary elections was alarmingly low and plunged to 31.4% when the new European Parliament was chosen three months later. "The European Parliament is still perceived as something very distant, and not only in Finland. After all, it is not a parliament in which a government is formed with the support of the majority. The voter still finds it difficult to figure out what the parliament's tasks are, even though its powers are now clearly greater than they used to be," says Lipponen. Is, therefore, the fact that citizens seem to have lost interest in politics both a national and an all-Union worry? "Yes it is," says the Prime Minister. "Politicians ought to be able to articulate alternatives better."
Making Daddy smile
Welcome to Finland met Paavo Lipponen at the Prime Minister's official residence Kesäranta, a romantic wooden building with ornate towers that stands in a verdant park setting on an inlet of the Baltic, and yet fairly close to the city centre. The ambience is a lot homelier than in his office in the stately Neoclassical structure that houses the Government. Thus it is hardly surprising that Lipponen receives many of his official guests at Kesäranta.
Adding to the cosiness is the fact that Lipponen and his family - his wife and two small children - life upstairs. When the sound of the children's footsteps is carried downstairs through the wooden floor, Daddy smiles and his gaze wanders to the ceiling a couple of times. Perhaps hard politics should be practised more often in places where soft values and a proper life can certainly never be forgotten.