New six-party coalition government formed

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President Tarja Halonen appointed a new six-party government led by Prime Minister Jyrki Katainen on 22 June 2011. The new government’s programme has been welcomed by the unions but the Confederation of Finnish Industries (EK) says it is disappointed with the programme. According to the EK, it does not do enough to restore competitiveness, strengthen economic growth and balance the public finances. The EK criticised the government’s proposed tax policies in particular.

The Finnish Parliament has approved National Coalition Party Chair Jyrki Katainen as Prime Minister. President Tarja Halonen formally appointed the new six-party government led by Katainen at the Government Palace in Helsinki on 22 June 2011. The new government is composed of six parties: the National Coalition (Kokoomus), the Sicuak Democratic Party (SDP), the Left Alliance (Vasemmistoliitto), the Green League (Vihreä liitto), the Swedish People’s Party of Finland (SFP) and the Christian Democrats (Kristillisdemokraatit)

Long-lasting talks on the formation of a new cabinet ended on 17 June with the publication of a new government programme. The negotiations for the new government lasted almost two months because of the exceptional election result, which increased the number of members of Parliament of the populist True Finns party (PS) from five to 39. Despite the historical election victory, the True Finns will continue in opposition with the biggest loser of the election, the Centre Party (Keskusta), which dropped 16 seats from 51 to 35.

Government highlights good relations with social partners

After the formation of the government, Prime Minister Katainen told Parliament that he would invite labour market leaders for talks on the state of the economy in August. He said the aim would be to find ways to create jobs and to safeguard the Finnish economy’s competitiveness.

From the beginning, the new government has emphasised good relations with social partners, and the new Minister of Labour, Lauri Ihalainen, is a former President of the Central Organisation of Finnish Trade Unions (SAK).

Presenting his ‘rainbow’ government’s programme to Parliament, Mr Katainen stated that labour market groups needed to do their bit for economic growth. Without giving details, he pledged that his government was also prepared to take action to protect jobs and purchasing power.

Mixed reactions of social partners to government programme

The new government programme was accepted by the trade unions. Union leaders praised the strong emphasis on cooperation with labour market organisations concerning, for example, the coordination of economic and employment policies and labour legislation reforms.

Trade union leaders are satisfied with the government’s commitmens to step up the fight against the ‘grey’ or ‘black’ economy. For example, the programme promises legislation that will make it mandatory for construction workers to have with them at all times an identity card with a photograph and tax number.

The programme includes both general outlines with respect to future policy and also several concrete solutions. The government is dedicated to stop growing inequality and to improve standards of living for the poor. The programme promises that unemployment will fall and the rise in the budget deficit will be considerably slowed down, which is necessary for economic growth .

Employer organisations were less enthusiastic in their comments. The Confederation of Finnish Industries (EK) stated that it was disappointed with the government programme, as it does not include enough measures to restore competitiveness, strengthen economic growth and balance the public finances. In particular, the EK criticised the government’s tax proposals.

The EK was especially critical of the move to raise the capital transaction tax and the added progressive element attached to the tax. According to the EK, this is an erroneous taxation policy that does not encourage business to take necessary investment risks. The EK has also been critical of the government’s decision to leave income tax rates unchanged, saying that the level of income tax is already too high in Finland, and higher than in many other European countries.

According to the EK, the moves to balance the public finances are also inadequate, and simply delay dealing with the problem.

However, the EK has stated that it is willing to cooperate with social partners to reform the collective bargaining system in order to create a competitive, stable and predictable environment for the labour market. The EK welcomed the government’s support for the social partners’ goal of raising the retirement age by at least three years by 2025. According to the EK magazine Prima, a long-term solution is needed to deal effectively with pension scheme funding and ensure adequate pensions.

Pertti Jokivuori, University of Jyväskylä

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