Bloomberg News

Finnish Finance Minister Ousted as Party Head Over Austerity (2)

May 10, 2014

Finance Minister Jutta Urpilainen

As finance minister, Jutta Urpilainen has been a front figure defending austerity measures. Photographer: Georges Gobet/AFP via Getty Images

Finnish Finance Minister Jutta Urpilainen was ousted as Social Democratic leader yesterday as her party turned to a trade union leader advocating more stimulus to promote growth in the northernmost euro member.

Antti Rinne, head of the trade union Pro, won the backing of 257 party members against Urpilainen’s 243 at a congress yesterday in Seinaejoki, northwest of Helsinki. Urpilainen said she will step down as finance minister and leave the government.

“Social democrats in Finland and in Europe must again target full employment,” Rinne, 51, said in a speech today. “Economic policies must target strengthening nascent growth and creating confidence in the future. The key are investments that create the foundations for rapid growth in the future.”

Voters have grown dissatisfied with austerity policies that have collided with a broader decline in Finnish business, as Nokia Oyj (NOK1V) shrinks and the paper industry struggles. Finland’s economy has contracted in three of the past five years, pushing unemployment to 9.5 percent in March. Industrial production shrank for the 17th consecutive month in March.

“The trade-union side of the party feels that their voice hasn’t been heard,” Ville Pitkaenen, researcher at the University of Turku, said by phone this week.

Alliance Breaking

Support for the Social Democrats has slid to 15.8 percent, according to an YLE poll, from 19.1 percent in the 2011 general election when the SDP helped form a six-party coalition. Backing was as low as 15 percent in September. The Left Alliance also quit in March in protest over austerity, leaving a five-party government.

Rinne’s victory means political risks are increasing in Finland, Suvi Kosonen, analyst at Nordea Bank AB in Helsinki, said in a message on Twitter.

Rinne, who has stated he wants to renegotiate the government’s four-year spending limits agreed on in March, yesterday said the party will continue along the lines of the government program agreed on in 2011. He said that “small amendments may be made in June” when the larger National Coalition Party also chooses a new leader.

“We need to focus on what we can do to boost growth and foster higher employment -- we need to strengthen domestic demand,” Rinne said today. “The 600 million-euro ($825 million) growth package decided upon this spring is a good start, but it’s not enough. We need to agree on an extension to the growth plan” in the June talks, he said.

Losing Leaders

Urpilainen’s defeat means the government will lose both its top ministers ahead of elections next year. Prime Minister Jyrki Katainen has announced he will step down next month to pursue an international political career. Urpilainen will remain finance minister for “at least some weeks” and Rinne will decide on the timetable for the handover, she said in an interview on state-owned broadcaster YLE TV1 today. She could remain in the job until June and plans to return as a member of parliament, she said.

Rinne worked as a lawyer until 2002 before embarking on a trade-union career and has no experience in parliament or as a minister. He said in an interview on YLE TV1 today the party must discuss ministerial portfolios and declined to identify a preferred post for himself.

“Rinne isn’t afraid of appearing hard-nosed and unyielding,” said Mari K. Niemi, visiting researcher at the University of Strathclyde, Scotland. “It’s about reaching out to the ordinary citizen, who wants to see more common sense and less political correctness.”

As finance minister, Urpilainen has been a front figure defending austerity measures. Since 2011, she has cut spending and raised taxes by 6.8 billion euros to protect Finland’s AAA rating and contain debt growth.

Difficult Decisions

She also came under attack from Rinne for seeking to temper austerity measures through corporate tax cuts, a move Urpilainen said was necessary to improve competitiveness and encourage investment.

“Urpilainen has to defend the government’s policy,” Pitkaenen said. “Rinne will quickly find himself in Urpilainen’s place, justifying the government’s difficult decisions.”

The government said yesterday it’s negotiating with Meyer Werft GmbH on jointly purchasing STX Europe AS’s shipyard operations in Turku from its Korean owners. Rinne has repeatedly called for the state to invest to save the facility.

“Healthy public finances and economic policy are tools, as is the welfare state,” Rinne said today. “They are not the end goal -- they are means to ensure that each person is equal and can lead as good a life as possible.”

Lost Elections

Urpilainen, 38, who has been party leader since 2008, was re-elected without challengers in 2010 and 2012. She has presided over five consecutive elections with falling voter support. Many of the traditional working-class supporters have turned to “The Finns” party, drawn by its opposition to bailouts for indebted euro-area countries and its calls for stimulus to create jobs.

The next parliamentary vote is set for April 19, 2015.

“With their current low support, the Social Democrats aren’t in a good position to negotiate,” said Niemi. “Rinne may find himself in a tough spot if he gets caught making promises that he can’t keep.”

To contact the reporters on this story: Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net; Kasper Viita in Helsinki at kviita1@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brogger at tbrogger@bloomberg.net Jonas Bergman


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