Finland heads for coalition without eurosceptics

By Jussi Rosendahl

HELSINKI, June 10 (Reuters) – Finland’s prime minister-elect Jyrki Katainen said on Friday he planned to form a six-party coalition without the eurosceptic True Finns, whose presence might have jeopardised the approval of a new EU bailout for Greece.

The exclusion of the True Finns, after weeks of squabbling over policy since April’s general election, will soothe concerns among Finland’s European Union partners.

“I believe we can offer for Finland and Finns stable, predictable government policy… and stable policy in international affairs,” Katainen told reporters.

EU leaders are due to finalise a new rescue package for Greece at a summit on June 23-24 that officials say will total 120 billion euros ($173.7 billion) until 2014.

Finland’s parliament is the only one in the EU which retains the right to vote on issues such as bailout funds, making it crucial for Katainen to form a multi-party coalition with a majority in parliament.

He said the True Finns, who made strong gains to come third in the election, had dropped out of the coalition talks because of disagreements over EU issues.

The planned coalition is a broad one, including Katainen’s National Coalition and the second largest party, the Social Democrats, as well as the smaller Leftist Alliance, Green Party, Swedish People’s Party, and Christian Democrats. Together, they would hold 126 of the 200 seats in parliament.

The previously obscure True Finns’ strong showing at the polls initially raised expectations they would join government, possibly disrupting policymaking in Brussels.

Katainen’s National Coalition party can count on the Social Democrats to support Brussels policies, since it played a major role in Finland’s entry into the European Union. The top two parties have already co-operated to form policies on helping debt-burdened countries in Europe.

 

FISCAL DIFFERENCES

But the parties have widely diverging views on domestic fiscal policies. A first round of talks failed earlier this month due to disagreements over tax reforms, after two weeks of negotiations.

Katainen has been calling for spending cuts to ensure Finland can rein in government debt and maintain a triple-A credit rating, but left-leaning parties have opposed many of those proposals.

Paavo Arhinmaki, the leader of the Leftist Alliance — third-biggest of the six parties — told Reuters he assumed the coalition would balance public finances by focusing on tax hikes, not spending cuts.

Katainen declined to comment on the fiscal outlook.

“The economy is the biggest challenge (in the negotiations), but we are all committed to lower the debt during this government term,” he said.

Economists have called for substantial reforms in taxation, government spending and the retirement age to boost the Finnish economy.

Katainen said he aimed to finalise negotiations by next Friday, and have a government in place by June 23.