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Fund selectors size up new Finnish government

Five party centre-left coalition plans to raise taxes and increase spending but fragile pact concerns investors


David Robinson
Incoming Finnish prime minster Antti Rinne

Talks concluded on Sunday over the formation of Finland’s new coalition government, which will see former union boss Antti Rinne become the Nordic country’s first leftist prime minister in 20 years.

The centre left Social Democrats party narrowly won April 14 general election but with a record low 17.7% of the vote they have been locked in negotiations with five other parties – including the Centre Party, the Greens, the Left Alliance and the Swedish People’s Party – to form a coalition.

The new government represents a shift to the left following outgoing prime minister’s Juha Sipila’s centre-right coalition which presided over an aggressive austerity drive.

Rinne plans to boost public spending by €1.23bn a year and spend an additional €3bn on one-off investments during the four-year term, he announced in Monday.

To finance the spending hikes, the new government plans to raise taxes by €730m, via environmental levies, and sell off as much as €2.5bn in state assets.

The five-party coalition will hold 117 seats in the 200-seat parliament and concerns about the fragile nature of the partnership is reflected in a survey of Finnish fund selectors at an Expert Investor event in Helsinki in May.

Three quarters of attendees (75%) said they were “pessimistic” about Finland’s new coalition government and just 8% of attendees said they were “optimistic”.

Seventeen percent said the government represented “more of the same”.

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Source: Last Word 

Populist surge

The surge in support for the nationalist Finns Party in April’s poll has also become a source of concern for investors in Finland.

The Eurosceptic group narrowly came second in the election with 17.5% of the vote, only 0.2% behind the Social Democrats.

Hostility towards immigrants is a key theme for the Finns Party – formerly known as the True Finns – which argues that immigration to Finland from outside the EU should be significantly curtailed, and only permitted in cases where it brings “economic advantage”.

The party also argues that Finland’s generous welfare system should be reserved primarily for Finnish nationals and says refugees should not be welcome.

At Expert Investor’s Helsinki event in May 19% of attendees said they were “worried” about the popularity of the Finns Party and nobody proffered support for the group (0% of attendees said the Finns Party “stood up for Finnish people”.

However, according to the survey, the Finns Party’s Euroscepticism is unlikely to lead to Finland quitting the European Union. 81% of attendees said there was “no chance” Finland would leave the EU, citing the Brexit crisis as the chief reason.

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Source: Last Word