Finland and the EU

In and happy

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The Estonians out
and not so sure

SOMETIMES it is the new members who most dislike the club. The European Union is pretty unloved in Sweden and Austria, which joined only in 1995. Yet in the third country of that intake, Finland, the EU is still popular. And Finns are, by Nordic standards, friendly to Europe’s single currency. Though popular opinion may well keep Denmark and Sweden out of the monetary union, Finland’s leaders are determined to join. Why such enthusiasm in a famously pragmatic people?

They have three answers. The most important is security, always Finland’s bugbear. True, Sweden and Austria, fellow neutrals, joined the EU partly for security, too. But to Finns, with their 1,300-kilometre (800-mile) border with Russia, and memories of fighting against the Soviet Union in 1940 and again in 1944, security is tops. Even joining the euro is often seen as just another way to gird Finland securely to Western Europe.

Hence, too, the seriousness with which the country (like several other neutrals) sets about defending itself. Conscription, fast disappearing elsewhere in Europe, is fiercely supported. The government quietly opposes international efforts to ban landmines. And though joining NATO is clearly on the agenda, few Finns are pressing for it right now. In the words of a senior official, bleakly reflecting on his country’s past, “We cannot trust anybody.”

The second explanation for Finns’ keenness on the EU is the solid bonuses it has brought them. Because Finland used to cosset its farmers behind even higher trade barriers than the EU’s, membership has cut food prices by some 13%—which helped send inflation tumbling to today’s 1%. Cutting the budget deficit and joining Europe’s exchange-rate mechanism, both required by the Maastricht criteria for joining the single currency, have also helped to steady the economy, which has grown at a respectable average rate of 4% a year for the past three years.

Though that makes qualifying for the euro easy, it may not be enough to dent the Finns’ horrendous 15% unemployment rate. But, unlike many other Europeans, they do not blame the EU for this. The collapse in 1990 of barter trade with the Soviet Union, which once took a fifth of Finnish exports, set off a brutal recession. The Finns’ GDP fell 11% in three years; by 1994, 18% had no work; several banks went bust. But, fortunately for the EU, joining in 1995 coincided with the onset of recovery.

The third reason for Finland’s euro-zeal is to get ahead of its neighbours. A Swedish possession for 500 years and part of the Russian empire for a further century, Finland has long suffered from an inferiority complex. How nice it would be to leap ahead of Swedes and Danes by being the first Nordic lot to embrace the euro. It might also help Finnish efforts to pull Estonia into the club (see article).

Would it be good economics, as well? Paavo Lipponen, the Social Democratic prime minister in a curious five-party coalition, has no doubts. Interest rates have dropped in anticipation of membership. Meeting the criteria was something he wanted to do anyway. And though he would like Sweden and Britain, both big export markets, to join the euro too, he does not believe any country can now steal a march through competitive devaluation. That is a change: the Finns have often devalued their markka in the past.

Most Finnish business—which these days means not just forestry but big metals companies and international high-tech firms such as Nokia—also wants the euro. But there are dissenters. Esko Aho, leader of the opposition Centre Party, who as prime minister took Finland into the EU, is one. He worries about Finland’s big trading partners not having the euro, and fears that the new currency, combined with Finland’s rigid labour market, will keep unemployment high. He wants the government to deregulate and privatise faster, and to lighten the tax burden, one of the heaviest in the world. Most voters also mistrust the euro, if not passionately enough to deflect the government from its course.

So Mr Aho’s opposition to the euro is mainly tactical, a sop to Eurosceptic farmers and others in his party. He knows that Mr Lipponen’s surprisingly durable coalition has more than enough parliamentary votes to approve euro membership. Before the next election in 1999, Finland should be in; Mr Aho has no intention of campaigning to pull it out again.

What about loss of sovereignty? Finns are, after all, determinedly nationalistic—and they are proud of the markka, which became their currency under Russian rule in 1860. Yet many reckon that EU membership has strengthened sovereignty, by anchoring Finland in Europe and giving it more of a voice. As for the new currency, when its name was chosen at the Madrid summit in 1995, Mr Lipponen mused that Finland had experienced several currencies and would not mind calling the new one the mark or the crown. Only the rouble, he said, would be taboo.

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