Olli Rehn returns to stricken Finland pledging austerity

On a glorious sunny afternoon in Helsinki, Olli Rehn is bringing it all back home.

The former EU commissioner is Finland's best-known political export, remembered in Ireland as a tough taskmaster in the crisis years.

But after a decade in Brussels, Rehn has returned to his Nordic home – and an election campaign – dominated by a three-year economic stagnation. Rehn’s proposed antidote: austerity, Irish-style.

His hope is to return to the Finnish parliament after Sunday’s general election and help his opposition Centre Party back into power to start work on overdue reforms.

“We have studied the Irish experience very closely and we need a similar internal devaluation to restore our competitivess and public finances,” said Rehn.

After a decade in Brussels, he sees Finland "on a downward slope". It's a strikingly frank assessment even from a man known for his directness. But it's curious to hear this in a country that often matched – and sometimes even surpassed – Berlin's reform rhetoric and austerity demands from bailout recipients. This general election, it seems, is a case of Finland: heal thyself.

Rehn is enjoying a drink after a political discussion at a local craft brewery in Helsinki's Cable Factory cultural centre, a hulking waterfront structure that is an appropriate place to discuss Finland's rise and fall. This complex once housed the company that later became the mobile phone giant Nokia. A year ago, US tech giant Microsoft swallowed the struggling Finnish company.

Budget shortfall

It was a tough moment, economically and emotionally, for many Finns who were proud of Nokia for transforming their country into a modern, information-age economy. But, in hindsight, many here also see the flip side of success typified by Nokia, manufacturing and strong unions: an erosion of competitiveness in the last decade that saw Finnish salaries rise one-fifth higher than Sweden and Germany, its favoured benchmarks. They remain stuck there even after the financial crisis caused the economy to stall. Add struggling paper and exporting industries – the latter compounded by EU sanctions on neighbouring

Russia

– and you begin to understand why Finland is facing a €6 billion budget shortfall.

At the Cable Factory political discussion, as in the wider Finnish election campaign, almost everyone agrees something drastic has to be done. But, as elsewhere in Europe, the devil is in the detail of how best to weight and time austerity and stimulus measures. And just don't call it a crisis.

“In this election our politicians are like the socialist Spanish prime minister a few years ago, desperately trying to avoid the word crisis,” says local woman Mirka Palonen at the beer festival.

Rehn’s Centre Party manifesto proposes spending cuts and wage restraint – a radical shift from the tax-and-spend approach of the current government – towards a more business-friendly, versatile economy. Though Finland backed this approach for others in Europe, not all here believe austerity is best.

“All this right-wing talk of cuts worries me,” says Lauri Hirvonnen, a 35 year-old computer engineer. “We have a good social system that needs to be financed. Structural problems, like our ageing population, won’t be solved by starving it of funds.”

Political legacy

On the campaign trail, the centre-left Social Democrats (SDP), part of the outgoing coalition, want further tax increases to supplement budgets cuts.

"And the cuts should be carried out over an eight-year period," argues Antii Rinne, the departing finance minister and SDP chairman, who hopes for an export-led revival.

But with debt levels set to shatter the EU ceiling of 60 per cent this year, the Centre Party says time is not on Finland’s side.

As the likely winners on Sunday with 25 per cent in polls, the Centre, a conservative party with rural roots, will set the tone for the next four years. Rehn is coy about what role he would like to play in government under party leader Juha Sipilä as prime minister.

Rather than a role in finance, the smart money is on him taking foreign affairs. But he still has his eye on Greece. In opposition, the Centre Party opposed all assistance for Greece in the last four years. So no one in Athens should expect empathy from the party in office – or from its returning austerity taskmaster. "If Athens doesn't get serious about reforms, in particular fighting fraud and pushing privatisation," said Rehn, "it's difficult to see how Greece will avoid default. But it's in their hands."