Finnish premier narrowly avoids defeat

Finnish voters swung to the right in parliamentary elections last nigh, dealing a blow to the Social Democrats, but economists…

Finnish voters swung to the right in parliamentary elections last nigh, dealing a blow to the Social Democrats, but economists said even a possible switch of government would only bring small changes in economic policy.

The Centre Party of Prime Minister Matti Vanhanen clung to its position as the biggest bloc in parliament despite losing seats, but the conservative National Coalition scored big gains and overtook the co-ruling Social Democrats as second biggest.

"The changes are likely to be very small - the three big parties are quite of the same opinion," said Sampo Bank economist Lauri Uotila, who predicted markets would be unfazed.

The National Coalition's 35-year-old leader Jyrki Katainen claimed a "landslide victory" and said his party could no longer be kept out of government after four years in opposition.

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As leader of the biggest party with 51 seats in the 200-seat parliament after complete returns, Mr Vanhanen is expected to form a new coalition government, and analysts said he was likely to drop the Social Democrats and embrace the conservatives.

But economists said a possible new centre-right coalition would hardly change the main lines of economic policy from that of the outgoing three-party coalition of the Centre, Social Democratic Party (SDP) and Swedish People's Party.

"If the election result determines the composition of the government, then the current economic policy will be continued with growth of public expenditure kept under control and with at least moderate tax cuts," said economist Pasi Sorjonen at the  ETLA think tank.

Mr Uotila said however: "If one big party is changed for another, it could lead to more daring policies, above all in labour market policy and in promotion of employment."

A centre-right government could look to Denmark or Austria for examples of more flexibility in the labour market to encourage the unemployed to find work, Mr Uotila added.

But economic policy is unlikely to swing far to the right.

"Finnish conservatives are not very conservative, Finnish socialists are not very socialist, so things will stay pretty much the same, regardless of what happens in the election," Risto Penttila, director of the Finnish Business and Policy Forum  (EVA), said before the vote.

Since a severe recession of the early 1990s, Finnish governments have cut taxes and boosted competitiveness. Unemployment has fallen to 7.3 per cent, less than half of its peak, and last year the economy grew by five per cent.