COMMENTARY: Finland and Portugal – two countries on Europe’s far edges
By Juha Akkanen
While Finland and Portugal have some significant differences, they also have a number of things in common.
Let’s start with the differences: Portugal is a former colonial power, and in the days of its greatest prosperity it was, thanks to its explorers, the world’s richest country. It became independent of the power of the Moors in 1139, nearly 800 years before Finland became independent.
Both countries have had a representative parliament for about 100 years. However, Portugal was a military dictatorship run by António Salazar for nearly 40 years. Naturally, someone might also ask how well parliamentary democracy was doing during the 25 years that Urho Kekkonen was President.
There are similarities as well. Both are small nations on the outer edges of Europe, and both have much larger countries as neighbours, which ordinary citizens view with some suspicion at the very least. Melancholy and wistfulness are typical of the national characters of both countries.
More similarities will be in store if Portugal’s budget proposal, which is more severe than ever before, is passed. This is likely to happen, as the government has a sufficient majority in Parliament.
The draft budget is even somewhat tighter than the so-called Troika – the European Commission, the European Central Bank, and the International Monetary Fund – would have wanted. In this way Portugal wants to show that it can get through its problems on its own, or at least without additional support. Does this sound Finnish?
Nearly every generation has to deal with a tribulation that puts a stamp on the collective memory of the entire generation. Finland has the generation of the Civil War, the generation of the Winter War and the Continuation War, and the generation of the period of shortages.
My generation is no generation of overindulged spoiled brats. It is the generation that paid off bank subsidies and the recession of the 1990s – to the last penny.
Portugal is trying to do the same, although its means are even more severe than the ones used by Finland in the 1990s.
When Portuguese Minister of Finance Vitor Gaspar, who is a professional economist and not a politician, put his budget proposal before Parliament, he predicted that 2012 would be remembered by all Portuguese as the hardest year of their lives. Nevertheless, the popularity of the government keeps on growing. The people seem to like being told bad news honestly, even though the result might be wailing and gnashing of teeth. Sound familiar?
Unemployment is expected to grow next year to 13.4 per cent. Does the scale bring anything to mind about Finland in the 1990s?
The Portuguese like to emphasise that their country is no Greece. Portugal is trying to make do on its own. Portuguese certainly protest against the tough measures, but they are not rioting – at least not yet. In Greece a similar austerity programme would have led to chaos.
Here are a few of the key aspects of the draft budget:
Public sector employees are to lose two months’ pay next year and the year after. In Portugal salaries are paid in 14 instalments a year. This means that one seventh of pay will be cut.
State administration is to be scaled back, and there will be a total ban on recruitment for the next two years.
Value-added tax is to be raised. With some products, VAT will rise at one go from six or thirteen per cent to 23 per cent. The raise also applies to gas and electricity.
In addition, corporate and capital taxes will go up. Two or three public holidays will be shifted to coincide with the weekend. Municipal and regional reforms are to be decisively launched.
Car taxes will be raised, as well as the tax on tobacco. The lowest retirement age will be raised. State-owned companies, such as the postal service, energy companies, and an airline are to be privatised.
Do any of these measures sound familiar?
Working hours are to be extended by half an hour a day, and termination compensation on a level that would be quite inconceivable to us is to be reduced gradually.
So far, compensation for being sacked has been 1.5 months’ pay for each year of service.
This means that severance pay for someone who has worked for 24 years has been the equivalent of three years’ pay.
Portugal’s colonial empire started to collapse when Brazil’s gold reserves dwindled. It was no longer possible to maintain an expensive colonial administration.
Now a similar process is underway: the public sector is way too big to be maintained by tax revenues.
Still one characteristic that separates Portugal and Finland: Finland was not raised from the swamp by tough economic policies and devaluations alone.
Also having an effect were Nokia and the subcontractor network that developed around it, as well as the high level of education for engineers in our country.
Portugal has nothing even vaguely resembling Nokia, and as a country with the euro, it has no national currency that it could devalue.
Wine, Fado, and tourism are not enough to raise the country back onto its feet to start rapid growth.
Helsingin Sanomat / First published in print 27.10.2011
Previously in HS International Edition:
Parliament passes Portugal bailout package 137-49 (25.5.2011)
"What the Finns need to know about Portugal" video goes viral and sparks flame war on YouTube (9.5.2011)
JUHA AKKANEN / Helsingin Sanomat