NEWS ANALYSIS: Credit rating fears outweigh need to keep the voters happy

Relations between government and unions as bad as they were under Esko Aho in the 1990s

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By Juha Akkanen
     
      No, the idea for the raising of the pension age did not come to Prime Minister Matti Vanhanen like a bolt from the blue while he was out skiing on the tracks in Ruka.
      The government had already commissioned a report on ageing from the Economic Council of Finland, which was published on January 22nd.
      This stated among other things that over time it would be necessary to hike up the age-thresholds for old age pensions.
      That same report also urged the blocking of all possible means of access to early retirement, seen as overly attractive to too many people approaching retirement age.
     
The January report was further discussed in a meeting of the Council, which is chaired by the PM and is a body for facilitating co-operation between the government, the Bank of Finland, and major interest groups.
      Hence the other "social partners", including labour market leaders, were in on the discussion, so they knew what might be coming up.
      The debate on the subject around the council table is described as "colourful".
      From that discussion, Prime Minister Vanhanen (Centre Party) must have been capable of discerning that there would not be much support for raising the pension age from the trade union side.
     
On the ski-tracks in Ruka, it might be that the decision matured in Vanhanen's mind that the pension question should be agreed in the government's "halfway house" talks, without hearing the views of the wage-earners, come what may.
      The approach taken also had a bit of tit-for-tat about it.
      In January, when the labour market organisations decided among themselves on the so-called social collective bargaining agreement over the financing of social welfare and unemployment benefits, the unions and EK (the Confederation of Finnish Industry) did so in such a clever manner that they managed to preserve the linkage between the basic unemployment benefits and income-linked benefits.
      This effectively torpedoed one of the Centre Party's key aims: to increase basic benefits and leave index-linked ones unchanged.
     
The wage-earners' organisations now view all the government's doings with grave suspicion. They seem particularly worried that the deal cut in January may not be honoured.
      The government, meanwhile, says that yes, the deal still holds.
      In fact the government basically has to agree to the social package, for if it were to renege on it, then the last shreds of confidence would be gone and we would be back in the sort of situation that pertained during the centre-right administration led by Esko Aho (Centre Party) in the '90s: the country in recession and the government and the labour market organisations at each others' throats.
      It is no wonder, then, that there are already some mutterings in the ranks of the union side about a general strike.
     
When one listens to the government representatives, one does gradually lean towards the idea that raising the minimum pension-age is a must-do thing.
      In the first place, Finland has a low retirement age relative to other Western countries.
      The alternative to lifting it up would have been to enact cuts in public spending or to raise taxation, they say in the government.
     
But surely raising the age at which pensions are paid is not going to be able to do anything to influence this current economic crisis?
      Except that it is. Raising the pension age is a way of paying off the debt that Finland is going to take on board in the next few years in the name of stimulus packages to get the coughing economy back into shape.
     
We have again returned to a situation where the government's most important objective is to keep the international credit rating agencies happy.
      This is a policy that governments have followed almost without fail ever since the deep recesssion that overcame the country in the early 1990s.
      It is a different matter to judge just how justified is the fear that our borrowing will become that much more expensive.
      At present Finland gets its loans at the second-most attractive rate of all the EU countries, right after Germany.
     
After all this, the government still hopes that the labour market parties will agree to negotiations on moderate pay increases.
      The government trusts that a sense of responsibility among the wage-earners' organisations will win the day.
      A bigger task in prospect is to get the employers - in the PM's words "the stone-deaf" - around the same table.
      The government has not acted terribly adroitly in its dealings with the employers.
      It has given them on a plate in advance everything that the business interests desired, without demanding anything in return.
      So once again it is no wonder that the employers thank the government politely for their decisions, but stay hunkered down in their fox-holes when it comes to discussions on wages and salaries.
     
     
Helsingin Sanomat / First published in print 3.3.2009


Previously in HS International Edition:
  Organised labour angered by government decision on old-age pensions (26.2.2009)
  Minister Liisa Hyssälä: Old-age pension reform also calls for improvements to working conditions (3.3.2009)
  Opposition parties hint at general strike to support vote of confidence over retirement age plans (27.2.2009)
  Government decides on gradual raising of minimum age for old-age pension to 65 (25.2.2009)
  Government stimulus measures aimed at halving growth in unemployment (2.2.2009)
  Report calls for nearly 5-year increase in retirement age (23.1.2009)
  Agreement reported on removing employers´ national pension contribution (22.1.2009)

See also:
  Warning! Painful Recovery Ahead (24.2.2009)

JUHA AKKANEN / Helsingin Sanomat
juha.akkanen@hs.fi