Social Democrats walked out of government talks despite winning many concessions

Tension prevails between SDP and National Coalition Party

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The six parties, which until late Wednesday tried to form a new government, were discussing whether or not state finances should be balanced primarily by raising taxes or by cutting public spending when the negotiations finally failed.
      The government formation process took a dramatic turn on Wednesday when the Social Democratic Party and the Left Alliance, walked out of the talks that were headed by National Coalition Party leader Jyrki Katainen. Also taking part in the negotiations were the Left Alliance, the Green League, the Swedish People’s Party and the Christian Democratic Party.
     
The economic policy that was on the table was closer to the ideology of the parties of the left than those of the National Coalition Party, which wanted to focus on cutting costs.
      Helsingin Sanomat has learned that there were plans to extract EUR 1.9 billion in new tax revenue, while cutting spending by EUR 1.3 billion.
     
The Social Democrats succeeded in getting many concessions from Katainen's National Coalition Party.
      The proposed government would not have meddled with the retirement age, more money was to be budgeted for employment, income disparities were to be eased by aiming tax cuts at those with low incomes, and the National Coalition Party would even have agreed to progressive taxation of capital gains income.
      The ultimate deal-breaker for the SDP was a call by the National Coalition Party for a hike in value-added tax. According to various sources, the SDP said that it would have accepted a rise in income tax instead, but that was not acceptable to the National Coalition Party.
     
Things finally came apart on Wednesday, when the SDP’s Jutta Urpilainen and Eero Heinäluoma and the National Coalition Party’s Jyrki Katainen and Kimmo Sasi tried to find a compromise.
      In the afternoon the last proposal put forward by Katainen was examined by the top representatives of all six parties involved in the talks. According to one source, the SDP got some concessions at this phase. Closer to the evening there was a lengthy break, during which time the Social Democrats held a meeting of their Parliamentary group.
     
The meeting of the leadership team resumed at 7:00 in the evening. Urpilainen reiterated the SDP’s opposition to a rise in VAT. After half an hour of discussions Katainen noted that he could no longer continue negotiating with the SDP or the Left Alliance.
      Both Urpilainen and Left Alliance leader Paavo Arhinmäki made note of the situation. After handshakes they left. There were no great expressions of emotion.
      Katainen got a round of applause from at a meeting of the National Coalition Party’s Parliamentary group, which was held after the decision.
     
Interpretations vary on which of the two sides pushed the situation to the point of no return. Mutual recriminations continued, and escalated, on Thursday.
      One of the SDP’s main negotiators, Eero Heinäluoma, wrote in his blog that the negotiations were led in a haphazard manner and that no deadlines were set. “Unexpectedly on Wednesday [Katainen] pulled some ‘take it or leave it’ demands out of his pocket.”
      Social Democratic Party Secretary Mikael Jungner said that the impasse was deliberately set up. He was surprised that Katainen did not even try to hold bilateral discussions with Urpilainen any more. “Katainen threw us out.”
      According to an anonymous source, this view is seen as a “shocking lie”
     
The view among the smaller parties is that the SDP overreached, and did not understand that Katainen really had been pushed too far.
      According to the anonymous source, Heinäluoma was taken by surprise by Katainen’s move, as he did not have enough time to leave his own offer.
      Erkki Tuomioja wrote in his blog that the SDP would have had a proposal for a compromise.
     
Jungner says that relations between the SDP and the National Coalition Party are icy now, but he feels nevertheless that it is important to stay calm, “so that not all bridges are burned”.
      The Greens at least would very much like to see the SDP and the Left Alliance come back into the government formation talks. The Greens’ chairwoman Anni Sinnemäki said that the parties could have hammered out a taxation policy which narrows income disparities and reduces poverty.
      Left Alliance chairman Paavo Arhinmäki said on Thursday that the party could go back to the government formation talks if the National Coalition Party drops its demand to raise VAT.
      Sources at the negotiations do not expect Katainen to take the SDP and the Left Alliance back very easily – at least not unless things fail to work out with the Centre Party.


Previously in HS International Edition:
  THURSDAY: Social Democrats and Left Alliance quit government talks – SDP and National Coalition Party blame each other (2.6.2011)
  Government talks: National Coalition Party and Social Democrats make progress on economic policy (1.6.2011)
  Government formation talks continue for 12th day – pressure mounts on Katainen (31.5.2011)

See also:
  Governments usually formed a month or two after Parliamentary elections (24.5.2011)

Helsingin Sanomat