True Finns continue to rise

Last week, the True Finns announced that it could not participate in a Coalition government that supported the bail-out of Portugal, its opposition to which was a key plank of the party's election manifesto. Announcing the decision, True Finns leader Timo Soini said, "It would have been nice to be part of the government but you cannot betray yourself."

Soini may have passed up on power, but his decision seems to have gone down well with voters. In an opinion poll carried out at the end of last week - when it had already become clear that the True Finns would not join the government due to the Portugal bail-out - the party got 22.4%, beating its election score by over 2% and making it the biggest party for the first time. It is trailed by the National Coalition Party on 20.6%, the Social Democrats on 18.6% and the Centre Party on 14.4%.

At this rate - particularly if the eurozone continues to deteriorate, requiring more bail-outs - Soini could become absolutely lethal in four years' time. It's that tension again, inherent in the eurozone structure - political ambition vs national democracy vs. economics...

On a separate note - irrespective of what we think of the True Finns - there's an interesting contrast here to a certain UK party, which, upon joining a Coalition government as a junior partner dropped from 23% at the election to 18% just over a month later and falling even lower this year.

The Great Euro Gamble

In today's Wall Street Journal we argue,

"When European Union leaders forged their monetary union without a full political and economic merger, they gambled on two vital factors: That economic forces could be kept in check, and that national democracies could be managed.

Over the past 16 months, we have been reminded time and again exactly how big and how irresponsible those gambles were. Sunday's was arguably the strongest reminder yet, courtesy of the anti-euro True Finns party that may hold the balance of power in the next Finnish government. Paris, Berlin and Brussels seem not to have factored Nordic populism into their grand plans for the euro. But ultimately the euro zone is about politics, and politics remain as local as they ever were."

We go on,

"The True Finns' success will not change European politics overnight, and the party may not even succeed in blocking Finland's participation in future bailouts. But, irrespective of what we think of the True Finns, the election does highlight how powerfully a euro-zone crisis can contribute to shaping national politics. Euro bailouts were also an important issue in Slovakia's elections last year, and helped to deliver a new governing coalition that refused to take part in Europe's Greek bailout. That government only reluctantly kicked in later to help create the temporary bailout fund that euro leaders are now looking to replace after 2013.

This year the True Finns asked voters to consider the same question that Slovaks did last year: Why should they work harder and retire later to pay for the mistakes and wasteful habits of southern European governments? This "triple-A populism" has proven a powerful force in a number of countries with sparkling credit ratings, including Germany. Writ large, this weekend's Finnish elections are a rebuke of one of the euro zone's central, and fatal, conceits: that political ambition can trump economic and democratic realities."

Looking at EU leaders' gamble on being able to keep economic forces in check, we note,

"Markets have now finally woken up to the fact that Greece and Germany are poles apart; it is time for EU leaders to do so as well. Ireland, Greece and Portugal have made all too clear that economic forces can rarely be predicted, let alone contained.

Some particularly federal-minded EU leaders took this as a pretext to push even harder for a full-fledged fiscal union. Former European Commission President Romano Prodi wrote in an op-ed in the Financial Times last May that "When the euro was born everyone knew that sooner or later a crisis would occur. . . . I was warning years ago that, through no one's fault in particular, extraordinary events could occur that would force joint co-ordination of fiscal policies."

That sentiment spurred EU leaders to take their next major gamble, which was even riskier than the first: They bet that once they did start to effect robust economic and political union, national voters and parliaments would play along and vote the "right" way. So last year, when the EU elites decided to break their own treaties and turn the euro zone into a de facto debt union, they forced taxpayers in some countries to take on the liabilities of foreign governments in other countries—without the possibility of voting these governments out of office. But taxpayers are now showing signs of revolt. "

We conclude,

"Will EU politicians' second gamble turn out as ill-judged as their first? Time will tell. But one thing is clear. The political price that European leaders are paying to keep their flawed project afloat continues to rise."

The EU's walls of Jericho moment?

The exact consequences for the eurozone of the True Finns' success in yesterday's Finnish elections remain unclear. The result makes it the third largest party, securing 39 seats in the 200-strong parliament with 19% of the votes, close behind the National Coalition Party (NCP), which received 20.5% of the votes (44 seats in Parliament) and the Social Democrats which won 19.1% of the votes (42 seats). To put this into context, they polled only 4% in the last national elections.

With performance better than the 15 or so percent expected on Friday, a seat within the new coalition government is now a distinct possibility. Finnish television Yle quotes the party secretary of the victorious National Coalition Party saying that a government consisting of the three major parties is a "strong possibility", with the NCP’s Jyrki Katainen as Prime Minister.

Formal coalition negotiations are due to start on 27 April, which could make it very difficult for Finland to sign up to a bail-out package for Portugal, as that requires the approval of Finnish Parliament. True Finns leader Timo Soini has re-stated his opposition to the Portuguese bail-out package following last night’s election results. “I don’t believe that the package that is there will remain”, he told Yle last night. The Social Democrats want Portugal to restructure its debt rather than seek a bail-out, which is an additional factor in all of this. However, let's not also forget as with all politicians, Mr. Soini wants to be in government - he wants powers - so it's possible that he might compromise on the party's tough 'no more bailouts' position. What's clear is that when it comes to the EU Soini and Katainen occupy two different planets.

Regardless, it's clear that a new brand of "triple A" populism has emerged in the creditor eurozone countries, whose voters are voicing strong opposition to the "we'll keep the euro together at any price" doctrine that they have been fed by EU elites up to now. As we've noted before, such anti-euro sentiments are now picked up by nationalist parties from Vienna to Paris, feeding into the mix of anti-incumbency, pro-independence and most often, strong anti-immigration sentiments.

As we also noted before, the "far-right" label is inappropriate as a generalised term to describe the various parties currently occupying this space around Europe - they're all different in their make-up, roots and emphasis with some a lot nastier than others - and the True Finns simply isn't a "far right" party. What's clear though, is that they all push a heavily nationalist agenda, and they all fish in more or less murky, anti-immigration waters.

But in relation to the eurozone specifically, what's so significant about this election is that it's changing the parameters of the debate. In Austria, Netherlands, Germany and France, the established parties have managed to keep strong anti-euro, anti-bail-out forces outside the realm of government. The Dutch government rely on the opposition parties to circumvent Gert Wilders' Freedom Party, for example. If the True Finns make it into government - and chances are that they will - 'triple A populism' will have become part of the mainstream conversation, in a mainstream European country.

The guiding principle of European integration has always been 'build the institutions and the facts of life will follow'. In the realms of eurozone bail-outs, as well as in the contentious domain of immigration, this guiding principle is now being tested to its limits.

As Gideon Rachman points out on his blog today, the EU is in "deep trouble". Someone (a certain Mr T. Blair), in a speech to the European Parliament, said in 2005:

"It is time to give ourselves a reality check. To receive the wake-up call. The people are blowing the trumpets round the city walls. Are we listening? Have we the political will to go out and meet them so that they regard our leadership as part of the solution not the problem?"

That was six years ago. It's a most unfortunate irony that EU leaders, in their misguided efforts to stamp out 'nationalism' via over-building institutions and attempting to superimpose an artificial identity from above, are now contributing to the rise of the very currents they were professing to fight.

First to the Finnish line

This is a graph showing the support for the different parties, according to a poll published last night, ahead of the Finnish national elections on Sunday. All international eyes are on the True Finns (fourth from the left) - the party that has said it opposes a bail-out deal for Portugal and putting any more cash on the table for struggling eurozone economies. In fact, the party doesn't want to be in the euro at all.

A lot has been said about the True Finns, with the European media all of a sudden forced to become experts on Finnish national politics - it has to be said with varying degrees of success. That many still refer to the True Finns as a "right wing" party indicates the need for a bit more analysis and a bit less reliance on labels that are flying around. The party is pretty skilfully moving along the right-left scale. It's effectively social democratic on economic and welfare issues, favouring a big state, combined with a pretty clear socially conservative flavour. It's definitely populist and not exactly enthusiastic about immigration (and this in a country which accepts some of the fewest migrants in Europe).

So what will happen on Sunday? We wouldn't bet our money on any player. The True Finns have seen a drop in support recently - 15.4% in the poll published yesterday, down from 17.2% a month ago. The National Coalition Party extended its lead to 21.2% in yesterday's poll, while the Centre Party was the second largest party at 18.6%. The Social Democrats were at 18%. The Nordic bookies don't think the True Finns will make it into government and will give you 2.10 times your money for a bet on them winning ministerial seats, while a bet on them not making it only gives you 1.65 times your money.

Regardless, the True Finns are likely to make huge gains compared to the last elections in which they scored just over 4% (see the rise of the True Finns here, in yellow). And a second thing to remember, the Social Democrats - currently at 18% - have also expressed pretty clear opposition to a Portuguese bail-out, instead arguing for a restructuring. Between them, the two parties could well reach above 30% - that's a pretty powerful anti-bail-out bloc. As we've noted before, this could potentially hugely complicate a Portuguese bail-out, as well as efforts to top up the temporary bail-out fund (EFSM) and cash injections in to the permanent rescue mechanism (EFM).

The elections in Finland have made people - not least many opinion formers - start to realise that, shock horror, ultimately the eurozone is about politics. And as we know all politics is local.

In fact, it's difficult to find a more conspicuous example of the inherent flaws of the eurozone - the idea that political ambition can stamp out both economic and democratic realities - coming up against the full force of national democracy.

What's the truth about the True Finns?

We have received a couple of comments in regards to our blog post below on the rise of populist parties in the wake of the eurozone bail-outs. Some have been unhappy about our assertion that the Front National is gaining ground in French politics, whereas others have taken issue with us mentioning the True Finns in the same breath as the Front National and FPÖ (the expression "not as bad as FPÖ" has caused particular offence).

But on the point about the True Finns, a clarification might be appropriate. The True Finns party, or Perussuomalaiset in Finnish, has its roots in an anti-incumbency, rural protest movement from the 1950s, leading to the formation of a political party, eventually named the Finnish Rural Party. The party's dissolution in 1995 led to the creation of the True Finns (one of the party's slogans, "Crush the power hold of the old parties", is testament to its heritage). More than anything else, its euroscepticism seems to flow out of this tradition (which also explains its opposition to providing more cash to the temporary eurozone bail-out fund, the EFSF, for more bail-outs - bail-outs which we agree aren't really working).

So clearly, the party has very different roots compared to other Scandinavian populist parties, such as the Sweden Democrats and the Danish People's Party (for Swedish speakers, here's an article breaking it down). The Front National, Geert Wilder's Freedom Party etc are much farther away again from the True Finns.

In other words, the party cannot be described as "far right", as some non-Finnish media insist on so doing. However, it cannot be described as "centre-right" either, as it draws heavily from an old school, social democratic agenda (i.e. high taxes and a big welfare state). Kind of like a social democratic tea party, with a lot of emphasis on national sovereignty and independence.

According to an opinion poll published today, the party has lost some ground over the last few days, and are now fourth in the race (compared to second in a poll published the other week) - a race that is still wide open it has to be said.

What makes this interesting for the EU and the eurozone is that Finland is the first Triple A eurozone country in which euro bail-outs have become a national election issue. As the leader of the True Finns, Timo Soini, put it, the election might evolve into the referendum which the Finnish people were refused when the euro was first introduced.

We shall see.