Finnish Premier Throws Curve Ball to Limit Election Slump

(Bloomberg) -- Finland’s millionaire prime minister has a history of defying the odds, but his latest gamble may not be enough to rescue his party from defeat in next month’s general election.

A businessman who made his fortune selling mobile-phone parts in the 1990s, Juha Sipila capped his meteoric rise into politics by winning the 2015 election at the helm of the Center Party, a conservative movement that has its traditional base in Finland’s rural areas.

While in office, he oversaw a stunning turnaround in an economy that until recently was being referred to as “the sick man of Europe.” He also convinced recalcitrant trade unionists to get people to work more for less, pulled through a migration crisis that split a nationalist ally, and survived a potentially devastating scandal involving his family business.

However, with his party faring badly in the polls amid voters’ resentment over a series of budget cuts, his decision to suddenly step down just weeks before the April 14 vote smacks of desperation.

Damage Control

“A defeat in the election for the Center Party is impossible to avoid,” said Markku Jokisipila, a professor of political history at the University of Turku. His resignation is “essentially an attempt to stop the downward spiral” and will “allow the party to do some damage control ahead of election day.’’

In his resignation speech, Sipila blamed disagreements in parliament and constitutional hurdles for the government’s failure to push through what he described as “one of the key objectives” of the government, a “long-awaited” reform of the country’s health and social services.

“We managed to achieve 80 percent of our objectives, but one of the five most important ones was left unfinished,” Sipila told reporters in Helsinki. “This is a huge disappointment for me.”

Sipila on Saturday contested the claim that his party’s weak polling led to his decision to disband the coalition.

“The timing had nothing to do with the polls,” Sipila said in an interview on YLE TV1. “I would have done this had the health-care reform collapsed, say, in November.”

Budget Constraints

Statistics Finland has estimated that more than a quarter of the population will be aged over 65 by 2030, making a more cost-effective welfare state a top priority. The government’s plan involved a drastic re-organization of the way health care is administered at local level, as well as a greater role for the private sector.

Read more on the government’s reform agenda

With the northernmost euro member bound by strict budget rules, Sipila had argued that the changes would have helped cut 3 billion euros ($3.4 billion) off a projected increase in care costs by 2030. These kind of savings have been cited by credit-rating companies and the European Commission as the key to get Finland’s public spending on a sustainable path.

The challenge of pushing through a reform that’s been talked about for more than a decade will now fall on the next government. As things stand, it looks like Sipila will no longer be playing a leading role in such discussions.

Though his resignation will allow him to deflect the blame for the government’s failures, and open up the election to infighting within the incumbent three-party center-right coalition, the 57-year-old appears to be paying the price for pushing through deeply unpopular measures like the labor market reform, with the health care fiasco only adding to his woes.

“This is a failure on a grand scale, as it was the most central reform of this government,’’ Jokisipila said. “Undoubtedly there will be discussions on a future leadership within his party.’’

To contact the reporters on this story: Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net;Leo Laikola in Helsinki at llaikola@bloomberg.net

To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Nick Rigillo

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