As an EU Member State, Finland has gone out of its way to defend the rights of small countries. Finland has tried to fit in both at the core of the Union and on the fringes of it, and the Finns have at times been enthusiastic about integration and at times cautious about it. Finland has been a Member of the European Union for just over a decade now, a period of economic success.

Photo: The Central Audiovisual Library of the European Commission

As an EU Member State, Finland has gone out of its way to defend the rights of small countries. Finland has tried to fit in both at the core of the Union and on the fringes of it, and the Finns have at times been enthusiastic about integration and at times cautious about it. Finland has been a Member of the European Union for just over a decade now, a period of economic success. The biggest change that the Finnish public has noticed is that prices of cars and alcoholic beverages have fallen.

Finland’s accession to the European Union in 1995 was a small part of an enormous geo-political change that affected all of Europe. As recently as the mid-1980s, Finland was an unallied Nordic country and not even a member of the Council of Europe.

Until the fall of the Berlin wall and the disintegration of the Soviet Union, Finland’s foremost trade policy framework was EFTA, the European Free Trade Association. There were also strong bonds with the other Nordic countries, both on a political and a grassroots level. The Nordic countries had already created a joint labour market and passport union in the 1960s. However, Finland also had links with the east in the shape of the Treaty of Friendship, Co-operation and Mutual Assistance with the Soviet Union.

By this time, history was already carrying the small Finnish nation at speed toward new international constellations. Finland became a member of the Council of Europe in 1989, and a few years later, work started on outlining the European Economic Area (EEA), which would link the EFTA countries with what was then the European Community (EC) — without, however, making them full members of the last-named.

Surprise move by Sweden

By the time the EEA was established in 1994, negotiations for Finnish membership of the European Community, which was about to transform into the European Union, were well under way. Austria had been the first of the EFTA countries to try for membership in the then 12-member Community, but the pivotal event for Finland was when its neighbour, Sweden, made the decision in spring 1991 to apply for EC membership.

This was an unexpected move by Sweden and it took Finnish political leaders by surprise. It also seems to have affected subsequent relations between the two countries and brought about differences in their EU policies. The ‘northern bloc’ predicted by so many did not, in fact, materialize within the European Union, and when Finland was among the first to make the transition to the euro, Sweden — like Denmark — chose to stay outside economic and monetary union.

The Nordic front is further split by the fact that Norway has twice rejected EU membership in national referendums. Moreover, Norway and Denmark are members of NATO, while Sweden and Finland have elected not to apply for membership.

Security tips the scales

At the time when possible membership of the European Union was being debated in Finland, the burning issues were specifically the future of neutrality and military non-alliance, and the future of Finnish agriculture. There was also concern that the general right of self-determination might be eroded as many laws traditionally enacted in the national Parliament would have to be harmonised with the extensive legislation and treaties of the European Union.

Meanwhile, the foremost argument in favour of membership concerned improved influence. Pro-membership advocates argued that it was important for Finland to be seated at the table where the decisions affecting Finland would be made with or without the country's presence. Furthermore, it was believed that accession to the European Union would open new markets for Finnish exports and help Finland recover from the severe economic recession of the early 1990s. The collapse of trade with Russia, in particular, had bitten a big chunk out of Finland’s economic growth, and the number of unemployed had rocketed from under 200,000 to nearly half a million in a population of about five million.

Only after Finland’s EU membership had been confirmed was it widely admitted that national security had been the motive of the majority of the 57 per cent of Finns who voted for EU membership in the referendum of October 1994. At least, this was the interpretation put forward by President Mauno Koivisto, who was in office from 1982 to 1994 and had considerable influence over Finland’s choices vis-à-vis Europe.

The 'Beneflux' front

Once Finland had taken its place in the European Union, now consisting of 15 members, it immediately set out to gain an influential position within the organisation. From 1995 to 2003, the period when Paavo Lipponen was Prime Minister, in 1995-2003 were particularly a time when Finland was often regarded as punching above its weight. Lipponen’s premiership was also marked by Finland's endeavour to get to the core of the Union. At the time of the negotiations for the Treaty of Amsterdam, Finland was among the Member States that placed great emphasis on commmunality. Finland’s foremost aim at that time, and also later on when the Treaty of Nice was drafted, was to increase decisions by qualified majority in the European Union’s legislative procedures.

During the late 1990s, Finland often sided with the Netherlands, Belgium and Luxembourg on matters concerning development of the Union. This phenomenon was sometimes described by saying that the Benelux group had turned into the ‘Beneflux bloc’.

In addition to having more decisions made a by qualified majority, Finland was in favour of maintaining a key position for the Commission. It was Prime Minister Lipponen’s stated opinion that a strong Commission was the best ‘life insurance policy’ for a small Member State. On the other hand, it was also considered important that every Member State would continue to be allowed to appoint one member to the Commission.

At the stage when the Treaty of Nice was emerging, Finland's position changed,in a manner of speaking. Finland become identified as a champion of the rights of small Member States,and even arranged separate meetings of 'like-minded' countries, gathering together the small and medium-sized Member States to ensure equality among all the members of the Union.

In Helsinki an invitation to Turkey

Photo: Audiovisual Library of the European Commission

Turkey was accepted as a candidate for EU membership in the Helsinki European Council of December 1999. In the picture Turkish Prime Minister Erdogan, and Olli Rehn, EU Commissioner for Enlargement, in Brussels, December 2004.

Finland held the Presidency for the first time from July to December 1999. Suitable for that point in time, was the slogan 'Europe into the new Millennium'. The Presidency peaked in the Helsinki European Council of December 1999, where the Millennium Declaration was adopted. It solemnly listed all the achievements in integration thus far and the principal challenges for the future. Its political importance, however, proved to be very modest.

The most visible achievements of the Helsinki European Council were the recognition of Turkey as a candidate for membership of the Union (after some rather dramatic events) and a policy decision concerning crisis management forces for future EU-led military operations. The Finns have been more favourably disposed towards Turkey's proposed membership of the Union than most other Europeans. This may have been influenced by the decision having been made in Helsinki. Later on, something else that may have supported Finland's favourable attitude towards Turkey may have been the fact that the European Commissioner for Enlargement in the Barroso Commission is a Finn, Olli Rehn.

New initiatives in Tampere

New initiatives were also made by the first European Council to be arranged during the Finnish Presidency, in October 1999. This special meeting of the European Council, held in Tampere, was the first EU summit to focus exclusively on internal affairs and justice.

Finland starts its second Presidency of the EU on July 1. This is an official Presidency logo.

Despite the ambition of the Tampere milestones, concrete decisions were slow to materialize. Something that proved particularly difficult was the creation of a common asylum and migration policy, although that had been entered as one of the main goals. After the Dutch Presidency in autumn 2004, the policy guidelines on justice and internal affairs have been known as the Hague Programme.

1999 was a top year for Finland in EU policy, and not only because of the Presidency. Finland's President at the time, Martti Ahtisaari, was head of an EU mission that persuaded Yugoslav leader Slobodan Milosevic to cease military action in Kosovo. In autumn 2005, Ahtisaari was given another Kosovo mission, when the UN appointed him to lead negotiations aimed at outlining the future for the region that had suffered from fighting between Serbs and ethnic Albanians.

Influential Finns

In the early years of Finland's EU membership, Finnish influence was also evident in the appointment of Finns to important posts. Jacob Söderman was appointed as the first European Ombudsman in 1995, and retired from the post halfway through his second period of office in 2003. Söderman made a reputation by engaging in a public dispute concerning EU transparency with Romano Prodi, then President of the Commission, in spring 2000.

When a Military Committee was set up for the European Union in 2000, its first chairman was General Gustav Hägglund, a former commanding officer of Finland's Defence Forces. At about the same time, the influential Economic and Financing Committee of the euro zone was chaired by Johnny Åkerholm, another Finn.

Finnish influence in the field of economic and financing policy was also boosted when Sirkka Hämäläinen was appointed as one of the first members of the Executive Board of the European Central Bank (ECB), and by Sixten Korkman's tenure as Director-General of the Ecofin Council of the EU from 1995 to 2005.

The first Finnish European Commissioner, who assumed office at the beginning of 1995, was Erkki Liikanen, from the Social Democratic Party of Finland, who had earlier been Minister of Finance and Head of the Finnish Mission to the European Union. He held the position of European Commissioner for Budget, Personnel & Administration in the Santer Commission and the post of European Commissioner for Enterprise and the Information Society in the Prodi Commission until he was appointed Governor of the Bank of Finland in 2004. The last mentioned appointment also made him a member of the Governing Council of the European Central Bank (ECB). In the Commission, Liikanen was succeeded by Olli Rehn, who represented the political centre.

Prime Minister or President?

After the referendum, there have not been any major internal disagreements in Finland about the direction of EU policy, although there was some fairly intense debate on whether Finland should join EMU. In Finland, once a decision has been made, people are in the habit of have always pulling together for the common good, whatever the new circumstances.

One matter that Finnish leaders have found difficult to agree on is the issue of who should wield Finland’s vote at top-level EU meetings. Very often, both the Prime Minister and the President have attended summits, even though management of EU affairs is defined as the responsibility of the Government and the Prime Minister under the Finnish Constitution.

On the other hand, the same Constitution states that the President is in charge of Finland’s foreign and security policy together with the Government. Traditionally, the President is also Supreme Commander of the Finnish Defence Forces. These fundamental premises caused some problems when Finland was preparing the legislation that would enable participation in EU rapid reaction forces in 2005 as the presidential election was under way. The Government finally went as far as proposing an amendment to the Constitution in order to ensure that the President retains the power to make the final decision on the despatch of Finnish military personnel abroad.

Lipponen steps aside

No more than a couple of years into the new millennium, Finland's warm relationship with the EU seemed to have cooled off noticeably. The change coincided with a change of Government in Finland, with Prime Minister Lipponen stepping aside and making room for subsequent prime ministers representing the political centre. Anneli Jäätteenmäki, Finland's first ever woman prime minister, held the post for only a few months before having to relinquish it to Matti Vanhanen.

Photo: Audiovisual Library of the European Commission

Pillars of strength. Between 1995 and 2003 Prime Minister Paavo Lipponen (left) was the embodiment of Finland's EU policy. He believed that a strong EU Commission was in the interest of a small member state. Lipponen was long regarded as the candidate to take over from Romano Prodi (right) as President of the Commission, but in 2004 the post went to Portugal's José Manuel Borroso.

On the other hand, experts have pointed out that the tone of Finland's EU policy had already changed before the Parliamentary elections in spring 2003, before Lipponen stepped down. Even when the European Convention was working under Valery Giscard d'Estaing to draw up a draft constitution for the Union, Lipponen expressed some sharp criticism of the plans. In his opinion, the Convention had exceeded its authority in dealing with issues such as the development of security and defence policy.

In themselves, the establishment of the Convention and the drafting of the Constitutional Treaty did find favour with Lipponen; he was, in fact, one of the people behind the whole process. He had proposed the idea of a Convention in a speech in Brugge in November 2000.

For his part, before becoming Prime Minister, Matti Vanhanen had been a Convention member appointed by the Finnish Parliament. As a result, he was familiar with the subject when work on the Constitutional Treaty continued at the Intergovernmental Conference (IGC)in autumn 2003.

Battle for an agency

It came as a surprise to many people when, towards the end of the IGC, Finnish leaders began to demand amendments to the sections on security and defence in the draft Constitutional Treaty. Erkki Tuomioja, the Minister for Foreign Affairs, wanted the wording of the mutual defence clause to be changed from an obligatory to a more voluntary concept. Meanwhile, Matti Vanhanen considered it important that the concept of ‘structural cooperation’ would not turn out to mean a sort of ‘hard core’ of defence within the Union.

These opinions all contributed to the signs of a new Finnish approach in EU policy. Some observers maintained that Finland's approach the attitude had been altered not only by the change of prime minister but also by the death of highly regarded Finnish diplomat Antti Satuli. Satuli had been Finland's permanent representative in Brussels since the start of EU membership until the end of 2001, after which he became Secretary of State at the Ministry for Foreign Affairs and died unexpectedly in spring 2003.

Many other influential Finns transferred from EU duties back to Finland or retired. It soon became apparent that Finns had become extremely rare in high positions within the Union. For several years there was no Finnish Director-General in the Commission.

Finland was also a long time waiting for an EU agency to be located on Finnish soil. A lengthy dispute about the location of the European Food Safety Authority (EFSA) ended in December 2003 with victory for Italy, and specifically Parma. In a trade-off, Finland and Helsinki got the European Chemicals Agency, a body to be established under the Union's ambitious REACH Directive.

Increase in euroscepticism

The scarcity of Finnish appointments, the dispute about the EFSA and, in particular, the disagreements within the EU, first at Nice and then during the negotiation of the Constitutional Treaty — all had a clear effect on attitudes in Finland. In summer 2005, opinion polls showed that Finns would no longer even say yes to membership of the Union in a referendum. One poll showed figures of 46-43 against the EU. Finnish attitudes towards the Constitutional Treaty, the euro and the development of EU defence capabilities were also more negative than before.

The continuing enlargement of the European Union also certainly had an effect on attitudes. People in Finland have realized that membership of the Union will become much more expensive for them. After all, the treaty drawn up in the accession negotiations had ensured for Finland a reasonably bearable position amid the Union’s budgetary flows. Finland, whose economic growth was rather good once the recession of the 1990s had ended, was usually a very low-level net contributor and even a low-level net recipient in certain years, whereas neighbouring Sweden felt that EU membership was always rather expensive.

In 2004, Sweden assembled a group of net contributor countries to demand that Union expenditure be limited to one per cent of the area’s GDP. Finland was not asked to join this group, which consisted of Sweden, Germany, France, the UK, the Netherlands and Austria. Once again, the two Nordic countries had taken quite a different line.

When the attempt to reach agreement on EU finances for the period 2007-2013 failed at the June 2005 summit, Finland was one of five countries that blocked the proposals for compromise put forward by the Luxembourg Presidency. This was an unusually high-profile action from a country that had until then always been seen seeking concialition and avoiding confrontation.

Prices an eternal worry

Most Finns probably did not see much of the effects of membership of the European Union in their everyday lives until the euro entered circulation at the beginning of 2002. The switch to the new currency went very smoothly, including the process of giving up the Finnish markka, which dated back to 1860, or over half a century before Finnish independence. There had been careful preparation for this big change, which was made easier by the fact that payment cards and electronic cash were already in widespread use in Finland.

The biggest fear focused on whether prices would rise in conjunction with the transition to the euro. In the years following the change, statistics showed that prices remained unchanged for the most part. Nevertheless people were annoyed by certain blatant changes to their everyday routine; for instance, the price of an evening paper went from five markka to one euro, the equivalent of about six markka.

Worry over sugar production

Finland's entry into the the European Union in 1995 was accompanied by a fall in food prices in particular. Eggs, pork and many other everyday products became noticeably cheaper.

Similarly, producer prices also fell. The composition of a farmer’s income went through a total overhaul as social support was replaced by direct payments on the basis of hectares of cultivated land or headcounts of livestock.

With EU membership, farmers were also burdened with mountains of paperwork. The endless support forms to be filled in and the visits by inspectors made many a farmer consider a change of occupation. The number of farms in Finland has been falling continuously since EU membership, whilst the average size of farms has grown correspondingly.

The most recent cause for concern in the Finnish countryside is the threat that sugar production may end. In summer 2004, the EU Commission proposed a cut of about 40 per cent in the producer price for sugar beet as part of an extensive reform that had been forced by the World Trade Organization (WTO). Decisions made by Ministers of Agriculture at the end of 2005 meant that Finand retained sugar production but with only one factory to process the sugar beet.

Alcohol from Estonia

The effects of Finland’s accession to the European Union have only become visible to the general public over time. One typical example is alcohol policy. The start of EU membership did not bring any great change because the Nordic countries were given permission to continue with their own system, whereby retail sale of alcoholic beverages is the exclusive right of the state. Similarly, the Nordic countries were able to continue to impose limitations on the volumes of alcoholic beverages travellers were allowed to bring in from other EU Member States.

However, the separate limitations on alcohol brought in by travellers had to be given up in 2004, after a transition period of two years. In May of that year, ten new Member States joined the EU one of them being Finland’s neighbour to the south, Estonia, where price levels have been more than fifty per cent lower than in Finland. The Finnish Government and Parliament were left with no option but to drastically cut the excise duty on alcohol from the beginning of March 2004. Since then, consumption of alcohol in Finland has risen by more than ten per cent, and alcohol poisoning and alcohol-related ailments have become the main cause of death for working-age men.

Moreover, running a car has traditionally been more expensive in Finland than elsewhere in Europe. EU membership brought a change in this situation, too, when the European Court of Justice ruled in 2002 that Finland charges too much tax on used cars imported from other Member States.

This ruling gave rise to something of a mass movement, as motorists went abroad to buy cars, especially from Germany. The government had to respond by cutting vehicle tax. Despite this, almost one in five cars registered in Finland in the first half of 2003 was a used imported vehicle.

Economic growth

In economic terms, EU membership has brought prosperous times to Finland, a country that has always been dependent on exports. Originally, the exports were led by the forest and paper industry, but over the past few decades, the information and communications sector has taken its place, with the world’s biggest mobile phone manufacturer, Nokia, as the jewel in its crown.

Photo: European Commission Representation

The picturesque Esplanade avenue in central Helsinki, where The European Commission and Parliament Representation are situated.

Joining the European Union was a natural continuation of Finland’s trade policy up to that point. In terms of monetary policy, however, taking part in economic and monetary union (EMU) meant a complete change of direction in Finland’s economic thinking. Inflation had been fairly high for years, and devaluation of the Finnish markka from time to time was a way of ensuring that exports stayed competitive. When Finland gave up its separate exchange rate, it meant that the means of adapting to future external economic disturbances would have to be found elsewhere, in wage cuts if need be.

In considering whether to join EMU, one of the foremost suspicions was, in fact, that a common monetary policy would prove too inflexible for a small economy like Finland’s that is dependent on exports. But practical experience of EMU proved otherwise. When the economy of Finland’s big neighbour, Russia, was going through some bad times in the early years of the new millennium, Finland was spared the fluctuations. Only a decade earlier, the collapse of trade with Russia had been a significant factor in accelerating Finland's slide into recession.

Lovely low interest rates

For Finns with housing loans and other types of loan, the euro era has been a time of stable, low interest rates. In this respect, too, the change from earlier times has been considerable. Loans have been cheap for the general public, but the prices of consumer goods have remained high compared with other industrialized countries in western Europe.

EMU and the euro have naturally been beneficial for travellers by obviating the need to exchange currency when travelling to another euro country. This has made the Finns' popular holiday trips to Spain more convenient, but currency exchange is still a necessary inconvenience when travelling to all of Finland’s neighbouring countries: Sweden, Estonia, Russia and Norway.

A relatively high unemployment rate continues to trouble the people of Finland. It is true that the unemployment rate has fallen from its highest level of over 15 per cent to less than nine per cent, but this has not happened as quickly as Finnish Governments, regardless of their political composition, have promised and worked for.

Ageing population

Since the introduction of the euro Finland has been one of the few Member States to remain within the bounds set down by the Stability and Growth Pact. The shock therapy required for Finland to survive the recession of the early 1990s brought with it many structural changes that many other Member States have not had the political will to implement. As a result of reform and, particularly, success in the ICT sector, Finland has now reached the number one spot on many worldwide surveys of competitiveness.

However, economic growth in Finland is threatened by the same phenomenon as everywhere else in Europe. The ageing of the population is changing the economic dependency ratio as the proportion of pensioners grows and the number of working age people declines. In Finland, this change is progressing more rapidly than in most Member States.

Opening the labour market

It is thought that immigration may be one possible solution to the threat of labour shortages, but politically this is still a delicate subject as unemployment remains high. Unlike Sweden, Finland did not throw open its labour market to citizens from the new EU Member States immediately in 2004, but chose to retain work permit procedures until spring 2006. The trade union movement in particular called at length for the restriction to be retained and for the transitional period to be extended. But early in 2006 the Finnish government decided to open the labour market, partly because the work permit regulation was not sufficiently effective.

Many Estonians, for example, have come to work in Finland by way of labour hire firms and the Finnish labour market has apparently not suffered any noticeable negative side effects as a result.