Finnish Finance Minister Ousted as Party Head Over Austerity

Finnish Finance Minister Jutta Urpilainen lost the Social Democratic leadership as her party soured on her fronting three years of austerity measures that have weighed on growth and jobs in the northernmost euro member.

Antti Rinne, head of the trade union Pro, won the backing of 257 party members against Urpilainen’s 243 at a congress today in Seinaejoki, 360 kilometers (225 miles) northwest of Helsinki. Urpilainen has said she will step down as finance minister should she lose.

“SDP’s stance will change to more and more targeting creating jobs and economic growth,” Rinne, 51, said to reporters after the vote. “We should focus now on a little more stimulus.”

The ouster underscores voter dissatisfaction with austerity policies that have collided with a broader decline in Finnish business, as Nokia Oyj shrinks and the paper industry flounders. Finland’s economy has contracted in three of the past five years, pushing unemployment to 9.5 percent in March. Industrial production shrank for the 17th consecutive month in March, slumping an annual 5 percent, the statistics office said.

“The trade-union side of the party feels that their voice hasn’t been heard,” Ville Pitkaenen, researcher at the University of Turku, said by phone before the vote.

Alliance Breaking

Support for the Social Democrats has slid to 15.8 percent, according to an YLE poll, from 19.1 percent in the 2011 general election when the SDP helped form a six-party coalition. Backing was as low as 15 percent in September. The Left Alliance also quit in March in protest over austerity, leaving a five-party government.

Rinne’s victory means political risks are increasing in Finland, Suvi Kosonen, analyst at Nordea Bank AB in Helsinki, said in a message on Twitter.

Rinne, who has said he wants to renegotiate the government’s four-year spending limits agreed on in March, today said the party will continue along the lines of the government program agreed on in 2011. He said that “small amendments may be made in June” when the larger National Coalition Party also chooses a new leader.

Losing Leaders

Urpilainen’s defeat means the government will lose both its top ministers ahead of elections next year. Prime Minister Jyrki Katainen has announced he will step down next month to pursue an international political career. Urpilainen told reporters after the vote that the timetable for the handover isn’t yet decided and that she plans to return to work as a member of parliament.

Rinne worked as a lawyer until 2002 before embarking on a trade-union career and has no experience in parliament or as a minister. He said he wouldn’t respond today on possible ministerial posts.

“Rinne isn’t afraid of appearing hard-nosed and unyielding,” said Mari K. Niemi, visiting researcher at the University of Strathclyde, Scotland. “It’s about reaching out to the ordinary citizen, who wants to see more common sense and less political correctness.”

As finance minister, Urpilainen has been a front figure defending austerity measures. Since 2011, she has cut spending and raised taxes by 6.8 billion euros ($9.5 billion) to protect Finland’s AAA rating and contain debt growth.

Difficult Decisions

She also came under attack from Rinne for seeking to temper austerity measures through corporate tax cuts, a move Urpilainen said was necessary to improve competitiveness and encourage investment.

“Urpilainen has to defend the government’s policy,” Pitkaenen said. “Rinne will quickly find himself in Urpilainen’s place, justifying the government’s difficult decisions.”

The government said yesterday it’s negotiating with Meyer Werft GmbH on jointly purchasing STX Europe AS’s shipyard operations in Turku from its Korean owners. Rinne has repeatedly called for the state to invest to save the facility.

Urpilainen, 38, who has been party leader since 2008, was re-elected without challengers in 2010 and 2012. She has presided over five consecutive elections with falling voter support. Many of the traditional working-class supporters have turned to “The Finns” party, drawn by its opposition to bailouts for indebted euro-area countries and its calls for stimulus to create jobs.

The next parliamentary vote is set for April 19, 2015.

“With their current low support, the Social Democrats aren’t in a good position to negotiate,” said Niemi. “Rinne may find himself in a tough spot if he gets caught making promises that he can’t keep.”

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