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Finland has a highly industrialised, mixed economy with a per capita output equal to that of other western economies such as France, Germany, Sweden or the United Kingdom. The largest sector of the economy is services at 65.7 percent, followed by manufacturing and refining at 31.4 percent. Primary production is 2.9 percent.^[10] With respect to foreign trade, the key economic sector is manufacturing. The largest industries^[11] are electronics (21.6 percent), machinery, vehicles and other engineered metal products (21.1 percent), forest industry (13.1 percent), and chemicals (10.9 percent). Finland has timber and several mineral and freshwater resources. Forestry, paper factories, and the agricultural sector (on which taxpayers spend around 2 billion euro annually) are politically sensitive to rural residents. The Greater Helsinki area generates around a third of GDP.^{[citation needed]} In a 2004 OECD comparison, high-technology manufacturing in Finland ranked second largest after Ireland. Knowledge-intensive services have also ranked the smallest and slow-growth sectors – especially agriculture and low-technology manufacturing – second largest after Ireland. Investment was below expected.^[12] Overall short-term outlook was good and GDP growth has been above many EU peers. Finland has the 4th largest knowledge economy in Europe, behind Sweden, Denmark and the UK.^[13]

Finland is highly integrated in the global economy, and international trade is a third of GDP. The European Union makes 60 percent of the total trade.^[14] The largest trade flows are with Germany, Russia, Sweden, the United Kingdom, the United States, Netherlands and China.^[14] Trade policy is managed by the European Union, where Finland has traditionally been among the free trade supporters, except for agriculture. Finland is the only Nordic country to have joined the Eurozone; Denmark and Sweden have retained their traditional currencies, whereas Iceland and Norway are not members of the EU at all.

History[link]

Finland started out as a relatively poor country that was vulnerable to shocks to the economy such as the great famine of the 1860s. Until the 1930s, the Finnish economy was predominantly agrarian, and, as late as in the 1950s, more than half the population and 40 percent of output were still in the primary sector.^{[citation needed]}

After World War II[link]

Property rights were strong. While nationalization committees were set up in France and the United Kingdom, Finland avoided nationalizations. After failed experiments with protectionism, Finland eased restrictions and concluded a free trade agreement with the European Community in 1973, making its markets more competitive. Local education markets expanded and an increasing number of Finns also went abroad to study in the United States or Western Europe, bringing back advanced skills.^{[citation needed]} There was a quite common, but pragmatic-minded, credit and investment cooperation by state and corporations, though it was considered with suspicion. Support for capitalism was widespread.^[15] Savings rate hovered among the world's highest, at around 8% until the 80s. In the beginning of the 1970s, Finland's GDP per capita reached the level of Japan and the UK. Finland's economic development shared many aspects with export-led Asian countries.^[15]

In 1991 the Finnish economy fell into recession. This was caused by a combination of economic overheating, depressed markets with key trading partners (particularly the Swedish and Soviet markets) as well as local markets, slow growth with other trading partners, and the disappearance of the Soviet barter system. Stock market and housing prices declined by 50%.^[16] The growth in the 1980s was based on debt, and when the defaults began rolling in, GDP declined by 13% and unemployment increased from a virtual full employment to one fifth of the workforce. The crisis was amplified by trade unions' initial opposition to any reforms. Politicians struggled to cut spending and the public debt doubled to around 60% of GDP.^[16] Much of the economic growth in the 1980s was based on debt financing, and the debt defaults led to a savings and loan crisis.A total of over 10 billion euros were used to bail out failing banks, which led to banking sector consolidation.^[17] After devaluations the depression bottomed out in 1993.

Liberalization[link]

Like other Nordic countries, Finland has modified its system of economic regulation since late 1980s. Financial and product market regulations were modified. Some state enterprises were privatized and some tax rates were altered. However, unlike Denmark, Finland has not adopted polices such as a basic income or negative income tax.

European Union[link]

Finland joined the European Union in 1995. The central bank was given an inflation-targeting mandate until Finland joined the euro zone.^[16] The growth rate has since been one of the highest of OECD countries and Finland has topped many indicators of national performance.

Finland was one of the 11 countries joining the third phase of the Economic and Monetary Union of the European Union, adopting the euro as the country's currency, on January 1, 1999. The national currency markka (FIM) was withdrawn from circulation and replaced by the euro (EUR) at the beginning of 2002.

Agriculture[link]

Finland's climate and soils make growing crops a particular challenge. The country lies between 60° and 70° north latitude - as far north as Alaska - and has severe winters and relatively short growing seasons that are sometimes interrupted by frosts. However, because the Gulf Stream and the North Atlantic Drift Current moderate the climate, Finland contains half of the world's arable land north of 60° north latitude. Annual precipitation is usually sufficient, but it occurs almost exclusively during the winter months, making summer droughts a constant threat. In response to the climate, farmers have relied on quick-ripening and frost-resistant varieties of crops, and they have cultivated south-facing slopes as well as richer bottomlands to ensure production even in years with summer frosts. Most farmland had originally been either forest or swamp, and the soil had usually required treatment with lime and years of cultivation to neutralise excess acid and to develop fertility. Irrigation was generally not necessary, but drainage systems were often needed to remove excess water.

Until the late nineteenth century, Finland's isolation required that most farmers concentrate on producing grains to meet the country's basic food needs. In the fall, farmers planted rye; in the spring, southern and central farmers started oats, while northern farmers seeded barley. Farms also grew small quantities of potatoes, other root crops, and legumes. Nevertheless, the total area under cultivation was still small. Cattle grazed in the summer and consumed hay in the winter. Essentially self-sufficient, Finland engaged in very limited agricultural trade.

This traditional, almost autarkic, production pattern shifted sharply during the late nineteenth century, when inexpensive imported grain from Russia and the United States competed effectively with local grain. At the same time, rising domestic and foreign demand for dairy products and the availability of low-cost imported cattle feed made dairy and meat production much more profitable. These changes in market conditions induced Finland's farmers to switch from growing staple grains to producing meat and dairy products, setting a pattern that persisted into the late 1980s.

In response to the agricultural depression of the 1930s, the government encouraged domestic production by imposing tariffs on agricultural imports. This policy enjoyed some success: the total area under cultivation increased, and farm incomes fell less sharply in Finland than in most other countries. Barriers to grain imports stimulated a return to mixed farming, and by 1938 Finland's farmers were able to meet roughly 90 percent of the domestic demand for grain.

The disruptions caused by the Winter War and the Continuation War caused further food shortages, especially when Finland ceded territory, including about one-tenth of its farmland, to the Soviet Union. The experiences of the depression and the war years persuaded the Finns to secure independent food supplies to prevent shortages in future conflicts.

After the war, the first challenge was to resettle displaced farmers. Most refugee farmers were given farms that included some buildings and land that had already been in production, but some had to make do with "cold farms," that is, land not in production that usually had to be cleared or drained before crops could be sown. The government sponsored large-scale clearing and draining operations that expanded the area suitable for farming. As a result of the resettlement and land-clearing programs, the area under cultivation expanded by about 450,000 hectares, reaching about 2.4 million hectares by the early 1960s. Finland thus came to farm more land than ever before, an unusual development in a country that was simultaneously experiencing rapid industrial growth.

During this period of expansion, farmers introduced modern production practices. The widespread use of modern inputs—chemical fertilisers and insecticides, agricultural machinery, and improved seed varieties—sharply improved crop yields. Yet the modernisation process again made farm production dependent on supplies from abroad, this time on imports of petroleum and fertilisers. By 1984 domestic sources of energy covered only about 20 percent of farm needs, while in 1950 domestic sources had supplied 70 percent of them. In the aftermath of the oil price increases of the early 1970s, farmers began to return to local energy sources such as firewood. The existence of many farms that were too small to allow efficient use of tractors also limited mechanisation. Another weak point was the existence of many fields with open drainage ditches needing regular maintenance; in the mid-1980s, experts estimated that half of the cropland needed improved drainage works. At that time, about 1 million hectares had underground drainage, and agricultural authorities planned to help install such works on another million hectares. Despite these shortcomings, Finland's agriculture was efficient and productive—at least when compared with farming in other European countries.^[18]

Forestry[link]

Forests play a key role in the country's economy, making it one of the world's leading wood producers and providing raw materials at competitive prices for the crucial wood-processing industries. As in agriculture, the government has long played a leading role in forestry, regulating tree cutting, sponsoring technical improvements, and establishing long-term plans to ensure that the country's forests continue to supply the wood-processing industries.

Finland's wet climate and rocky soils are ideal for forests. Tree stands do well throughout the country, except in some areas north of the Arctic Circle. In 1980 the forested area totaled about 19.8 million hectares, providing 4 hectares of forest per capita—far above the European average of about 0.5 hectares. The proportion of forest land varied considerably from region to region. In the central lake plateau and in the eastern and northern provinces, forests covered up to 80 percent of the land area, but in areas with better conditions for agriculture, especially in the southwest, forests accounted for only 50 to 60 percent of the territory. The main commercial tree species—pine, spruce, and birch—supplied raw material to the sawmill, pulp, and paper industries. The forests also produced sizable aspen and elder crops.

The heavy winter snows and the network of waterways were used to move logs to the mills. Loggers were able to drag cut trees over the winter snow to the roads or water bodies. In the southwest, the sledding season lasted about 100 days per year; the season was even longer to the north and the east. The country's network of lakes and rivers facilitated log floating, a cheap and rapid means of transport. Each spring, crews floated the logs downstream to collection points; tugs towed log bundles down rivers and across lakes to processing centers. The waterway system covered much of the country, and by the 1980s Finland had extended roadways and railroads to areas not served by waterways, effectively opening up all of the country's forest reserves to commercial use.

Forestry and farming were closely linked. During the twentieth century, government land redistribution programmes had made forest ownership widespread, allotting forestland to most farms. In the 1980s, private farmers controlled 35 percent of the country's forests; other persons held 27 percent; the government, 24 percent; private corporations, 9 percent; and municipalities and other public bodies, 5 percent. The forestlands owned by farmers and by other people—some 350,000 plots—were the best, producing 75 to 80 percent of the wood consumed by industry; the state owned much of the poorer land, especially that in the north.

The ties between forestry and farming were mutually beneficial. Farmers supplemented their incomes with earnings from selling their wood, caring for forests, or logging; forestry made many otherwise marginal farms viable. At the same time, farming communities maintained roads and other infrastructure in rural areas, and they provided workers for forest operations. Indeed, without the farming communities in sparsely populated areas, it would have been much more difficult to continue intensive logging operations and reforestation in many prime forest areas.

The Ministry of Agriculture and Forestry has carried out forest inventories and drawn up silvicultural plans. According to surveys, between 1945 and the late 1970s foresters had cut trees faster than the forests could regenerate them. Nevertheless, between the early 1950s and 1981, Finland was able to boost the total area of its forests by some 2.7 million hectares and to increase forest stands under 40 years of age by some 3.2 million hectares. Beginning in 1965, the country instituted plans that called for expanding forest cultivation, draining peatland and waterlogged areas, and replacing slow-growing trees with faster-growing varieties. By the mid-1980s, the Finns had drained 5.5 million hectares, fertilized 2.8 million hectares, and cultivated 3.6 million hectares. Thinning increased the share of trees that would produce suitable lumber, while improved tree varieties increased productivity by as much as 30 percent.

Comprehensive silvicultural programmes had made it possible for the Finns simultaneously to increase forest output and to add to the amount and value of the growing stock. By the mid-1980s, Finland's forests produced nearly 70 million cubic meters of new wood each year, considerably more than was being cut. During the postwar period, the annual cut increased by about 120 percent to about 50 million cubic meters. Wood burning fell to one-fifth the level of the immediate postwar years, freeing up wood supplies for the wood-processing industries, which consumed between 40 million and 45 million cubic meters per year. Indeed, industry demand was so great that Finland needed to import 5 million to 6 million cubic meters of wood each year.

To maintain the country's comparative advantage in forest products, Finnish authorities moved to raise lumber output toward the country's ecological limits. In 1984 the government published the Forest 2000 plan, drawn up by the Ministry of Agriculture and Forestry. The plan aimed at increasing forest harvests by about 3 percent per year, while conserving forestland for recreation and other uses. It also called for enlarging the average size of private forest holdings, increasing the area used for forests, and extending forest cultivation and thinning. If successful, the plan would make it possible to raise wood deliveries by roughly one-third by the end of the twentieth century. Finnish officials believed that such growth was necessary if Finland was to maintain its share in world markets for wood and paper products.^[18]

Industry[link]

From the 1990s, Finnish industry, which for centuries had relied on the country's vast forests, became dominated by to a larger extent by electronics and services, as globalization lead to a decline of more traditional industries.^[19] Outsourcing resulted in more manufacturing being transferred abroad, with Finnish-based industry focusing to a greater extent on R&D and hi-tech electronics.

Electronics[link]

The Finnish electronics and electrotechnics industry relies on heavy investment in R&D, and has been accelerated by the liberalisation of global markets. Electrical engineering started in the late 19th century with generators and electric motors built by Gottfried Strömberg, now part of the ABB Group. Other Finnish companies – such as Instru, Vaisala and Neles (now part of Metso) - have succeeded in areas such as industrial automation, medical and meteorological technology. Nokia is a world leader in mobile telecommunications.

Metals, engineering and manufacturing[link]

Finland has an abundance of minerals, but many large mines have closed down, and most raw materials are now imported. For this reason, companies now tend to focus on high added-value processing of metals.^{[citation needed]} The exports include the production steel, copper, chromium, zinc and nickel, and finished products such as steel roofing and cladding, welded steel pipes, copper pipe and coated sheets. Outokumpu is known for developing the flash smelting process for copper production and stainless steel.

With regard to vehicles, the Finnish motor industry consists mostly of manufacturers of trucks (Sisu Auto), tractors (Valtra, formerly Valmet tractor) military vehicles (Sisu, Patria) and Valmet Automotive, a contract manufacturer, whose factory in Uusikaupunki produces Fisker electric cars. Shipbuilding is an important industry: the world's largest cruise ships are built in Finland; also, the Finnish company Wärtsilä produces the world's largest diesel engines. In addition, Finland also produces train rolling stock.

The manufacturing industry is a significant employer of about 400,000 people ^[20]

Chemical industry[link]

The chemical industry is one of the Finland's largest industrial sectors with its roots in tar making in the 17th century.^[19] It produces an enormous range of products for the use of other industrial sectors, especially for forestry and agriculture. In addition, its produces plastics, chemicals, paints, oil products, pharmaceuticals, environmental products, Biotech products and petrochemicals. Biotechnology is regarded as one of the most promising high-tech sectors in Finland and it is growing rapidly.^[21]

Pulp and paper industry[link]

Forest products has been the major export industry in the past, but diversification and growth of the economy has reduced its share. In the 1970s, the pulp and paper industry accounted for half of Finnish exports. Although this share has shrank, pulp and paper is still a major industry with 52 sites across the country. Furthermore, several of large international corporations in this business are based in Finland. Stora Enso and UPM were placed #1 and #3 by output in the world, both producing more than ten million tons. M-real and Myllykoski also appear on the top 100 list.^[22]

Energy industry[link]

Finland's energy supply is divided as follows: nuclear power - 26%, net imports - 20%, hydroelectric power - 16%, combined production district heat - 18%, combined production industry - 13%, condensing power - 6%.^[23] One half of all the energy consumed in Finland goes to industry, one fifth to heating buildings and one fifth to transport.^[24] Lacking indigenous fossil fuel resources, Finland has been an energy importer. This might change in the future since Finland is currently building its fifth and approved the building permits for its sixth and seventh reactors.^[25]

Companies[link]

Aleksanterinkatu, a commercial street in Helsinki.

Notable companies in Finland include Nokia, the market leader in mobile telephony; Stora Enso, the largest paper manufacturer in the world; Neste Oil, an oil refining and marketing company; UPM-Kymmene, the third largest paper manufacturer in the world; Aker Finnyards, the manufacturer of the world's largest cruise ships (such as Royal Caribbean's Freedom of the Seas); Rovio Mobile, video game developer most notable for creating Angry Birds; KONE, a manufacturer of elevators and escalators; Wärtsilä, a producer of power plants and ship engines; and Finnair, the largest Helsinki-Vantaa based international airline.^[26] Finland has sophisticated financial markets comparable to UK in efficiency.^[27] Though foreign investment is as not high as some other European countries, the largest foreign-headquartered companies included names such as ABB, Tellabs, Carlsberg, and Siemens.^[28]

Around 70-80% of the equity quoted on the Helsinki Stock Exchange is owned by foreign-registered entities.^[29] The larger companies get most of their revenue from abroad, and the majority of their employees work outside the country. Cross-shareholding has been abolished and there is a trend towards an Anglo-Saxon style of corporate governance. However, only around 15% of residents had invested in stock market, compared to 20% in France, and 50% in the US.^[28]

Between 2000-2003, early stage venture capital investments relative to GDP were 8.5 percent against 4 percent in the EU and 11.5 in the US. Later stage investments fell to the EU median.^[30] Invest in Finland and other programs attempt to attract investment.^[31] In 2000 FDI from Finland to overseas was 20 billion euro and from overseas to Finland 7 billion euro. Acquisitions and mergers have internationalized business in Finland.

Although some privatization has been gradually done, there are still several state-owned companies of importance. The government keeps them as strategic assets or because they are natural monopoly. These include e.g. Neste Oil, VR Group (rail), Finnair, VTT (research) and Itella (mail). Depending on the strategic importance, the government may hold either 100%, 51% or less than 50% stock. Most of these have been transformed into regular limited companies, but some are quasi-governmental (liikelaitos), with debt backed by the state, as in the case of VTT.

Household income and consumption[link]

Finland's income is generated by the approximately 1.8 million private sector workers, who make an average 25.1 euro per hour (before the median 60% tax wedge) in 2007.^[32] In 2003 residents worked on average around 10 years for the same employer^[33] and around 5 jobs in lifetime. 62 percent worked for small and medium-size enterprises.^[34] Female employment rate was high and gender segregation on career choices was higher than in the US.^[35] In 1999 part-time work rate was one of the smallest in OECD.^[35]

Future liabilities are dominated by the pension deficit. Unlike in Sweden, where pension savers can manage their investments, in Finland employer chooses a pension fund for the employee. The pension funding rate is higher than in most Western European countries, but still only a portion of it is funded and pensions exclude health insurances and other unaccounted promises.^[36] Directly held public debt has been reduced to around 32 percent in 2007.^[37] In 2007, the average household savings rate was -3.8 and household debt 101 percent of annual disposable income, a typical level in Europe.^[38]

In 2008, the OECD reported that "the gap between rich and poor has widened more in Finland than in any other wealthy industrialised country over the past decade" and that "Finland is also one of the few countries where inequality of incomes has grown between the rich and the middle-class, and not only between rich and poor." ^[39]

In 2006, there were 2,381,500 households of average size 2.1 people. Forty percent of households consisted of single person, 32 percent two and 28 percent three or more. There were 1.2 million residential buildings in Finland and the average residential space was 38 square metres per person. The average residential property (without land) cost 1,187 euro per square metre (without land) and residential land on 8.6 euro per square metre. Consumer energy prices were 8-12 euro cent per kilowatt hour.^[40] 74 percent of households had a car. There were 2.5 million cars and 0.4 other vehicles.^[41] Around 92 percent has mobile phone and 58 percent Internet connection at home. The average total household consumption was 20,000 euro, out of which housing at around 5500 euro, transport at around 3000 euro, food and beverages excluding alcoholic at around 2500 euro, recreation and culture at around 2000 euro. Upper-level white-collar households (409,653) consumed an average 27,456 euro, lower-level white-collar households (394,313) 20,935 euro, and blue-collar households (471,370) 19,415 euro.^[42]

Unemployment[link]

The unemployment rate was 6.8% and 6.9% in early 2008.^[43] The unemployment security benefits for those seeking employment are at an average OECD level. The labor administration funds labour market training for unemployed job seekers, which is often vocational. The aim of the training is to improve the channels of finding employment. Very much like in Sweden,^[44] the government is often accused (often by foreigners, especially in Anglo-Saxon countries) of "cleaning the unemployment statistics" by vocational training programmes.^[45]

Public policy[link]

Finnish politicians have often emulated other Nordics and the Nordic model.^[46] Nordics have been free-trading and relatively welcoming to skilled migrants for over a century, though in Finland immigration is a relatively new phenomenon. This is due largely to Finland's less hospitable climate and the fact that the Finnish language shares roots with none of the major world languages, making it more challenging than average for most to learn. The level of protection in commodity trade has been low, except for agricultural products.^[46]

As an economic environment, Finland's judiciary is efficient and effective. Finland is highly open to investment and free trade. Finland has top levels of economic freedom in many areas, although there is a heavy tax burden and inflexible job market. Finland is ranked 16th (ninth in Europe) in the 2008 Index of Economic Freedom.^[27] Recently, Finland has topped the patents per capita statistics, and overall productivity growth has been strong in areas such as electronics. While the manufacturing sector is thriving, OECD points out that the service sector would benefit substantially from policy improvements.^[47] The IMD World Competitiveness Yearbook 2007 ranked Finland 17th most competitive, next to Germany, and lowest of the Nordics.^[48] while the World Economic Forum report has ranked Finland the most competitive country.^[49] Finland is one of the most fiscally responsible EU countries.

Product market[link]

Economists attribute much growth to reforms in the product markets. According to OECD, only four EU-15 countries have less regulated product markets (UK, Ireland, Denmark and Sweden) and only one has less regulated financial markets (Denmark). Nordic countries were pioneers in liberalising energy, postal, and other markets in Europe.^[46] The legal system is clear and business bureaucracy less than most countries.^[50] For instance, starting a business takes an average of 14 days, compared to the world average of 43 days and Denmark's average of 6 days. Property rights are well protected and contractual agreements are strictly honored.^[27] Finland is rated one of the least corrupted countries in Corruption Perceptions Index. Finland is rated 13th in the Ease of Doing Business Index. It indicates exceptional ease to trade across borders (5th), enforce contracts (7th), and close a business (5th), and exceptional hardship to employ workers (127th) and pay taxes (83rd).^[51]

Job market[link]

According to the OECD, Finland's job market is the least flexible of the Nordic countries.^[46] Finland increased job market regulation in the 1970s to provide stability to manufacturers. In contrast, during the 90s, Denmark liberalised its job market, Sweden moved to more decentralised contracts, whereas Finnish trade unions blocked many reforms. Many professions have legally recognized industry-wide contracts that lay down common terms of employment including seniority levels, holiday entitlements, and salary levels, usually as part of a Comprehensive Income Policy Agreement.^[46] Some^{[weasel words]} consider these agreements to be bureaucratic, inflexible, and, along with tax rates, a key contributor to unemployment and distorted prices^{[dubious – discuss]}. Possibly it may also slow down structural change as there are fewer incentives to acquire better skills, although Finland already enjoys one of the highest skill-levels in the world.^[12][46]

Taxation[link]

Tax is collected mainly from municipal income tax, state income tax, state value added tax, customs fees, corporate taxes and special taxes. There are also property taxes, but municipal income tax pays most of municipal expenses. Taxation is conducted by a state agency, Verohallitus, which collects income taxes from each paycheck, and then pays the difference between tax liability and taxes paid as tax rebate or collects as tax arrears afterward. Municipal income tax is a flat tax of nominally 15-20%,^[52] with deductions applied, and directly funds the municipality (a city or rural locality). The state income tax is a progressive tax; low-income individuals do not necessarily pay any. The state transfers some of its income as state support to municipalities, particularly the poorer ones. Additionally, the state churches - Finnish Evangelical Lutheran Church and Finnish Orthodox Church - are integrated to the taxation system in order to tax their members.^[52]

The middle income worker's tax wedge is 46% (NationMaster) and effective marginal tax rates are very high.^[12] Value-added tax is 23% for most items. Capital gains tax is 28% and corporate tax is 26%, about the EU median. Property taxes are low, but there is a transfer tax (1.6% for apartments or 4% for individual houses) for home buyers.^[12] Alcoholic beverages are separately taxed and highly restricted. For instance, McKinsey estimates that a worker has to pay around 1600 euro for another's 400 euro service^[53] - restricting service supply and demand - though some taxation is avoided in the black market and self-service culture. Another study by Karlson, Johansson & Johnsson estimates that the percentage of the buyer’s income entering the service vendor’s wallet (inverted tax wedge) is slightly over 15%, compared to 10% in Belgium, 25% in France, 40% in Switzerland and 50% in the United States.^{[54][dated info]} Tax cuts have been in every post-depression government's agenda and the overall tax burden is now around 43% of GDP compared to 51.1% in Sweden, 34.7% in Germany, 33.5% in Canada, and 30.5% in Ireland.^[55]

State and municipal politicians have struggled to cut their consumption, which is very high at 51.7% of GDP compared to 56.6% in Sweden, 46.9 in Germany, 39.3 in Canada, and 33.5% in Ireland.^[27] Much of the taxes are spent on public sector employees, many of which are jobs-for-life and amount to 124,000 state employees and 430,000 municipal employees.^[12] That is 113 per 1000 residents (over a quarter of workforce) compared to 74 in the US, 70 in Germany, and 42 in Japan (8% of workforce).^[56] The Economist Intelligence Unit's ranking for Finland's e-readiness is high at 13th, compared to 1st for United States, 3rd for Sweden, 5th for Denmark, and 14th for Germany. Also, early and generous retirement schemes have contributed to high pension costs.^[12] Social spending such as health or education is around OECD median.^[12] Social transfers are also around OECD median. In 2001 Finland's outsourced proportion of spending was below Sweden's and above most other Western European countries. Finland's health care is more bureaucrat-managed than in most Western European countries, though many use private insurance or cash to enjoy private clinics. Some reforms toward more equal marketplace have been made in 2007-2008.^[57] In education, child nurseries, and elderly nurseries private competition is bottom-ranking compared to Sweden and most other Western countries.^[46] Some public monopolies such Alko remain, and are sometimes challenged by the European Union. The state has a programme where the number of jobs decreases by attrition: for two retirees, only one new employee is hired.

Occupational and income structure[link]

Finland's export-dependent economy continuously adapted to the world market; in doing so, it changed Finnish society as well. The prolonged worldwide boom, beginning in the late 1940s and lasting until the first oil crisis in 1973, was a challenge that Finland met and from which it emerged with a highly sophisticated and diversified economy, including a new occupational structure. Some sectors kept a fairly constant share of the work force. Transportation and construction, for example, each accounted for between 7 and 8 percent in both 1950 and 1985, and manufacturing's share rose only from 22 to 24 percent; however, both the commercial and the service sectors more than doubled their share of the work force, accounting, respectively, for 21 and 28 percent in 1985. The greatest change was the decline of the economically active population employed in agriculture and forestry, from approximately 50 percent in 1950 to 10 percent in 1985. The exodus from farms and forests provided the manpower needed for the growth of other sectors.

Studies of Finnish mobility patterns since World War II have confirmed the significance of this exodus. Sociologists have found that people with a farming background were present in other occupations to a considerably greater extent in Finland than in other West European countries. Finnish data for the early 1980s showed that 30 to 40 percent of those in occupations not requiring much education were the children of farmers, as were about 25 percent in upper-level occupations, a rate two to three times that of France and noticeably higher than that even of neighbouring Sweden. Finland also differed from the other Nordic countries in that the generational transition from the rural occupations to white-collar positions was more likely to be direct, bypassing manual occupations.

The most important factor determining social mobility in Finland was education. Children who attained a higher level of education than their parents were often able to rise in the hierarchy of occupations. A tripling or quadrupling in any one generation of the numbers receiving schooling beyond the required minimum reflected the needs of a developing economy for skilled employees. Obtaining advanced training or education was easier for some than for others, however, and the children of whitecollar employees still were more likely to become white-collar employees themselves than were the children of farmers and bluecollar workers. In addition, children of white-collar professionals were more likely than not to remain in that class.

The economic transformation also altered income structure. A noticeable shift was the reduction in wage differentials. The increased wealth produced by an advanced economy was distributed to wage earners via the system of broad income agreements that evolved in the postwar era. Organised sectors of the economy received wage hikes even greater than the economy's growth rate. As a result, blue-collar workers' income came, in time, to match more closely the pay of lowerlevel white-collar employees, and the income of the upper middle class declined in relation to that of other groups.^[18]

The long trend of growth in living standards paired with diminishing differences between social classes was dramatically reversed during the 1990s. For the first time in the history of Finland income differences have sharply grown. This change has been mostly driven by the growth of income from capital to the wealthiest segment of the population.^[58]

References[link]

http://www.nationmaster.com/graph/tax_tot_tax_wed_sin_wor-total-tax-wedge-single-worker

See also[link]

• Finnish Maritime Cluster
• Economy of Europe
• List of Finnish companies
• List of banks in Finland
• Current statistics from Statistics Finland

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Coordinates: 65°N 27°E / 65°N 027°E / 65; 027

Republic of Finland Suomen tasavalta (Finnish) Republiken Finland (Swedish)
Flag Coat of arms
Anthem: Maamme  (Finnish) Vårt land  (Swedish) "Our Land"
Location of  Finland  (dark green) – in Europe  (green & dark grey) – in the European Union  (green)  —  [Legend]
Capital (and largest city)		Helsinki 60°10′N 024°56′E / 60.167°N 24.933°E / 60.167; 24.933
Official language(s)		Finnish Swedish
Recognised regional languages		Saami
Ethnic groups (2011)		Finns 90.0% Swedes 5.4% Russians 1.1% Estonians 0.6% Romani 0.1% Sami 0.1%
Demonym		Finns, Finnish
Government		Parliamentary republic[1]
-	President	Sauli Niinistö
-	Prime Minister	Jyrki Katainen (NCP)
-	Speaker of the Parliament	Eero Heinäluoma (SDP)
Legislature		Eduskunta
Independence
-	Autonomy within Russia	29 March 1809
-	Declared from Soviet Russia	6 December 1917
-	First recognized by Soviet Russia	4 January 1918
Area
-	Total	338,424 km2 (64th) 130,596 sq mi
-	Water (%)	10
Population
-	2012 estimate	5,404,956[2] (112th)
-	2000 census	5,180,000
-	Density	16/km2 (201st) 41/sq mi
GDP (PPP)		2011 estimate
-	Total	$195.723 billion[3]
-	Per capita	$36,236[3]
GDP (nominal)		2011 estimate
-	Total	$266.553 billion[3]
-	Per capita	$49,349[3]
Gini (2000)		26.9 (low)
HDI (2011)		0.882[4] (very high) (22nd)
Currency		Euro (€) (EUR)
Time zone		EET (UTC+2)
-	Summer (DST)	EEST (UTC+3)
Date formats		d.m.yyyy
Drives on the		right
ISO 3166 code		FI
Internet TLD		.fi, .ax ¹
Calling code		358
1	The .eu domain is also used, as it is shared with other European Union member states. The .ax domain is reserved for the autonomous province of Åland Islands

Finland ⁱ/ˈfɪnlənd/ ( Finnish: Suomi; Swedish: Finland (help·info)), officially the Republic of Finland,^[5] is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.

Around 5.4 million people reside in Finland, with the majority concentrated in the southern region.^[6] It is the eighth largest country in Europe in terms of area and the most sparsely populated country in the European Union. Finland is a parliamentary republic with a central government based in Helsinki and local governments in 336 municipalities,^[7][8] and an autonomous region of the Åland Islands. About one million residents live in the Greater Helsinki area, which consists of Helsinki, Espoo, Kauniainen and Vantaa, and a third of the country's GDP is produced there. Other larger cities include Tampere, Turku, Oulu, Jyväskylä, Lahti and Kuopio.

Finland was a part of Sweden from the 12th to 19th century, and from 1809 to 1917 was an autonomous Grand Duchy within the Russian Empire. The Finnish Declaration of Independence from Russia in 1917 was followed by a civil war in which the red side was defeated with German support. Finland fought World War II as essentially three separate conflicts: the Winter War (1939–40), the Continuation War (1941–44), and the Lapland War (1944–45). Finland joined the United Nations in 1955, the OECD in 1969, the European Union in 1995, and the eurozone at its inception in 1999.

Finland was a relative latecomer to industrialisation, remaining a largely agrarian country until the 1950s. Thereafter, economic development was rapid. Finland built an extensive welfare state and balanced between the East and the West in global economics and politics. With the best educational system in Europe,^[9][10] Finland has recently ranked as one of the world's most peaceful, competitive and livable countries.^{[11][12][13][14]}

Etymology[link]

Finland[link]

Among the first documents to mention Finland are three rune-stones. There are two in the Swedish province Uppland, with the inscriptions finlonti (U 582) and one in Gotland, in the Baltic Sea, with the inscription finlandi (G 319), the latter dating from the 13th century.^[15]

Astuvansalmi rock paintings at Saimaa, the oldest dating from 3000 to 2500 BCE.

Suomi[link]

The name Suomi (Finnish for "Finland") has uncertain origins, but a candidate for a cognate is the Proto-Baltic word *zeme, meaning "land". In addition to the close relatives of Finnish (the Finnic languages), this name is also used in the Baltic languages Latvian and Lithuanian. Alternatively, the Indo-European word *gʰm-on "man" (cf. Gothic guma, Latin homo) has been suggested, being borrowed as *ćoma. The word originally referred only to the province of Finland Proper, and later to the northern coast of Gulf of Finland, with northern lands such as Ostrobothnia still being excluded as late as the 18th century. Earlier theories suggested derivation from suomaa (fen land) or suoniemi (fen cape), and parallels between saame (Sami, a non-Finnish people in Finland) and Häme (a Finnish people and a province) were drawn, but these theories are now considered outdated.^[16]

History[link]

Prehistory[link]

According to archaeological evidence, the area now comprising Finland was settled at the latest around 8500 BCE during the Stone Age as the ice sheet of the last ice age receded. The artifacts the first settlers left behind present characteristics that are shared with those found in Estonia, Russia and Norway.^[17] The earliest people were hunter-gatherers, using stone tools.^[18] The first pottery appeared in 5200 BCE when the Comb Ceramic culture was introduced.^[19] The arrival of the Corded Ware culture in southern coastal Finland between 3000 and 2500 BCE may have coincided with the start of agriculture.^[20] Even with the introduction of agriculture, hunting and fishing continued to be important parts of the subsistence economy.

The Bronze Age (1500–500 BCE) and Iron Age (500 BCE–1200 CE) were characterised by extensive contacts with other cultures in the Fennoscandian and Baltic regions. There is no consensus on when Uralic languages and Indo-European languages were first spoken in the area of contemporary Finland. During the 1st millennium AD early Finnish was spoken at least in agricultural settlements of Southern Finland, whereas Sámi-speaking populations occupied most parts of the country.^{[citation needed]}

Swedish era[link]

The Swedish Empire following the Treaty of Roskilde of 1658. The dark green shows Sweden proper represented in the Riksdag of the Estates, while the other shades of green stand for different dominions and possessions.

Swedish kings established their rule in the Northern Crusades from the 12th century until 1249.^[21] The area of present-day Finland became a fully consolidated part of the Swedish kingdom. Swedish-speaking settlers arrived at the coastal regions during the medieval time. Swedish became the dominant language of the nobility, administration and education; Finnish was chiefly a language for the peasantry, clergy and local courts in predominantly Finnish-speaking areas.

During the Protestant Reformation, the Finns gradually converted to Lutheranism.^[22] In the 16th century, Mikael Agricola published the first written works in Finnish. The first university in Finland, The Royal Academy of Turku, was established in 1640. Finland suffered a severe famine in 1696–97, during which about one-third of the Finnish population died.^[23] In the 18th century, wars between Sweden and Russia led to the occupation of Finland twice by Russian forces, wars known to the Finns as the Greater Wrath (1714–21) and the Lesser Wrath (1742–43).^[23] By this time Finland was the predominant term for the whole area from the Gulf of Bothnia to the Russian border.

Russian Empire era[link]

On 29 March 1809, having been taken over by the armies of Alexander I of Russia in the Finnish War, Finland became an autonomous Grand Duchy in the Russian Empire until the end of 1917. In 1811 Alexander I incorporated Russian Vyborg province into the Grand Duchy of Finland. During the Russian era, the Finnish language began to gain recognition. From the 1860s onwards, a strong Finnish nationalist movement known as the Fennoman movement grew. Milestones included the publication of what would become Finland's national epic—the Kalevala—in 1835, and the Finnish language's achieving equal legal status with Swedish in 1892.

The Finnish famine of 1866–68 killed 15% of the population, making it one of the worst famines in European history. The famine led the Russian Empire to ease financial regulations, and investment rose in following decades. Economic and political development was rapid.^[24] The GDP per capita was still half of that of the United States and a third of that of Britain.^[24]

In 1906, universal suffrage was adopted in the Grand Duchy of Finland. However, the relationship between the Grand Duchy and the Russian Empire soured when the Russian government made moves to restrict Finnish autonomy. For example, the universal suffrage was, in practice, virtually meaningless, since the tsar did not have to approve any of the laws adopted by the Finnish parliament. Desire for independence gained ground, first among radical liberals^[25] and socialists.

Civil war and early independence[link]

Soviet approval of Finland's independence in Russian.

After the 1917 February Revolution, the position of Finland as part of the Russian Empire was questioned, mainly by Social Democrats. Since the head of state was the Czar of Russia, it was not clear who the chief executive of Finland was after the revolution. The parliament, controlled by social democrats, passed the so called Power Act^[26] to give the highest authority to parliament. This was rejected by the Russian Provisional Government and by the right-wing parties in Finland. The Provisional Government dissolved the parliament by force, which the social democrats considered illegal, since the right to do so had been stripped from the Russians by the Power Act.^{[citation needed]}

New elections were conducted, in which right-wing parties won a slim majority. Some social democrats refused to accept the result and still claimed that the dissolution of the parliament (and thus the ensuing elections) were extralegal. The two nearly equally powerful political blocs, the right-wing parties and the social democratic party, were highly antagonized.^{[citation needed]}

The October Revolution in Russia changed the game anew. Suddenly, the right-wing parties in Finland started to reconsider their decision to block the transfer of highest executive power from the Russian government to Finland, as radical communists took power in Russia. Rather than acknowledge the authority of the Power Law of a few months earlier, the right-wing government declared independence on 6 December 1917.

On 27 January 1918, the official opening shots of the war were fired in two simultaneous events. The government started to disarm the Russian forces in Pohjanmaa, and the Social Democratic Party staged a coup.^{[not in citation given]} The latter succeeded in controlling southern Finland and Helsinki, but the white government continued in exile from Vaasa. This sparked the brief but bitter civil war. The Whites, who were supported by Imperial Germany, prevailed over the Reds.^[27] After the war, tens of thousands of Reds and suspected sympathizers were interned in camps, where thousands died by execution or from malnutrition and disease. Deep social and political enmity was sown between the Reds and Whites and would last until the Winter War and beyond. The civil war and activist expeditions to the Soviet Union strained Eastern relations.

After a brief flirtation with monarchy, Finland became a presidential republic, with Kaarlo Juho Ståhlberg elected as its first president in 1919. The Finnish–Russian border was determined by the Treaty of Tartu in 1920, largely following the historic border but granting Pechenga (Finnish: Petsamo) and its Barents Sea harbour to Finland. Finnish democracy did not see any Soviet coup attempts and survived the anti-Communist Lapua Movement. The relationship between Finland and the Soviet Union was tense. Germany's relations with democratic Finland cooled also after the Nazis' rise to power.^{[citation needed]} Military was trained in France instead, and relations to Western Europe and Sweden were strengthened.

In 1917 the population was 3 million. Credit-based land reform was enacted after the civil war, increasing the proportion of capital-owning population.^[24] About 70% of workers were occupied in agriculture and 10% in industry.^[28] The largest export markets were the United Kingdom and Germany.

World War II[link]

Areas ceded by Finland to the Soviet Union after the Winter War in 1940 and the Continuation War in 1944. The Porkkala land lease was returned to Finland in 1956. Finland covered an area of approximately 385,000 km² (149,000 sq mi) before the handover.

During World War II, Finland fought the Soviet Union twice: in the Winter War of 1939–40 after the Soviet Union had attacked Finland; and in the Continuation War of 1941–44, following Operation Barbarossa, in which Germany invaded the Soviet Union. For 872 days, the German army besieged Leningrad, the USSR's second largest city.^[29] The siege of Leningrad resulted in the deaths of some one million of the city's inhabitants.^[30] Finnish troops controlled some of the areas around the city but refused to attack or let Germans use those areas for attack; whether they should be said to have helped in the siege or refused to help is controversial. After fighting a major Soviet offensive in June/July 1944 to a standstill, Finland reached an armistice with the Soviet Union. This was followed by the Lapland War of 1944–45, when Finland forced the Germans out of northern Finland.

The treaties signed in 1947 and 1948 with the Soviet Union included Finnish obligations, restraints and reparations—as well as further Finnish territorial concessions begun in the Moscow Peace Treaty of 1940. As a result of the two wars, Finland was forced to cede most of Finnish Karelia, Salla and Petsamo, which amounted to ten percent of its land area and twenty percent of its industrial capacity, including the ports of Vyborg (Viipuri) and ice-free Liinakhamari (Liinahamari). Almost the whole population, some 400,000 persons, fled these areas. Finland was never occupied by Soviet forces and retained its independence, however at a loss of about 93 000 soldiers killed, by proportion the third-highest loss rate in World War II.^{[citation needed]}

Finland rejected Marshall aid, in apparent deference to Soviet desires. However, the United States provided secret development aid and helped the still non-communist Social Democratic Party in hopes of preserving Finland's independence.^[31] Establishing trade with the Western powers, such as the United Kingdom, and the reparations to the Soviet Union caused Finland to transform itself from a primarily agrarian economy to an industrialised one. For example, the Valmet corporation was founded to create materials for war reparations. Even after the reparations had been paid off, Finland—poor in certain resources necessary for an industrialized nation (such as iron and oil)—continued to trade with the Soviet Union in the framework of bilateral trade.^{[citation needed]}

Cold War[link]

In 1950 half of the Finnish workers were occupied in agriculture and a third lived in urban areas.^[32] The new jobs in manufacturing, services and trade quickly attracted people to the towns. The average number of births per woman declined from a baby boom peak of 3.5 in 1947 to 1.5 in 1973.^[32] When baby-boomers entered the workforce, the economy did not generate jobs fast enough, and hundreds of thousands emigrated to the more industrialized Sweden, with emigration peaking in 1969 and 1970.^[32] The 1952 Summer Olympics brought international visitors. Finland took part in trade liberalization in the World Bank, the International Monetary Fund and the General Agreement on Tariffs and Trade.

Urho Kekkonen, 8th president of Finland

Officially claiming to be neutral, Finland lay in the grey zone between the Western countries and the Soviet Union. The YYA Treaty (Finno-Soviet Pact of Friendship, Cooperation and Mutual Assistance) gave the Soviet Union some leverage in Finnish domestic politics. This was extensively exploited by president Urho Kekkonen against his opponents. He maintained an effective monopoly on Soviet relations from 1956 on, which was crucial for his continued popularity. In politics, there was a tendency of avoiding any policies and statements that could be interpreted as anti-Soviet. This phenomenon was given the name "Finlandization" by the German press.

Despite close relations with the Soviet Union, Finland remained a Western European market economy. Various industries benefited from trade privileges with the Soviets, which explains the widespread support that pro-Soviet policies enjoyed among business interests in Finland. Economic growth was rapid in the postwar era, and by 1975 Finland's GDP per capita was the 15th highest in the world.^{[citation needed]} In the 1970s and 1980s, Finland built one of the most extensive welfare states in the world. Finland also negotiated with the EEC (a predecessor of the European Union) a treaty that mostly abolished customs duties towards the EEC starting from 1977, although Finland did not fully join. In 1981, president Urho Kekkonen's failing health forced him to retire after holding office for 25 years.^{[citation needed]}

Miscalculated macroeconomic decisions, a banking crisis, the collapse of its largest single trading partner (the Soviet Union) and a global economic downturn caused a deep recession in Finland in the early 1990s. The depression bottomed out in 1993, and Finland saw steady economic growth for more than ten years.^{[citation needed]}

Recent history[link]

In 2002 Finland introduced the currency of the eurozone, the euro.

Like other Nordic countries, Finland has liberalized its economy since the late 1980s. Financial and product market regulation was loosened. Some state enterprises have been privatized and there have been some modest tax cuts. Finland joined the European Union in 1995, and the Eurozone in 1999.

The population is aging with the birth rate at 10.42 births per 1,000 population, or a fertility rate of 1.8.^[32] With a median age of 41.6 years, Finland is one of the oldest countries;^{[33][dead link]} half of voters are estimated to be over 50 years old. Like most European countries, without further reforms or much higher immigration, Finland is expected to struggle with demographics, even though macroeconomic projections are healthier than in most other developed countries.

The Finnish markka was replaced by the euro in 2002. As a preparation for this date, the minting of the new euro coins started as early as 1999; this is why the first euro coins from Finland have the year 1999 on them, instead of 2002 like some of the other countries of the Eurozone. Three different designs (one for €2 coin, one for €1 coin and one for the other six coins) were selected for the Finnish coins. In 2007, in order to adopt the new common map like the rest of the Eurozone countries, Finland changed the common side of its coins.

Geography[link]

Detailed map of Finland. See also atlas of Finland

Lying between latitudes 59° and 71° N, and longitudes 20° and 32° E, Finland is one of the world's northernmost countries. Of world capitals, only Reykjavik lies more to the north than Helsinki. The distance from the southernmost—Hanko—to the northernmost point in the country—Nuorgam—is 1,160 kilometres (720 mi).

Finland is a country of thousands of lakes and islands—187,888 lakes (larger than 500 m²/0.12 acre) and 179,584 islands.^[34] Its largest lake, Saimaa, is the fourth largest in Europe. The greatest number of islands are to be found in the southwest in the Turku archipelago. Further from the coast lies Ahvenanmaa or Åland (in Swedish) Islands.

Much of the geography of Finland is explained by the Ice Age. The glaciers were thicker and lasted longer in Fennoscandia compared to the rest of Europe. Their eroding effects have left the Finnish landscape mostly flat with few hills and fewer mountains. Its highest point, the Halti at 1,324 metres (4,344 ft), is found in the extreme north of Lapland at the border between Finland and Norway. The highest mountain whose peak is entirely in Finland is Ridnitsohkka at 1,316 m (4,318 ft), directly adjacent to Halti.

The retreating glaciers have left the land with morainic deposits in formations of eskers. These are ridges of stratified gravel and sand, running northwest to southeast, where the ancient edge of the glacier once lay. Among the biggest of these are the three Salpausselkä ridges that run across southern Finland.

Due to having been compressed under the enormous weight of the glaciers, terrain in Finland is rising due to the post-glacial rebound. The effect is strongest around the Gulf of Bothnia, where land steadily rises about 1 cm a year. As a result, the old sea bottom turns little by little into dry land: the surface area of the country is expanding by about 7 square kilometres (2.7 sq mi) annually.^[35] In a sense, Finland is rising from the sea.^[36]

Forest covers 86% of the country's area,^[37] the largest forested area in Europe. The forest consists of pine, spruce, birch and other species. Finland is the largest producer of wood in Europe and among the largest in the world.

The landscape is covered mostly (seventy-five percent of land area) by coniferous taiga forests and fens, with little arable land. The most common type of rock is granite. It is a ubiquitous part of the scenery, visible wherever there is no soil cover. Moraine or till is the most common type of soil, covered by a thin layer of humus of biological origin. Podzol profile development is seen in most forest soils except where drainage is poor. Gleysols and peat bogs occupy poorly drained areas.

The Whooper Swan, national bird of Finland

Biodiversity[link]

Phytogeographically, Finland is shared between the Arctic, central European and northern European provinces of the Circumboreal Region within the Boreal Kingdom. According to the WWF, the territory of Finland can be subdivided into three ecoregions: the Scandinavian and Russian taiga, Sarmatic mixed forests and Scandinavian Montane Birch forest and grasslands.

The brown bear (Ursus arctos) is the national animal of Finland

Similarly, Finland has a diverse and extensive range of fauna. There are at least sixty native mammalian species, 248 breeding bird species, over seventy fish species and eleven reptile and frog species present today, many migrating from neighboring countries thousands of years ago.^{[citation needed]} Large and widely recognized wildlife mammals found in Finland are the brown bear (the national animal), gray wolf, wolverine and elk (moose). Three of the more striking birds are the Whooper Swan, a large European swan and the national bird of Finland; the Capercaillie, a large, black-plumaged member of the grouse family; and the European Eagle-owl. The latter is considered an indicator of old-growth forest connectivity, and has been declining because of landscape fragmentation.^[38] The most common breeding birds are the willow warbler, chaffinch and redwing.^[39] Of some seventy species of freshwater fish, the northern pike, perch and others are plentiful. Atlantic salmon remains the favourite of fly rod enthusiasts.

The endangered Saimaa Ringed Seal, one of only three lake seal species in the world, exists only in the Saimaa lake system of southeastern Finland, down to only 300 seals today. It has become the emblem of the Finnish Association for Nature Conservation.^[40]

Climate[link]

Pyhä-Luosto National Park, Lapland.

Finland has a humid and cool semi-continental climate, characterized by warm summers and freezing winters. The climate type in southern Finland is north temperate climate. Winters of southern Finland (average day time temperature is below 0 °C/32 °F) are usually 4 months long, and the snow typically covers the land from middle of December to early April. In the southern coast, it can melt many times during early winter, and then come again. The coldest winter days of southern Finland are usually under −20 °C (−4 °F), and the warmest days of July and August can be as high as 35 °C (95 °F).^[41] Arctic tundra proper is not found in Finland; Finland lies almost exactly on the taiga belt, being covered in boreal forest.^[42] Alpine tundra can be found in the mountainous Lapland, and oak grows in the southernmost islands and coast.

Winter scene in Finland

Summer in Koli National Park, Lieksa, Finland

Repovesi National Park in southeastern Finland.

Climatic summers of the southern Finland last 4 months (from mid May to mid September). In northern Finland, particularly in Lapland, a subarctic climate dominates, characterized by cold—occasionally severe—winters and relatively warm, short summers. Winters in north Finland are nearly 7 months long, and snow covers the lands almost 6 months, from October to early May. Summers in the north are quite short, only two to three months.^{[citation needed]}

The main factor influencing Finland's climate is the country's geographical position between the 60th and 70th northern parallels in the Eurasian continent's coastal zone, which shows characteristics of both a maritime and a continental climate, depending on the direction of air flow. Finland is near enough to the Atlantic Ocean to be continuously warmed by the Gulf Stream, which explains the unusually warm climate considering the absolute latitude.^[41]

The Finnish climate is suitable for grain farming in the southernmost regions but not farther north.^[43]

A quarter of Finland's territory lies within the Arctic Circle and the midnight sun can be experienced for more days the farther north one travels. At Finland's northernmost point, the sun does not set for 73 consecutive days during summer, and does not rise at all for 51 days during winter.

Lake Pielinen seen from a hill in Koli National Park.

Administrative divisions[link]

The fundamental administrative divisions of the country are the municipalities, which may also call themselves towns or cities. They account for half of public spending. Spending is financed by municipal income tax, state subsidies, and other revenue. There are 336 municipalities,^[7][8] and most have fewer than 6,000 residents. People often identify with their municipality.

One of the most well-known buildings in Helsinki is the cathedral.

In addition to municipalities, two intermediate levels are defined. Municipalities co-operate in seventy sub-regions and nineteen regions. These are governed by the member municipalities and have only limited powers. The autonomous province of Åland has a permanent democratically elected regional council. In the Kainuu region, there is a pilot project underway with regional elections. Sami people have a semi-autonomous Sami Domicile Area in Lapland for issues on language and culture.

The Tammerkoski rapids in the inland city of Tampere.

In the following chart, the number of inhabitants includes those living in the entire municipality (kunta/kommun), not just in the built-up area. The land area is given in km², and the density in inhabitants per km² (land area). The figures are as of 31 January 2012. The capital region — comprising Helsinki, Vantaa, Espoo and Kauniainen — forms a continuous conurbation of one million people. However, common administration is limited to voluntary cooperation of all municipalities, e.g. in Helsinki Metropolitan Area Council.

Municipalities and regions map of Finland (2009).
Thin borders refer to municipalities and thicker ones to regions.

Politics[link]

The main building of the parliament.

The constitution[link]

The Constitution of Finland defines the political system. Finland is a parliamentary democracy, and the prime minister is country's most powerful politician. The constitution in its current form came into force on 1 March 2000, and was amended on 1 March 2012. Citizens can run and vote in parliamentary, municipal, and presidential elections, and in European Union elections.

The president[link]

According to the Constitution, the President of Finland is the head of state. Finland was formerly considered a semi-presidential parliamentary system, but under the 2000 constitution, and even further under its 2012 amendment, the presidency became largely a ceremonial, non-executive position.^[1] The position still does entail some powers, including responsibility for foreign policy (excluding affairs related to the European Union) in cooperation with the cabinet, being the head of the armed forces, some decree powers, and some appointive powers. Direct, one- or two-stage elections are used to elect the president for a term of six years and for a maximum of two consecutive terms. The current president is Sauli Niinistö (National Coalition Party); he took office on 1 March 2012.

The parliament[link]

Finland

This article is part of the series: Politics and government of Finland

State Constitution Declaration of Independence Human rights Executive President (List) Sauli Niinistö Prime Minister (List) Jyrki Katainen Cabinet Executive Departments Legislative 36th Parliament Speaker Eero Heinäluoma Judiciary General Courts Supreme Court Courts of Appeal District Courts Administrative Courts Supreme Administrative Court Regional Administrative Courts Prosecutor General Matti Kuusimäki Chancellor of Justice Elections 1991 parliamentary 1994 presidential EU Membership Referendum 1995 parliamentary 1996 European 1999 parliamentary 1999 European 2000 presidential 2003 parliamentary 2004 European 2006 presidential 2007 parliamentary 2011 parliamentary Divisions Regions (Maakunnat / Landskap) Sub-regions (Seutukunnat / Ekonomiska regioner) Municipalities (Kunnat / Kommuner) Political parties KOK (National Coalition Party) SDP (Social Democratic Party) PS (True Finns) KESK (Centre Party) VAS (Left Alliance) VIHR (Green League) RKP (Swedish People's Party) KD (Christian Democrats) Politicians Foreign Policy Foreign relations Ambassadors Politics of the European Union

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The 200-member unicameral Parliament of Finland exercises supreme legislative authority. It may alter the constitution and ordinary laws, dismiss the cabinet, and override presidential vetoes. Its acts are not subject to judicial review; the constitutionality of new laws is assessed by the parliament's constitutional law committee. The parliament is elected for a term of four years using the proportional D'Hondt method within a number of multi-seat constituencies. Various parliament committees listen to experts and prepare legislation. The speaker is currently Eero Heinäluoma (Social Democrats).^[46]

Since universal suffrage was introduced in 1906, the parliament has been dominated by the Centre Party (former Agrarian Union), the National Coalition Party (conservatives) and the Social Democrats. These parties have enjoyed approximately equal support, and their combined vote has totalled about 65–80% of all votes. Their lowest common total of MPs, 121, was reached in the 2011 elections. For a few decades after 1944, the Communists were a strong fourth party. Due to the electoral system of proportional representation, and the relative reluctance of voters to switch their support between parties, the relative strengths of the parties have commonly varied only slightly from one election to another. However, there have been some long-term trends, such as the rise and fall of the Communists during the Cold War; the steady decline into insignificance of the Liberal party and its predecessors from 1906 to about 1980; and the rise of the Green party and its predecessor since 1983. In the 2011 elections, the True Finns achieved exceptional success, increasing its representation from 5 to 39 seats, and thus surpassing the Centre Party.^[47]

The autonomous province of Åland, which forms a federacy with Finland, elects one member to the parliament, who traditionally joins the parliamentary group of the Swedish People's Party of Finland. (The province also holds elections for its own permanent regional council, and in the 2011 elections, Åland Centre was the largest party.)

The parliament can be dissolved by a recommendation of the prime minister endorsed by the president. This procedure has never been used, although the parliament was dissolved several times under the pre-2000 constitution, when this action was the sole prerogative of the president.

After the parliamentary elections on 17 April 2011, the seats were divided among eight parties as follows:

Party	Seats	Net gain/loss	% of seats	% of votes
National Coalition Party	44	-6	22.0	20.4
Social Democratic Party	42	-3	21.0	19.1
True Finns	39	+34	19.5	19.1
Centre Party	35	-16	17.5	15.8
Left Alliance	14	-2	7.0	8.1
Green League	10	-5	5.0	7.3
Swedish People's Party	9	0	4.5	4.3
Christian Democrats	6	-1	3.0	4.0
Others	1*	0	0.5	0.4
* Province of Åland's representative.

The Cabinet[link]

After parliamentary elections, the parties negotiate among themselves on forming a new cabinet (the Finnish Council of State), which then has to be approved by a simple majority vote in the parliament. The cabinet can be dismissed by a parliamentary vote of no confidence, although this rarely happens (the last time in 1957), as the parties represented in the cabinet usually make up a majority in the parliament.^[48]

The cabinet exercises most executive powers, and originates most of the bills that the parliament then debates and votes on. It is headed by the Prime Minister of Finland, and consists of him or her, of other ministers, and of the Chancellor of Justice. The current prime minister is Jyrki Katainen (National Coalition Party). Each minister heads his or her ministry, or, in some cases, has responsibility for a subset of a ministry's policy. After the prime minister, the most powerful minister is the minister of finance.

As no one party ever dominates the parliament, Finnish cabinets are multi-party coalitions. As a rule, the post of prime minister goes to the leader of the biggest party and that of the minister of finance to the leader of the second biggest.

Law[link]

The judicial system of Finland is a civil law system divided between courts with regular civil and criminal jurisdiction and administrative courts with jurisdiction over litigation between individuals and the public administration. Finnish law is codified and based on Swedish law and in a wider sense, civil law or Roman law. The court system for civil and criminal jurisdiction consists of local courts (käräjäoikeus, tingsrätt), regional appellate courts (hovioikeus, hovrätt), and the Supreme Court (korkein oikeus, högsta domstolen). The administrative branch of justice consists of administrative courts (hallinto-oikeus, förvaltningsdomstol) and the Supreme Administrative Court (korkein hallinto-oikeus, högsta förvaltningsdomstolen). In addition to the regular courts, there are a few special courts in certain branches of administration. There is also a High Court of Impeachment for criminal charges against certain high-ranking officeholders.

Around 92% of residents have confidence in Finland's security institutions.^[49] The overall crime rate of Finland is not high in the EU context. Some crime types are above average, notably the highest homicide rate in Western Europe.^[50] A day fine system is in effect and also applied to offenses such as speeding.

Finland has successfully fought against government corruption, which was more common in the 1970s and 1980s.^{[51][verification needed]} For instance, economic reforms and EU membership introduced stricter requirements for open bidding and many public monopolies were abolished.^{[51][dubious – discuss]} Today, Finland has a very low number of corruption charges; Transparency International ranks Finland as one of the least corrupt countries in Europe. Also, Finland's public records are among the world's most transparent.^{[verification needed]}

In 2008, Transparency International criticized the lack of transparency of the system of Finnish political finance.^[52] According to GRECO in 2007 corruption should be taken into account in the Finnish system of election funds better.^[53] A scandal revolving around campaign finance of the 2007 parliamentary elections broke out in spring 2008. Nine Ministers of Government submitted incomplete funding reports and even more of the Members of Parliament. The law includes no punishment of false funds reports of the elected politicians.

Foreign relations[link]

Finland has been a member of the European Union since 1995 and is represented in the European parliament.

According to the 2012 constitution, the president (currently Sauli Niinistö) leads foreign policy in cooperation with the government, except that the president has no role in EU affairs.^[54]

In 2008, president Martti Ahtisaari was awarded the Nobel Peace Prize.^[55] Finland was considered a cooperative model state, and Finland did not oppose proposals for a common EU defence policy.^[56] This was reversed in the 2000s, when Tarja Halonen and Erkki Tuomioja made Finland's official policy to resist other EU members' plans for common defence.^[56]

Social security[link]

Finland has one of the world's most extensive welfare systems, one that guarantees decent living conditions for all residents, Finns and non-citizens. Since the 80s then social security has been cut back, but still the system is one of the most comprehensive in the world.^{[citation needed]} Created almost entirely during the first three decades after World War II, the social security system was an outgrowth of the traditional Nordic belief that the state was not inherently hostile to the well-being of its citizens, but could intervene benevolently on their behalf. According to some social historians, the basis of this belief was a relatively benign history that had allowed the gradual emergence of a free and independent peasantry in the Nordic countries and had curtailed the dominance of the nobility and the subsequent formation of a powerful right wing. Finland's history has been harsher than the histories of the other Nordic countries, but not harsh enough to bar the country from following their path of social development.^[57]

Armed forces[link]

FNS "Hanko" Hamina Class fast attack craft of Finnish Navy.

The Finnish Defence Forces consist of a cadre of professional soldiers (mainly officers and technical personnel), currently serving conscripts, and a large reserve. The standard readiness strength is 34,700 people in uniform, of which 25% are professional soldiers. A universal male conscription is in place, under which all male Finnish nationals above 18 years of age serve for 6 to 12 months of armed service or 12 months of civilian (non-armed) service.

A Leopard 2A4 battle tank of the Finnish Army at the Independence Day Parade.

Alternative non-military service for men is possible, as is voluntary military service for women (currently approximately 500 annually)^[58] are possible. Finland is the only non-NATO EU country bordering Russia. Finland's official policy states that the 350,000 reservists, armed mostly with ground weaponry, are a sufficient deterrent.^{[citation needed]}

A Finnish F-18 of the Finnish Air Force.

The armed forces favour partnerships with Western institutions such as NATO, WEU and the EU, but are careful to avoid politics.^[59] Finland's defence budget equals about €2 billion or about 1.4–1.6% of the GDP. Finnish defence expenditure is around the sixth highest in the EU.^[60]

Voluntary post-conscription overseas peacekeeping service is popular, and troops serve around the world in UN, NATO and EU peacekeeping missions. Residents claim around 80% homeland defence willingness, one of the highest rates in Europe.^[61]

The armed forces are under the command of the Chief of Defence (currently General Ari Puheloinen), who is directly subordinate to the president in matters related to military command. The branches of the military are the army, the navy and the air force. The border guard is under the Ministry of the Interior but can be incorporated into the Defence Forces when required for defence readiness.

Economy[link]

Headquarters of Nokia, the largest Finnish company.

Finland has a highly industrialized mixed economy with a per capita output equal to that of other European economies such as France, Germany, Belgium or the UK. The largest sector of the economy is services at 66%, followed by manufacturing and refining at 31%. Primary production is 2.9%.^[62] With respect to foreign trade, the key economic sector is manufacturing. The largest industries^[63] are electronics (22%), machinery, vehicles and other engineered metal products (21.1%), forest industry (13%) and chemicals (11%).

Finland has timber and several mineral and freshwater resources. Forestry, paper factories, and the agricultural sector (on which taxpayers spend around 3 billion euros annually) are politically sensitive to rural residents. The Greater Helsinki area generates around a third of GDP. In a 2004 OECD comparison, high-technology manufacturing in Finland ranked second largest after Ireland. Knowledge-intensive services have also ranked the smallest and slow-growth sectors—especially agriculture and low-technology manufacturing—second largest after Ireland.^[64] Overall short-term outlook was good, and GDP growth has been above many EU peers.

Real GDP growth, 1998–2009.

Finland is highly integrated in the global economy, and international trade is a third of GDP. The European Union makes 60% of the total trade.^{[citation needed]} The largest trade flows are with Germany, Russia, Sweden, United Kingdom, United States, Netherlands and China. Trade policy is managed by the European Union, where Finland has traditionally been among the free trade supporters, except for agriculture. Finland is the only Nordic country to have joined the Eurozone.

Finland's climate and soils make growing crops a particular challenge. The country lies between latitudes 60°N and 70°N, and has severe winters and relatively short growing seasons that are sometimes interrupted by frosts. However, because the Gulf Stream and the North Atlantic Drift Current moderate the climate, Finland contains half of the world's arable land north of 60° north latitude. Annual precipitation is usually sufficient, but it occurs almost exclusively during the winter months, making summer droughts a constant threat. In response to the climate, farmers have relied on quick-ripening and frost-resistant varieties of crops, and they have cultivated south-facing slopes as well as richer bottomlands to ensure production even in years with summer frosts. Most farmland had originally been either forest or swamp, and the soil had usually required treatment with lime and years of cultivation to neutralize excess acid and to develop fertility. Irrigation was generally not necessary, but drainage systems were often needed to remove excess water. Finland's agriculture was efficient and productive—at least when compared with farming in other European countries.^[57]

Aleksanterinkatu, a commercial street in Helsinki

Forests play a key role in the country's economy, making it one of the world's leading wood producers and providing raw materials at competitive prices for the crucial wood-processing industries. As in agriculture, the government has long played a leading role in forestry, regulating tree cutting, sponsoring technical improvements, and establishing long-term plans to ensure that the country's forests continue to supply the wood-processing industries. To maintain the country's comparative advantage in forest products, Finnish authorities moved to raise lumber output toward the country's ecological limits. In 1984 the government published the Forest 2000 plan, drawn up by the Ministry of Agriculture and Forestry. The plan aimed at increasing forest harvests by about 3 percent per year, while conserving forestland for recreation and other uses.^[57]

Private sector employees amount to 1.8 million, out of which around a third with tertiary education. The average cost of a private sector employee per hour was 25.1 euros in 2004.^[65] As of 2008 average purchasing power-adjusted income levels are similar to those of Italy, Sweden, Germany and France.^[66] In 2006, 62% of the workforce worked for enterprises with less than 250 employees and they accounted for 49% of total business turnover and had the strongest rate of growth.^[67] The female employment rate is high. Gender segregation between male-dominated professions and female-dominated professions is higher than in the US.^[68] The proportion of part-time workers was one of the lowest in OECD in 1999.^[68]