Finnish PM moves to dissolve government amid populist upheaval

[HELSINKI] Prime Minister Juha Sipila moved to dissolve the three-party ruling coalition after junior partner The Finns was taken over by its anti-immigrant wing, throwing into doubt the next steps in a process that has helped Finland battle back from an economic slump.

The Finns' shift to the right over the weekend was too much to stomach for Mr Sipila's Center and Finance Minister Petteri Orpo's National Coalition parties that form the rest of the cabinet. Mr Sipila has ruled out fresh elections, saying he will work to build a new majority within the current parliament. He has already reached out to other opposition parties such as the Swedish People's Party and the Christian Democrats.

"Talks are over," Mr Sipila and Mr Orpo said on Twitter Monday. "Our joint proposal to the Center/National Coalition Party parliamentary groups: no prerequisites for continuing cooperation with The Finns party led by Jussi Halla-aho."

The Center Party will target "forming a new, functioning government as quickly as possible," Antti Kaikkonen, who heads the party's parliamentary group, said in an emailed statement.

Nordea Bank earlier on Monday warned that the political turmoil will harm the government's so far successful drive to propel economic growth.

Mr Sipila, a self-made millionaire who came into power in 2015, has been able to push through agreements that have cut labour costs and brought back growth. The government is now in the midst of revamping social and health care policies and municipal reforms that are seen as key projects to ease the structural pressure caused by a rapidly aging population.

"The reform process is likely to suffer a blow no matter what," Jan von Gerich, a strategist at Nordea, said in a note.

The bank on Monday raised its forecast for Finnish growth to 3 per cent this year while saying further labour market reforms were crucial to maintain momentum.

BLOOMBERG