November 6, 2015 / 9:30 AM / in 2 years

Finland's Rehn says crucial healthcare deal 'quite near'

HELSINKI (Reuters) - Finland’s Economy Minister Olli Rehn said on Friday that a deal between the three parties in the ruling coalition over spending cuts was “quite near”, easing concerns that the government might collapse after only five months in power.

Prime Minister Juha Sipila, in a surprise statement on Thursday, threatened to break up the government if it cannot reach agreement by Friday morning on healthcare reform.

The reform is a major part of his plan to save 10 billion euros ($11 billion) in the long term to balance public finances in the recession-hit economy that has a fast-ageing population.

“During the night there have been several propositions for a compromise.... I will make one more attempt this morning,” Sipila said in his Twitter account on Friday.

The row highlights Finland’s difficulty in agreeing on austerity measures and raising competitiveness in an economy that has been hit by the decline of Nokia’s phone business as well as economic troubles in neighboring Russia.

Rehn, from Sipila’s Centre party, said, “I truly hope a solution can be found... I think we are quite near,” he told public broadcaster YLE.

The Centre Party wants to create 18 healthcare regions with administrative powers serving regional interests.

But the co-ruling National Coalition party, led by Finance Minister Alexander Stubb, wants just five regions, arguing that a smaller number would ensure a more equal share of healthcare resources between the regions. It also says a larger number would weigh on funding.

The third coalition partner, the nationalist Finns Party, has accepted Sipila’s proposal.

Finns party leader, Foreign Minister Timo Soini, said the government crisis has already damaged the coaltion’s ability to cooperate.

“This reform should have been agreed in more detail already when the government was formed,” he told Helsingin Sanomat newspaper.

Overhauling healthcare, billed as Finland’s most important reform of the decade, is a longstanding problem. The previous government put the reform on hold because parties could not agree on it and it posed constitutional issues.

Nordea analyst Jan Von Gerich said questions over the government’s ability to implement important reforms was affecting Finnish securities.

“The pressure on Finnish government bonds will only increase, and we expect Finnish bond yields to approach French levels,” he said.

Finland has a generous welfare system but its population of 5.5 million is aging fast and is spread over a large land mass, with many Finns living in remote communities.

Editing by Alistair Scrutton and Louise Ireland

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