Finland remains somewhat of a mystery for many, and yet the country may well have much to offer in its bilateral relationship with Hungary. Offering a distinct viewpoint, Finland is a northern country that has up until no shied away from membership to NATO, yet it distinctly supports European defense initiatives. Finland’s experience in dealing with its transition to the European Union (EU) could prove valuable, as the country only entered the EU in 1995, and still struggles with some of the more painful repercussions of accession, mainly in the agricultural sector. While the high-tech sector and research and development are visible actors in the Finnish economy, spearheaded by mobile telecommunications giant Nokia, Finland is also a leading player in forestry, machinery, engineering and industrial machines manufacturing areas.

Since the systemic changes, Finland’s Foreign Ministry estimates investment in Hungary has been some EUR 6-7 million. Diplomacy and Trade spoke to Prime Minister Vanhanen in early January following a day of bilateral talks in Budapest.

What are the key issues at hand following daylong talks with your Hungarian counterparts?

Matti Vanhanen Hungary will, as of next May, play a very important role as a member in the EU. Because our peoples are very close, and because our languages are related: in both countries there is a feeling that we can expect a close cooperation with Hungary inside the EU. Within the EU, there will be 25 members, and while all of us have will have contacts with the others, there are always some with whom you will have closer contacts. I hope that Hungary and Finland can progress together.

Hungary and Central Europe are trying to determine how EU relations will work after accession. There is a cooperation group in this region, the Visegrad Group, which works or doesn’t work depending on how you look at it. What is your experience, from a Scandinavian perspective, in terms of the concept of regional cooperation?

Matti Vanhanen My quite strong opinion is that it is not good to try to make any blocks inside the EU. We must think of the union as a whole. The cooperation between northern countries is close, but we have not made a bloc.

Finland’s telecom giant Nokia is a major player in the country’s economy

We decided this about a year ago that before every European Council meeting - which is about four times every year - we will have a prime ministerial meeting between Sweden, Denmark, Finland and the three Baltic countries. This is basically a close cooperation between six northern countries. It is more a question about sharing information and a dialogue about the items discussed in the European Council. The EU policy agenda is so large that even countries like Finland and Sweden do not share the same position on every issue, even though our development has been so similar, there are always differences that we must recognize.

Are you concerned about the idea of navigating a so-called two-track Europe, where traditional powers like France and Germany have different levels of cooperation and development compared to states?

Matti Vanhanen I realize that in speaking of a two-speed Europe, they are trying to put pressure on the IGC [Inter-Governmental Conference], and this is a part of their strategy. But the discussion has been so serious that we are a little bit afraid of what is going to happen. I will say quite clearly that it is not acceptable when the union is having its biggest enlargement in history and at the same time we are starting a discussion about two speeds. I do not understand why this should be, since a pillar of EU policy is to keep the union as a whole.

Finland has chosen not to join NATO, and your government has not pressed the issue. Can you describe the dynamics of the Finnish defense strategy?

Matti Vanhanen Following our joining the EU, we have taken part and played an active role in the development of the EU crisis management capabilities. In crisis management we have cooperation with NATO countries. For instance, in Kosovo, we just had a five-year period where a Finish general led a NATO operation, which was the first time that a non-NATO member was leading such an operation. It only shows that Finland has a good cooperation in crisis management with NATO. The EU is also developing its own capabilities. In Macedonia and in Congo, we have already used such resources, so in the future there will be such operations where NATO does not take part, but the EU can undertake its own operations. We are ready to develop European defense resources.

What is the issue when discussing NATO membership? Is it a reaction to the influence of the United States on NATO?

Matti Vanhanen No. There was a question about our defense policy, and our basic line has been to remain a non-aligned country. This has its historical background, and now in Finland we are having a debate about this. Our government is now preparing a new white paper on security and defense policy, but probably we are not going to make any big changes to our historic background and basic line.

What has Finland’s experience been in the agricultural sector since joining the EU? Hungary might be able to benefit from this experience, since we expect significant changes to the agricultural sector following accession.

Matti Vanhanen For agriculture, EU membership has not been very easy. Of course we cannot answer whether if today we were outside the EU, what the development of agriculture would have looked like. Probably we would have the same kind of problems. But the changing of structures in agriculture have been very rapid. The amount of farms has gone down quite rapidly, about 7,000 every year. The change has been very traumatic and there have been problems. I can say that quite many, especially young farmers, have nevertheless managed quite well. We still have a lot of criticisms against EU membership because of this, but agriculture has also been given the possibility to develop, and the average size of our farms grown quite fast. The productivity has also grown, and those active young farmers now have better possibilities to work.

Can you respond to Hungary’s prime minister describing Finland as a potential model? Especially in terms of advancements in the R&D sector and in leading high technology companies like Nokia?

The Uspenski Cathedral sits in the port of Finland’s capital city, Helsinki

Matti Vanhanen We have at least 10 or 15 years experience developing a very active cooperation between universities, high schools and the private sector. The state has also devoted quite a lot of money in R&D, with public financing about 1 percent of GDP. At the same time, the private sector accounts for about 2.5 percent, meaning that more of the involvement is from the private sector.

In Finland, two or three sectors are flagships for the economy, with some particular successful companies like Nokia leading the way. In this context, is there a fear that the economy is underpinned too heavily on large firms, with a lack of an SME sector?

Matti Vanhanen One problem has been to get the small and medium-sized companies able to use state resources, and cooperate with high schools and universities. It is a problem that we are working on now. It is always risky if one company or one sector is very strong, but in our case we are in quite a good situation because the forest industry has always been very strong and is a pillar of our society. And for the future, we have a strategy of investing heavily in the biotechnology sector. We have not yet received very good or significant results, even though we have developed this strategy over the last 10 years. Meanwhile, we trust that in the future it will have a lot of investment, and bring results.

Finland, as well as Europe as a whole, is facing an especially acute long-term crisis in terms of the developing demographic of an aging population. Is there a strategy that Finland has adopted to deal with this challenge?

Matti Vanhanen This question is very problematic and difficult for us. We are opening this discussion, and preparing a white paper on this. We must consider how we can deal with immigration, since it has been quite low, and I am quite sure that the Finish society must be ready to, in the future, accept more immigration.