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Labour pressure seen limiting Finnish state sell-offs
August 20, 2013 / 2:36 PM / 4 years ago

Labour pressure seen limiting Finnish state sell-offs

* Finnish govt due to sell shares to boost budget

* Leftist parties in government oppose privatisation

* Trimming Sampo, TeliaSonera stakes seen as most feasible option

By Jussi Rosendahl

HELSINKI, Aug 20 (Reuters) - Pressure from labour unions is likely to limit sell-offs of state holdings when the government announces its 2014 budget proposals next week.

The six-party coalition is due to raise 500 million euros ($668 million) a year from share sales to boost revenues and maintain Finland’s triple-A rating in the face of falling taxes and rising spending on an ageing population.

But the SDP and Leftist Alliance, the second and third biggest groups in government after the conservative National Coalition party, are backed by unions which want the state to keep its historical role in business and discourage job cuts.

“In general, we are very critical towards selling state ownings,” Annika Lapintie, a senior lawmaker for the Leftist Alliance, told Reuters.

“The state must take care of Finnish employment, and ownership is one way of doing that.”

Despite moves toward privatisation since the 1990s, the government still owns stakes in 14 of Helsinki’s top listed firms and in 45 others.

Most of the value of Solidium, the 7.9 billion euros state fund that invests in listed companies, comes from stakes in investment group Sampo and telecoms operator TeliaSonera.

The easiest option for the government would be to trim its 14 percent stake in Sampo and its 12 percent holding in TeliaSonera, each worth nearly 3 billion euros.

Analysts said neither company was politically sensitive and equity analysts said a rise in Sampo’s share price to all-time highs could make it easier to cash out.

“From the pricing perspective, the state’s possible sales of these two stocks would be exceptionally successful,” said analyst Sauli Vilén from Inderes Equity Research.

But international investors expecting bolder steps, such as listing state-owned liquor maker Altia or reducing the 55.8 percent stake in airline Finnair, will be disappointed.

“What I have understood from discussions with the SDP is that it (Altia) is supposed to stay off the table,” Antti Rinne, the chairman of one of Finland’s biggest white collar unions, Pro Ammattiliitto.

Left-leaning lawmakers face strong pressure from unions in companies such as paper manufacturers and metal engineers which are trying to cut jobs due to weak exports.

Finland’s overall unionisation rate is around 75 percent, among the highest in the world, and state-owned companies are characterised by strong labour groupings.

Heidi Hautala, the minister responsible of state ownership and a member of the Green party, has floated the idea of cutting the state’s 55.8-percent stake in Finnair.

But he idea has been rejected by many lawmakers who say such a move could encourage more cuts at the airline, which is in the midst of restructuring and seeking to slash expenditure.

The SDP, whose support has fallen to historic lows of 16 percent, is particularly wary ahead of elections scheduled for 2015.

State-owned road and rail construction firm Destia is seen as slightly easier to offload because the government inherited a mandate to sell it from the previous administration.

But analysts said it might be hard to find a buyer and Destia would only raise 150-170 million euros.

Vilén said the government might be banking on a windfall from utility Fortum, of which it owns 51 percent, following a planned 5 billion-euro sale of its distribution business. ($1 = 0.7490 euros) (Editing by David Cowell)

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