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Cablegate: Pm Vanhanen Survives Vote of No Confidence

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FM AMEMBASSY HELSINKI
TO RUEHC/SECSTATE WASHDC 5192
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 HELSINKI 000361

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PREL PGOV FI
SUBJECT: PM VANHANEN SURVIVES VOTE OF NO CONFIDENCE

1. (SBU) SUMMARY: On October 1, the Finnish Parliament
voted 117 to 27 to reject a vote of no confidence
against Prime Minister Vanhanen's government. Vanhanen
and other Center Party members have been implicated in
a campaign funding scandal in which they received
large, undisclosed donations from business consultancy
firm KMS and a government-sponsored housing
organization Youth Foundation. Finnish law requires
that politicians publically disclose campaign
contributions. However, no penalties exist for non-
disclosure. There is no evidence of any quid pro quo
between KMS, Youth Foundation and government officials,
but the government's reputation for transparency has
taken a hit; recent polls show a strong drop in
confidence among the Finnish public. Although Prime
Minister Matti Vanhanen will remain in power, the
Center Party is now weaker relative to its coalition
partners. There is speculation that he will be
replaced as the Center Party's Chairman during the
party's Congress scheduled for summer 2010. A change
to its top leadership with fresh and less tainted
candidates could make the Center Party more competitive
during the next general elections campaign in March
2011. END SUMMARY.

2. (U) On October 1, Prime Minister Vanhanen's
government survived a vote of no confidence over a
campaign funding scandal in which the Prime Minister
and members of his Center party received undisclosed
funds from business consultancy group KMS and a
government-sponsored housing organization called Youth
Foundation. Parliament voted 117 to 27 to reject the
vote of no confidence, with forty parliamentarians
abstaining and fifteen absent.

CENTER PARTY AND NATIONAL COALITION RECEIVE LARGEST
SUMS
--------------------------------------------- -----

3. (U) In May 2008 the Finnish press published stories
about illicit campaign donations made to a large number
of parliamentary candidates in the 2007 elections. The
majority of the recipients were members of Prime
Minister Vanhanen's Center Party, including the Prime
Minister himself. Other recipients included members of
the National Coalition Party (NCP), as well as a small
number of opposition Social Democrats and one member
each from the Greens and the Swedish People's Party
(SPP).

4. (U) The largest source of donations came from KMS, a
business development association founded by Finnish
entrepreneurs. Nova Group, a privately owned
commercial real estate development company, channeled
some of the largest sums via KMS, amounting to 145,000
euros of the more than 400,000 euros which KMS
distributed to government officials. Nova has since
gone into bankruptcy, and a court-appointed receiver
has revealed that Nova's finances were shaky even as it
made large campaign donations.

5. (U) KMS says it paid out some 406,000 euros to 53
candidates in the 2007 elections. Most of the money,
at least 260,000 euros, went to 35 candidates from
Prime Minister Matti Vanhanen's Center Party. Vanhanen
himself received a contribution of 10,000 euros. KMS
says that 13 candidates from the other main government
party, the conservative National Coalition, received a
total of 112,000 euros, including Speaker of Parliament
Sauli Niinisto and Finance Minister Jyrki Katainen.

FOUNDATION DONATES FUNDS TO ITS FORMER CHAIRMAN
VANHANEN
--------------------------------------------- ---

6. (U) In addition to the KMS/Nova funding, Center
Party candidates - including the Prime Minister - also
received contributions from Youth Foundation, an
organization which builds housing for young people and
receives some of its funding from a government-
controlled gaming monopoly. Before becoming Prime
Minister, Vanhanen served as Youth Foundation's
Chairman and Deputy Chairman. Another Center Party MP
also served as Chairman until resigning recently due to
the scandal.

7. (U) While candidates were required to disclose
contributions, the law in effect at the time specified
no penalties for failure to disclose. A nonpartisan
working group established in May 2008 and headed by
former Supreme Court Judge Lauri Tarasti will soon
publish its second review of recommendations on

HELSINKI 00000361 002 OF 002


reforming the campaign finance law. The report is to
address the kinds of contributions to be declared, the
reporting mechanism, and whether campaigns should be
funded exclusively by public money distributed equally
to all candidates. The first phase of Tarasti's
working group reforms was approved and implemented in
May 2009.

FINNISH PUBLIC'S CONFIDENCE IN GOVERNMENT DROPS
--------------------------------------------- --

8. (U) Currently there are no criminal investigations
of politicians in connection with this scandal. There
is also no evidence of any quid pro quo between
KMS/Nova and government officials who received
donations. Nonetheless, the Finnish public is upset
that government officials have received large amounts
of money with no accountability or transparency. In a
recent poll, more than a quarter of those interviewed
said the present campaign scandal has reduced their
enthusiasm to vote. In addition, only 45 percent of
those interviewed had confidence in the ability of the
government to function and more than 40 percent said
that it has become dysfunctional already.

OTHER PARTIES NOT IMMUNE FROM CRITICISM
---------------------------------------

9. (U) In recent weeks, the Center Party, NCP, SDP, and
individual politicians have been lining up to return
campaign funds donated by KMS/Nova Group but criticism
remains. The Left Party and to a lesser extent the SDP
came out looking better as they already published wide-
ranging reports on their election financing. However,
each of them has been criticized in the recent past
concerning questionable funding they received from
labor unions.

10. (U) The Greens, while not receiving much money
themselves, have been criticized by some in the media
for not speaking out strongly against their partners in
the government, and the Green Justice Minister
(responsible for enforcing the rules on campaign
finance) has not taken an aggressive stance, arguing
that the working group led by former Supreme Court
judge Lauri Tarasti must be given time to finalize its
report and recommendations for reform.

11. (SBU) COMMENT: Although Prime Minister Matti
Vanhanen will remain in power, the Center Party is now
weaker relative to its coalition partners. There is
speculation that he will be replaced as the Center
Party's Chairman during the party's Congress scheduled
for summer 2010. A change to its top leadership with
fresh and less tainted candidates could make the Center
Party more competitive during the next general
elections campaign in March 2011. END COMMENT.
BUTLER

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