Finland clings to happiness crown as economic gloom deepens

By Anne Kauranen

HELSINKI (Reuters) -Harsh economic headwinds are sending a chill through the world's happiest country. But after 1,000 days of unemployment, 33-year-old Juho-Pekka Palomaa hasn't let Finland's problems get him down just yet.

Finland is grappling with economic stagnation, rising joblessness and strained public finances, but still managed to secure the title of world's happiest country for the eighth year in a row in this year's annual World Happiness Report.

Its success, experts say, is due in no small part to a generous welfare state - but that is now being trimmed back as ministers confront the surging social costs of an aging population.

"I've been grateful that in Finland there has been a safety net and social security that have supported me financially ... So maybe I'm not more unhappy than I was before," said Palomaa, who marked his 1,000 days of unemployment with a bring-your-own-food protest on the steps of parliament.

"But I don't feel there is very much I can do to change my situation," said the former video producer, who has submitted countless job applications and completed 11 unsuccessful interviews.

While unemployment benefits have been cut, the government has left untouched "almost sacred" pensions, he complained.

NOKIA COLLAPSE, RUSSIA SANCTIONS

Finland's export-dependent economy has struggled since the phone business of Nokia, once Europe's most valuable company, collapsed in 2014 after it fumbled the switch to touch-screen smartphones. Sanctions on neighbouring Russia over its war in Ukraine have also hit exports and tourism, while uncertainty over tariffs and global trade present a further challenge.

The Bank of Finland is forecasting economic growth of 0.3% this year, down from 0.4% in 2024. Unemployment is among the worst in the European Union, at nearly 10%, with the rate more than twice as high at 21.2% among 15- to 24-year-olds.

The European Commission is expected to decide on Tuesday whether to propose placing Finland in what it calls an "Excessive Deficit Procedure", after it forecast Finland will have a budget deficit above the 3% EU limit for the next three years.

Poor public finances have already prompted the government to start pruning some parts of the welfare state, including unemployment and housing benefits and some medical facilities.

"I'm honestly terrified for younger people," said Hanna Taimio, 54, another unemployed Finn who joined Palomaa's commemoration and fears she may never work again. "All these cutbacks and downgrades... it's genuinely frightening."

The right-wing coalition government, in office since 2023, aims to "to strengthen public finances and to bring the growing debt under control", Minister of Employment Matias Marttinen told Reuters.

Marttinen called the high jobless rate "an awful situation", but defended the government's decision to make dismissals easier to lower the risks of hiring for companies, to ultimately boost employment.

Some critics argue, however, that austerity measures have exacerbated economic challenges and consumer pessimism.

Lauri Holappa, director of the Finnish Centre for New Economic Analysis, pointed to simulations suggesting the fiscal consolidation measures could have even led to an increased public debt rate.

FINNS' HAPPINESS HOLDS FIRM

But there is more to happiness than economics.

The life evaluations that people report in the happiness survey are determined more by factors like resilience and the ability to "deal collaboratively and constructively in bad times" than by national economic conditions, said the report's founding editor, emeritus professor John Helliwell.

"Of course, Finland is very high in resilience," he said.

Survey data for next year collected by analytics company Gallup and seen by Reuters shows no significant fluctuations in Finns' reported happiness. The survey also takes into account key indicators such as GDP per capita, social support and healthy life expectancy.

Reeling from the financial hit from his long jobless spell, Palomaa has looked to a free community sauna run and funded by volunteers by the Baltic Sea shore in Helsinki.

"The sauna is a place where everyone's so equal ... You cannot say based on someone's appearance what they do for a living, who they are," he said.

When he asked social media followers what to do on his 1,000th day of unemployment, he got a million views and a flood of suggestions - including the bring-your-own-food party he held on the steps of parliament.

"I'm here obviously to celebrate something that I never wanted to celebrate," he said as he shared his home-made pastries in the misty rain.

But "I decided that this is my moment," he said. "I got to seize the moment and do something about it."​

(Reporting by Anne Kauranen in Helsinki; Additional reporting by Ilze Filks in Stockholm; Editing by Catherine Evans and Conor Humphries)