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By Bloomberg

Executives at some of Finland's biggest companies have had enough.

They say the country needs to act now to reinvent itself with a smaller public sector, less regulation and support for startups to halt a downward spiral brought on by the decline of Nokia Oyj. In interviews this week, Finnish chief executive officers aired their concerns over a public debt load that's set to almost double in the decade through 2017. They want the government to overhaul the tax code to help businesses hire.

"Finland has continued to live well beyond its means," said Kari Kauniskangas, CEO of Fiskars Oyj, maker of the orange- handled scissors. "We have created an administrative machine that is too large and bureaucratic. We need to make it easier to start and build a company."

Prime Minister Alexander Stubb, spurred by the loss of Finland's AAA rating at Standard & Poor's, vowed this week to complete a revamp already under way of the social, pension and municipal systems within the next six months.

Even if he succeeds, it will take years to replace the lost economic contribution from Nokia. Once the world's largest maker of mobile phones, Nokia's revenue has shrunk by 38 billion euros ($49 billion) since 2008, meaning it would take 380 startups with sales of 100 million euros to regain the loss.

Painful Years

Stubb, who took over as premier in June, says Finland is facing a "lost decade" with as many as four more painful years to come before the country reaches the gross domestic product achieved in 2008. GDP will contract 0.4 percent this year and then grow 0.8 percent in 2015 and 1.8 percent in 2016, according to a forecast last month from the ETLA Research Institute.

"The good thing with Finns is that we have a tendency to get down to work when we see the seriousness of the situation," Stubb said in an interview. "We have a good games industry, a wonderful startup scene and a good entrepreneurial culture emerging, which I think is going to change a lot of things."

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The country is home to Supercell Oy, the maker of Clash of Clans and Hay Day, two of the top-grossing games in the U.S. for Apple Inc.'s mobile devices. The challenges these potential new champions face in rising to the top -- and then staying there -- is underscored by the announcement this month that Rovio Entertainment Oy, maker of the Angry Birds games, will cut 16 percent of its workforce, as rivals overtake it in popularity.

Slashing Jobs

Rovio is not alone in slashing jobs. Companies across the country have announced plans to eliminate thousands of positions in recent years. Stockmann Oyj, which operates department and clothing stores, said this week it will post a loss this year as consumers tighten their purse strings. Retailer Kesko Oyj is cutting more than 230 posts.

The unemployment rate climbed to 7.4 percent in August from a low of 5.2 percent in mid-2008. From 2007 to 2012, the country lost 76,300 jobs in manufacturing as Nokia, engineering companies and papermakers such as UPM-Kymmene Oyj and Stora Enso Oyj retrenched, according to a report this month from Statistics Finland. The public sector, which accounted for 56.7 percent of GDP in 2012, grew over that same time period.

Anssi Rantala, Aktia Bank Oyj's chief economist and former head of forecasting at the Bank of Finland, said politicians need to adjust spending to a new reality characterized by slow annual growth of about 1.5 percent. His prescription for the ailing economy is budget cuts, lower corporate and income taxes and looking at charging for some services based on income.

Slow Slide

"The challenge is things are sliding down so slowly, it's easy to just let it go and wait another year,'" Rantala said. "We could do this in an orderly fashion now -- we still have time. But if we continue as is, we then end up in a situation where we have to do more drastic changes."

Business executives say Finland should focus on cuts in administration, such as continuing efforts to reduce the number of municipalities, which number 320 in a country of 5.5 million. More than half have fewer than 6,000 inhabitants, according to the Finnish municipalities website. Nordic neighbor Denmark, with 5.6 million inhabitants, has 98 municipalities, while Sweden, with 9.7 million people, has 290.

"There's no solution other than radical structural reform," said Keith Silverang, the American CEO of Technopolis Oyj who has lived in Finland since the 1980s. "You can't have the only sector that is growing be the government sector."

Labor Talks

Technopolis, a provider of office space, is an example of a company that has reinvented itself. In 1999, Nokia-related business accounted for 50 percent of the company's portfolio. Today, it's less that 3 percent. Technopolis, which has expanded to neighboring countries, has an occupancy rate of 94 percent thanks to a willingness to part with the past.

Companies are also pushing unions to reconsider labor agreements. Take unprofitable carrier Finnair Oyj, which after years of discussions clinched deals this month with cabin crews to lower costs through productivity gains and salary cuts as part of a plan to save 200 million euros annually.

"I see them as break-through agreements for us because these are permanent changes," Finnair CEO Pekka Vauramo said, explaining that past measures have been temporary. "For this size of company, we probably are the first ones to reach something like this. I've heard commentary from my colleagues that many other companies have the need to do similar things."

Unions are willing to consider deals such as at Finnair because it guaranteed jobs in exchange for the reductions, said Olli Koski, chief economist at SAK, the country's largest labor confederation. Executives must also look at lowering their own compensation as part of the bargain, he said.

"I am a little bit scared that the bosses themselves don't realize this," Koski said of the wage gap between workers and top management. "The red line for unions is that we will not make deals that sacrifice the minimum wage."