It's 60 degrees north of the equator, has a population of 55,000 and it an average annual temperature that's barely above freezing.

Welcome to the Finnish town of Salo, home to one of the world's most famous brands.

SOUNDBITE (English) REUTERS REPORTER IVOR BENNETT, SAYING:

"Nokia started making phones here in the 1970s. And when the company was at its peak, this was a major manufacturing hub. Now though, it's a very different story."

Nokia's struggles in the smartphone market saw manufacturing here cease last year, a demise that's hit Salo hard.

The town's lost 50 million euros in corporate taxes - 15 percent of its annual budget.

Without it, Mayor Antti Rantokokko is struggling to make ends meet.

SOUNDBITE (Finnish) SALO MAYOR ANTTI RANTAKOKKO, SAYING:

"Our expenses are 1 million euros a day. And our income is 900,000 per day. So we're having to take a daily loan of 100,000 to finance our operations. That's over 30 million a year."

Taxes have already been raised to help meet the shortfall.

Layoffs and even school closures are next.

SOUNDBITE (Finnish) SALO MAYOR ANTTI RANTAKOKKO, SAYING:

"It will take many years to balance our budget, and we still have to make even more cuts. We're going to have to lay people off and that's unusual for a local government in Finland. There are only three cities in the country at the moment in a similar position."

6000 people used to work at Nokia's plant here.

Now there's just 12 hundred, working in research and development.

The cutbacks have seen unemployment in Salo reach 15 percent - nearly double the national average.

Despite the problems, Nokia's still a source of pride for the town.

This hotel is named after one of the company's founders.

But the display inside shows it's living on past glories - not a smartphone in sight.

Mika Paukkeri has worked at Nokia for nearly 20 years.

He and his colleagues are confident the company can still bounce back.

SOUNDBITE (English) MIKA PAUKERRI, NOKIA, SAYING:

"I trust the future because I know we have very good experience to make mobile phone and phone technology. And I also think and I trust that Microsoft really needs us."

SOUNDBITE (English) MIKA KORTELAINEN, NOKIA EMPLOYEE, SAYING:

"We were number one. So we were the best, best all over the world. Here in Salo. And that was really nice time because that was a good atmosphere. So it has really changed."

Microsoft's trying to buy Nokia's mobile phone business.

If agreed the 5.4 billion euro deal would see all the workers in Salo transfer.

But there's no guarantee for how long.

And it's not just the employee's futures that hang in the balance in Salo - it's the whole town's.

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