Finance Minister Heinäluoma in Singapore: Finland needs a bigger surplus
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Finland's Minister of Finance Eero Heinäluoma (SDP) is not satisfied with the current condition of Finland's state economy.
Heinäluoma, who is in Singapore attending the annual meeting of the International Monetary Fund and the World Bank, says that the increasing average age of the Finnish population, and the possibility of setbacks in the world economy, call for "thicker buffers" for public finances.
Heinäluoma nevertheless recognises that Finland's state coffers are in reasonably good shape at the moment; few of the industrialised countries attending the meeting can boast as good figures as Finland.
The IMF calculates that Finland has a state surplus that is equivalent to 2.7 per cent of its GDP this year, and next year's surplus is set to be 3.3 per cent of GDP.
In an interview with Helsingin Sanomat, Heinäluoma would not say how much thicker he thinks the buffers should be.
However, in another recent press interview, the Director-General of the ministry's Economics Department Jukka Pekkarinen commented that an appropriate goal would be to increase the surplus by 1.5 percentage points when calculated against overall production.
This would amount to EUR 2.25 billion, and would raise Finland's surplus to 4.8 per cent.
In the IMF's figures for 27 industrialised countries, such a surplus would be the second-highest. The overwhelming leader in this respect is Norway, which wallows in oil revenue and enjoys a colossal estimated surplus of 20.4 per cent.
One way to boost state finances is to increase revenues by raising taxes. The other route is to reduce spending. Heinäluoma's strategy is to fight unemployment, thereby boosting state revenue and reducing expenses.
"The unemployed need to get work; all other means are worse", Heinäluoma says.
The minister's staff spat out the figures: a decline of one percentage point in the unemployment level increases the surplus by 0.6 percentage points.
Pekkarinen's goal of 1.5 per cent would therefore require a decline of 2.5 percent in unemployment, which the IMF predicts will stand at around 7.8 per cent next year.
The ageing of the population has long been recognised as a problem, and has been easy to anticipate. Heinäluoma's concern about the state of the national economy is apparently based largely on unpleasant surprises that might come from outside.
Such pitfalls are a major topic of discussion in Singapore, although the overall state of the world economy has been recognised as very good for a fifth year running.
Unpleasant surprises might include a rapid stagnation of the US economy, the continued high price of oil, and increasing global interest rates.
"This is quite a unique situation. Growth is strong everywhere, but dark clouds are clearly gathering on the horizon", Heinäluoma said.
Heinäluoma also pointed to recent Finnish history. He notes that a key factor in getting out of the recession of the early 1990s was the country's low level of indebtedness - about ten percent - before the crisis hit.
Helsingin Sanomat
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| 18.9.2006 - TODAY |
 Finance Minister Heinäluoma in Singapore: Finland needs a bigger surplus
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