Finance Minister raises possibility of spending cuts
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The future of public finances in Finland seems to be somewhat precarious, and there has been talk of possible spending cuts in the present Parliamentary term, says Minister of Finance Jyrki Katainen (Nat. Coalition Party).
No actual cuts are in store yet, but Katainen says that they cannot be ruled out.
The government discussed the European Union stability programme aimed at securing the sustainability of public finances on Thursday. In the same connection it was revealed that Finland's most recent population forecast is much more ominous than had been expected.
According to this year's forecast by Statistics Finland, the number of Finns aged 65 and over will have increased to 713,000 by 2050, which is 124,000 more than in a population forecast issued by the European Union.
A major turning point will come at the turn of the decade, when the bulk of members of the postwar baby boom generation start retiring.
The government was forced to recognise that Finland's public finances will be about EUR four billion below the definition set by the European Union for sustainability. In the spring the figure was just EUR two billion.
Included under rublic finances are state and municipal budgets, and pension funds.
The government decided that Finance Minister Katainen should present a statement from the Prime Minister to Parliament.
The announcement is especially aimed at dampening opposition demands and enthusiasm for increasing spending in the state budget, which is currently before Parliament.
In light of current population forecasts, a surplus, which would secure the sustainability of the public economy would be 4.5 per cent of GDP in 2011, by EU standards.
Under the stability programme of the Ministry of Finance, the projected surplus would be no more than 2.5 per cent. The missing two points creates a gap of EUR 4 billion.
"The temporary good times, which have existed, are simply falling behind", Katainen said to Helsingin Sanomat on Thursday.
Katainen does not expect an actual recession, but the growth rate in the economy is far too slow in his view, to cover the costs of a welfare state.
"All measures need to be taken into use, and many more ideas need to be invented for achieving growth", he said.
To improve the situation, the government plans to take measures to improve productivity, speed up reform in the municipal and service structure, and accelerate housing production in the Helsinki area, in order to ease the shortage of labour.
Cutting income taxes toward the end of the electoral term is another way in which growth is to be sought.
There have been no new turnarounds in the economy, and factors which slow down growth have long been known.
Finance Minister Katainen warns that the present good economic situation in the country has led to blurred vision, and the implications of an impending sharp decline of the working age population have not been understood on a deep level yet.
Helsingin Sanomat
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| 30.11.2007 - TODAY |
 Finance Minister raises possibility of spending cuts |
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