Finland chastised by EU Commission on excessive deficit
Olli Rehn
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Whilst we are not exactly economic pariahs as yet, Finland now officially belongs to the caste of the EU countries that have not been able to keep their deficit within the limit prescribed by the Union.
Finland’s deficit is predicted to reach 4.1 per cent of the country’s gross domestic product this year.
This way it will exceed for the first time the 3% ceiling agreed on in the EU's Stability and Growth Pact. In the view of the European Commission, the EU's executive arm, the exceeding of the limit cannot be considered a trivial matter.
“It is important to ensure that the deficit will turn clearly and credibly onto a declining path starting from next year”, EU Economic and Monetary Affairs Commissioner Olli Rehn said in the European Parliament in Strasbourg, France, on Tuesday.
Only Sweden,Estonia, and Luxemburg have still managed to keep their deficit figure below the 3% mark. In theory, also Bulgaria belongs to this elite, but the Commission has its doubts about the accuracy of the Bulgarian statistics.
The rest of the EU countries all clearly eat more than they earn. There are currently 27 member-states in the EU, 16 of which belong to the single currency club.
Rehn said on Tuesday that he hoped that he would not have to remind Finland again of the excessive deficit. According to the economic commissioner, Finland’s public economy is encumbered by the country lacking in its medium-term stability.
Rehn also warned Finland of the burden that the country’s ageing population will start placing on the state’s finances.
The stability deficit is now in the region of four per cent of GDP.
In the next few years Finland should reverse the situation in such a way that the country’s public spending figure would instead be around half a percentage point in surplus. This is unlikely to happen by 2013 without new spending cuts and taxes.
“The task for the coming governments is to reorganise the public economy with a sustained programme that spans several years”, Rehn said on Tuesday.
Finland’s deficit next year is predicted to come in at 2.9 per cent of GDP, and considering that the Commission regards Finland's slippage over the line to be a temporary phenomenon brought on by the depth of the recession in these latitudes, it is recommending the Council set a deadline of 2011 for correction.
In the case of two other "new sinners" - Cyprus and Denmark - the deadlines set are 2012 and 2013 respectively.
"The entry into the excessive deficit procedure of these countries, which until recently had surpluses, shows the severity of the economic and financial crisis we have gone through", said Rehn on Tuesday.
Many of the EU countries routinely broke the stability and growth pact regulations with regard to their deficit and the amount of debt even during the upswing.
After the start of the financial crisis in the autumn of 2008 complying with the regulations - not to mention keeping things in surplus - has proved nearly impossible.
According to the EU Commission, the measures needed vary from one EU country to the next. The countries that have managed their finances extraordinarily poorly have had to introduce draconian belt-tightening measures already this year.
The rest of the EU states can expect to commence the “worming programme” next year. According to this criteria, Finland still leans towards the elite among the poorly performing countries.
On July 13th the Ecofin (Economic and Financial Affairs) Council, which consists of the Finance Ministers of the EU member states, will decide on the recommendations on those member states that have broken against the 3% deficit ceiling rule.
After that, for example Finland will have six months to announce the measures that it plans to instigate in order to rectify the situation.
It will do little or no good that Olli Rehn is himself a Finn, for in his current position he is looking out for the interests of the entire EU, and not those special worries Finland might have.
Helsingin Sanomat
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| 16.6.2010 - TODAY |
 Finland chastised by EU Commission on excessive deficit |
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