Government and opposition clash over economic outlook

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A report from the Prime Minister presented to Parliament by Minister of Finance Jyrki Katainen (Nat. Coalition Party) on Monday revealed sharp differences between government parties and those of the opposition.
      The impetus for the report was a review of the European Union's stability programme, which the government approved in late November.
      Katainen said that according to a long-term assessment contained in the programme, Finland's economy is on an unsustainable basis.
      Katainen said that the programme indicates that if no changes are made to current policies, the state would have to borrow more money in the next Parliamentary term, and that in 2025 public finances would fall permanently into the red.
      Katainen compared urgency of the looming decline in economic growth with climate change; he said that instead of arguing whether or not the sea level will rise two or four metres if nothing is done, something actually needs to be done now.
     
On the opposition side, two Social Democratic former finance ministers, Eero Heinäluoma and Antti Kalliomäki, accused Katainen of putting on a political theatre, and of putting too much weight on the stability programme by bringing it before Parliament.
      Left Alliance MP Martti Korhonen said that Katainen was using the stability programme as a "Trojan horse". He noted that the calculations include a huge amount of assumptions. The stability programme has not been considered to be a political guideline, because its assumptions do not involve any political measures.
      Speaking on behalf of the Social Democratic Parliamentary group, MP Jukka Gustafsson accused the government of working to shut down the welfare state. He said that the government is using money for "tax reductions for interest groups" instead of making initiatives that boost dynamism.
     
There were also clashes on the previous government's decision to eliminate the wealth tax, and the initiative of the present government to eliminate the inheritance tax on corporate assets and farm and forest land.
      Green League Parliamentary group chairwoman Anne Sinnemäki unexpectedly came out against this government initiative, siding with the opposition.
      "Heinäluoma is right in saying that the combination in which there is no wealth tax, and in which the aim is to lift the inheritance tax on corporate wealth, is a bad one", she said.
      Katainen's main message was that Finland cannot afford any additional spending, and that economic growth needs to be increased by one percentage point above what has been forecast. Productivity has to be improved, and everyone who is able to work is needed in the work force. In his view Finland cannot afford any more marginalised people.
      "In the past century we have grown accustomed to annual economic growth of more than three per cent. Now the growth is expected to slow down permanently to below two per cent a year", he said.
     
The stability programme is a tool by the European Commission aimed at keeping the public finances of member states stable and on a sustainable track. From one year to another, Finland has easily met the requirements of the programme.


Previously in HS International Edition:
  ETLA: Income disparity likely to increase as economy slows down (5.12.2007)
  Economic forecast criticised for forgetting impact of immigration (12.12.2007)
  Bank of Finland: Peak of growth passed - economic development still positive (11.12.2007)

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