Katainen confident: Finland can withstand economic crisis
Little enthusiasm for Korhonen’s proposed “social contract”
In spite of the deepening crisis in the world economy and worsening economic news, the present government is not planning to change course.
Prime Minister Matti Vanhanen (Centre) and Minister of Finance Jyrki Katainen (Nat. Coalition Party) insisted in Parliament on Thursday that the policy line of the government would hold.
According to Vanhanen, there are no signs in banks operating in Finland of “risk concentrations” of the kind that have pushed financial institutions in other countries into a state of crisis.
Katainen said that next year’s draft budget would not be altered.
“Already now the budget is very stimulating, with tax cuts and transport infrastructure projects. Growth can be something between one and 1.8 per cent, but Finland can withstand that”, Katainen said.
Vanhanen’s key advisor, Undersecretary of State Vesa Vihriälä of the Prime Minister’s Office, emphasised on Thursday, that Finland needs to maintain a sense of proportion.
“It is clear that Finland is not going into a crisis of the type of the early 1990s”, Vihriälä emphasised.
It may be necessary to correct recent forecasts on next year’s economic trends downward, but contrary to what was the case in previous years, but Vihriälä insists: “we will withstand one thing and another”.
According to Vihriälä, corporate balance sheets, including those of banks, are significantly stronger than they were in the early 1990s, when Finland experienced a severe recession. The country’s competitiveness remains good, and the interest rate level is significantly lower than when the recession began.
Instead of a threat of mass unemployment, there is still a looming labour shortage, which means that “employers would do well to think twice before starting to reduce personnel on the basis of a temporary weakening of demand”, Vihriälä said.
Vihriälä also said that Finland should move ahead with its stable economic policy, and with its actions aimed at increasing the stability of the financial markets.
Prime Minister Vanhanen dismissed a proposal put forward by Jarmo Korhonen, the party secretary of his own Centre Party, calling for a social contract aimed at freezing wages and cutting social benefits.
“He is in the habit of swinging a sledge hammer whenever he says something”, Vanhanen said.
Vanhanen said that the government’s policy line could be seen in Tuesday’s meeting of employers and wage earners’ representatives, aimed at seeking a new kind of contract culture for the labour market.
Korhonen’s proposals were also denounced by opposition Members of Parliament; they were seen as unfair, and geared to the upcoming municipal elections.
Previously in HS International Edition:
Centre Party Secretary proposes extensive social contract (18.9.2008)
Parliamentary opposition criticises government stimulus measures (17.9.2008)