Katainen wants to put brakes on corporate incentive programmes

“Situation is exceptional - sense of inequality must not be increased”

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Minister of Finance Jyrki Katainen (Nat. Coalition Party) feels that it is “extremely important” that in the coming years, companies should refrain from incentive payments and stock option plans that unnecessarily increase a sense of inequality at workplaces.
     “I hope that corporate managers would sense the need for a spirit of cohesion. Some people might lose their jobs, while others get an extra bonus for past years, for instance”, Katainen says.
     He especially appeals to corporate owners, and feels that not all promises that have been made need necessarily be kept.
     “It is not always a sufficient explanation to say that they are based on agreements that have been made. That is what jobs are also based on”, Katainen says.
     
Katainen sees no good signs in economic trends yet. If the situation is extended over a few years, growth in state debt could prove to be very steep.
     “We have budgeted for an increase in indebtedness of two billion this year. That is nothing compared to what we could well face later”, Katainen warns.
     However, he also points out that the state needs to be very careful in assessing how much debt to take on, and now to use it.
     
“The only thing that gives me faith and hope in the future is that the crisis seems to be reaching its first stable phase. Now we can see very well what kinds of things are turning into problems. I am convinced that we will be able to find the means to tackle them.”
     Katainen does not believe that it is possible at this stage, to predict if the economic crisis will last a year, or two, or three.
     
The Finance Minister is convinced that the economy will start growing again in a few year’s time, and that when it happens, Finland will face a great labour shortage, as the members of the postwar baby boom generation start retiring.
     “As a nation we should stick it out a few years so that people would not fall in the cracks and become depressed. In addition to society, the church, and non-governmental organisations, we need each person to help neighbours and relatives. The state cannot be the only one to care.”
     The collapse in the export market for industry is leading to considerable losses of jobs and tax income. “It is unavoidable”, Katainen says.
     
There were 201,200 job seekers at labour exchanges in late November. Grim figures area also expected for December. Katainen will not estimate how many unemployed there will be at the end of this year. “We are now doing all we can to keep the number as low as possible.”
     The principle means of dealing with the crisis is to secure financing for companies, and to strengthen the lending capacity of banks.
     Another way to promote employment, which Katainen feels is worthy of serious consideration, would be to lift the national pension contribution imposed on companies.
     Stimulus is also to be used to improve employment, which means the use of money from the state budget for transport, projects, repairs, and construction of rental housing.
     
Katainen suggested before Christmas that about EUR 100 million should be set aside in a supplementary budget for economic stimulus. Now he admits that this will probably not be enough.
     Katainen emphasises that more important than a supplementary budget would be the combined effect of all factors. This could be achieved through the combined effect of securing corporate finance, boosting domestic market demand, and the public stimulus measures. Included in stimulus are cuts in income taxes and in VAT on food.
     “When a billion of state budget funds are being spent on road construction, its impact will be that of a billion. If the billion is spent on bank capital, it will mean the granting of 10 billion in credit to companies, and a significant impact on employment.”
     
Finance Minister Katainen also sees some positive sides to the situation.
     “If you happen to be a pensioner, there are few economic risks in your life.”
     He adds that for a pensioner paying off a housing loan, the interest on the loan will decrease, and that wage earners who do not lose their jobs will see a fairly large boost to their buying power, through pay increases and tax cuts. Also promoting buying power is the decline in inflation and in interest rates on housing loans.
     “An overwhelming majority of Finns will be economically better off this year than last.”


Previously in HS International Edition:
  Smoking ruins behind, thick mists ahead as the economy enters a new year (4.1.2009)
  Economic optimism plummets among consumers and industry (2.1.2009)
  Increasingly pessimistic Finance Ministry not predicting depth of slump (19.12.2009)

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