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Economists: government agenda half-baked

The new government programme has come in for harsh criticism from Finnish economists.

Commentators from the Government Institute for Economic Research and Tampere University have labelled the policy programme half-hearted and accused the so-called 'six-pack' parties' leaders of lacking courage.

Although the six-party government met its goal of finalizing its economic programme within the deadline set by PM-designate Jyrki Katainen, economists fear the agenda will have little impact on fostering economic growth, steadying state finances and job growth.

Aki Kangasharju, Chief Director with the Government Institute for Economic Research, called the proposal a “compromise programme”. “There is no clear direction. I would have liked to hear more clearly about the government’s plan from the perspective of the endurance deficit as well as with respect to working life and job creation – this remains unclear,” he added.

“The policy on taxation seems rather cautious,” pitched in Jukka Pirttilä, Economics Professor at Tampere University.

Approval for 'sin taxes'

The fledgling government’s proposed agenda did score some points for its attempt to relieve inequality by increasing capital taxes and enhancing basic social security entitlements. Hikes in “sin taxes” on products such as cigarettes, sweets and alcohol were also seen as a step in the right direction. The economists noted that it was also necessary to protect tax benefits such as mortgage interest reductions.

However they pointed out that the programme failed to address direct job creation and did not incentivise business to hire. There is also a danger that major reforms will not be undertaken.

“We need a clear and immediate plan for structural reforms, in other words, how the municipal sector can be helped, how to make municipal services more productive. From the perspective of inequality this is a larger issue than income differences,” declared Kangasharju.

Pirttilä said the government’s programme seemed like a step in the right direction, but that it lacked the courage of wholesale reform. “I can imagine that we will return to these issues during the government’s term in office and the entire finance policy will be modified based on the prevailing economic situation,” he explained.

“I see us returning to this in annual reviews to find possible targets for spending cuts and tax increases,” Kangasharju concurred.

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