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PM Sipilä: Prepare for additional cuts in 2017, if competitiveness doesn’t improve

Prime Minister Juha Sipilä says Finland is still lacking the spirit of renewal that is necessary if it plans to turn its dismal economy around. His traditional New Year's Eve message says the country should prepare for a new round of savings and tax increases in 2017, if the economy doesn’t start improving.

Juha Sipilä
Juha Sipilä Image: Stephanie Lecocq / EPA

Finland’s Prime Minister has released his traditional New Year’s address on December 31. He begins by praising the authorities and volunteers who have participated in handling the refugee crisis to date, saying Finland has survived the influx of 30,000 refugees reasonably well.

He has no praise, however, for nation’s ability to renew itself.

“For years now, we have been unable to make the necessary decisions and reforms. Our labour market is inflexible and has not been able to redeem the assurance of its ability to adjust as we promised when joining the euro. An increase in the number of unemployed has been the only way to adapt. This cannot continue,” his office’s translation of his message reads.

Unpleasant chore

He says his coalition is tasked with the “unpleasant chore” of closing a 10 billion-euro sustainability gap.

Prime Minister Sipilä outlines that austerity decisions are set to strengthen public finances by approximately 4 billion euros, and structural reforms such as the health and social services reform will cut public finances by another 4 billion. Pension reform has already been approved by Parliament and decisions to downsize local government are planned for early 2016, he says.

“The Government aims to cover the final 2 billion of the sustainability gap with other measures to promote competitiveness and employment. If this is not achieved, then in spring 2017 the Government will have to make additional savings and tax increases,” the premiere said.

After his last-ditch efforts to secure what he called a ’social contract’ with the country’s labour unions and employer associations fell flat for the umpteenth time earlier this month, Sipilä has moved forward with government plans to impose labour reform – cuts and savings to salaries and benefits that he threatened his social contract negotiators with, if the talks failed.

The labour reforms are intended to reduce unit labour costs by five percent. They would begin to take effect in 2017, if parliament votes them into law this coming spring.

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