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Finance Ministry wants 9 billion euros of spending cuts, tax increases

Officials at the ministry think Finland needs to tighten its belt after the next election, which is due in April 2023.

Juha Majanen, Permanent State Secretary at the Ministry of Finance, says Finland needs to make savings in the coming years. Image: Mikko Ahmajärvi / Yle
Yle News

The next government of Finland will have to make billions of euros in spending cuts and tax rises, predicted the Finance Ministry in a report published on Thursday.

Some nine billions of euros of austerity measures are needed over the next two parliamentary terms, according to the ministry's assessment.

That would mean Finns face more belt-tightening in the public sector than at any point in decades. Some six billion euros of spending cuts and tax rises should be implemented by the government taking office after next April's election.

The remainder, some three billion euros, should be implemented by the following government which is scheduled to take office in 2027.

These measures would balance the Finnish public finances, according to ministry officials, stop the rise in state debt and all but plug the long term sustainability gap.

"Sustainability gap" is a term referring to the shortfall in state budgets caused by an ageing population.

Officials claim that politicians in the coming years will be forced to make difficult decisions. That is due to the weak state of Finland's public finances and long-term economic trends.

The most senior official at the ministry, Juha Majanen, said that he is very concerned about the current trend. Economic growth has been weak for the last ten years.

"We have diverged negatively from the other Nordic countries," said Majanen. "The weakness of the public finances has been a fact for a long time. State finances' significance as a foundation for the welfare state and all the good that it brings is very significant."

Crisis spending

Majanen added that recent crises have shown the importance of strong public finances.

"There has to be some kind of leeway, so that we can take these blows and recover quickly from them," said Majanen. "That's why we think that we have to stop continually growing the debt."

Among other measures, officials suggest that lower VAT rates on food and other goods could be raised. The main rate of VAT levied on products sold in Finland is 24 percent.

They also suggested reforming unemployment benefit payments so the duration of stints on income-linked unemployment benefit is linked to the duration of spells in work. Special rules for unemployed older people should also be ditched, according to the ministry.

The report also said that Finland needs more work-based immigration to keep the economy moving.

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