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Government parties at odds over focus of next state budget

Finland's five coalition partners will be seeking common ground in talks next week outlining next year's budget.

Henkilöitä kauppakeskuksessa.
There are broadly differing views within the government on issues such as the means of boosting employment. Image: Henrietta Hassinen / Yle

The coronavirus epidemic has increased both unemployment in Finland, and the state debt.

While there is no disagreement among the five parties in the current centre-left coalition government about the need to boost economic growth and job creation, two partners, the Centre and the Swedish People's Party are also pushing to curb spending.

The governing parties are in agreement that increasing public debt growth must be reversed by the end of the decade. However, that goal could be reached by different routes.

The Social Democrats, Left Alliance, and the Greens believe that now is not the time for a laundry list of spending cuts. The Centre and the Swedish People's Party are, however, concerned about increases in state expenditure.

The Centre Party, which holds the finance portfolio, believes that the time for borrowing to stimulate the economy is past and public finances should revert to a normal framework.

With this in mind, the Centre is looking to savings.

"Any equation that only takes on more debt and increases spending without any limits, and does not make reforms to strengthen employment is not a responsible policy," says Antti Kurvinen, the chair of the Centre Party's parliamentary group.

Story continues after the photo.

Antti Kurvinen saapui Säätytalolle 23. maaliskuuta.
Antti Kurvinen, Chair of the Centre Party's Parliamentary Group on 21 March. Image: Silja Viitala / Yle

Kurvinen adds the view that if more reforms are introduced that can increase employment and reduce public expenditures, there will be less of a need to cut spending.

"The most important thing is that we get genuinely new jobs that do not burden public finances, but are naturally created in open markets," Kurvinen explains.

The Swedish People's Party also opposes increased government spending.

"Expenditures should be tied to agreed employment measures. There cannot be one without the other. It is premature to start talking about lists of spending cuts, but increased spending cannot be an option either," says Anders Adlercreutz, chair of the Swedish People's Party's parliamentary group.

Even though these two parties are holding a tight fiscal line, they also recognize the need for flexibility. Not all expenditure caused by the impact of the coronavirus epidemic will fit into the old budget framework.

SDP: Now is not the time for cuts

The SDP, the Left Alliance and the Greens all oppose spending cuts.

According to the SDP, economic policy must be seen as supportive of growth and employment.

"If we were to start budget cuts now, it would have the unfortunate side effect of simultaneously weakening the effectiveness of the ongoing stimulation effort and inevitably delay recovery. The time for adjustments will certainly come, but it is not now," argues Antti Lindtman, chair of the SDP's parliamentary group.

On the other hand, according to Lindtman, a massive effort to revive the economy may not be needed.

Story continues after the photo.

Antti Lindtman veininmyllyn puistossa vantaan tikkurilassa
Antti Lindtman, chair of the SDP's parliamentary group, says that at the moment, spending cuts would hit employment. Image: Jouni Immonen / Yle

The Left Alliance is also opposed to cuts.

"Now we have to make sure that the economy is restarted, jobs and economic growth are created, and in that way state finances will also improve," says Paavo Arhinmäki, chair of the parliamentary group of the Left Alliance.

According to the Greens, spending cuts would only exacerbate the consequences of the crisis.

"Cuts in spending especially in education, climate and environmental goals, or people's well-being is not the way to deal with the crisis at the moment," says Emma Kari, the Green's parliamentary group chair.

Story continues after the photo.

Emma Kari puistossa Toukolassa
According to Green's Emma Kari, spending cuts would exacerbate the consequences of the coronavirus crisis. Image: Markku Pitkänen / Yle

The wrong message

Disputes have arisen over a number of employment policy issues, for example, proposals to downgrade earnings-related unemployment payments.

"With regard to unemployment security, it must be ensured that it is always more profitable to take a job than to remain on unemployment benefits," is how Kurvinen outlines the position of the Centre Party.

The Centre has also pushed for more local-level labour market agreements. In fact, the number of local agreements seems to be on the rise without government input particularly in the forest industry and technology sectors.

The Left Alliance believes this is the right time to shift focus in employment policy.

"Now it is the turn for measures to help and support the unemployed," Arhinmäki says.

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Paavo Arhinmäki herttoniemen metroasemalla
The Left Alliance's Paavo Arhinmäki argues now is not the time to cut spending. Image: Jouni Immonen / Yle

Arhinmäki points out that a check of the website of the TE employment service shows about 30,000 vacancies. The number of unemployed is 300,000 to 400,000. Even if unemployment benefits were cut, there are not enough jobs for everyone. That is why benefits have to be paid, employment opportunities must be improved, and new jobs must be created, Arhinmäki explains.

The SDP, is not keen on downgrading earnings-related unemployment benefits either.

"In this situation where the coronavirus epidemic has impacted a very large number of sectors, and a lot of people have been laid off and unemployed, cutting their benefits would send a completely wrong message," the SDP's Lindtman says.

The Greens believe that all means of achieving the employment target must be carefully reviewed.

"Education and taking care of mental health are issues that must be at the heart of employment policy," Kari says.

Story continues after the photo.

Anders Adlercreutz ler.
The SPP's Anders Adlercreutz would like to speed up entry for people who come to Finland to work. Image: Yle/Sebastian Backman

The Swedish People's Party's Adlercreutz points out that his party has spoken out in favor of adjusting unemployment benefits.

"However, it is clear that at the same time good employment services and good employment support are needed," Adlercreutz says.

Divisions over peat

One difficult regional and climate policy issue also needs to be resolved in the government's budget framework talks — what is being done about peat production.

The target set by the government of Prime Minister Sanna Marin (SDP) is to at least halve the energy use of peat by 2030. Burning peat creates about one tenth of Finland's carbon emissions.

However, the use of peat has fallen dramatically in recent months, as its price has risen due to emissions trading among other reasons. Peat producers' sales have collapsed.

EU support has been pledged for a transition from peat production, but this is unlikely to ease the current financial straits of producers and will not necessarily directly help those who lose their livelihoods.

According to Kurvinen, the Centre party considers it absolutely essential to find a means to make fair transition.

"At the moment, the situation is not a fair transition, but rather an uncontrolled development," he argues.

The SPP's Adlercreutz agrees that the transition must be made fairly.

"This is a sector with a relatively large number of employees and regional significance," Adlercreutz points out .

The Greens are continuing to adhere closely to the government's climate goals, but are reportedly also preparing to discuss the situation faced by peat producers during the upcoming government negotiations.

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