Finance Minister Matti Vanhanen, who was appointed earlier this week, proposed on Wednesday that the state borrowing ceiling be raised to 150 billion euros due to the corona crisis.
The newly-minted minister defended the centre-left government’s record-large supplementary budget in Parliament. This is the fourth supplementary budget by Prime Minister Sanna Marin’s cabinet, which took office in December.
Vanhanen said that the borrowing cap should be increased from the current 125 billion to 150 billion euros due to need to deal with the repercussions of the Covid-19 pandemic.
The government wants to avoid the mistakes made during the severe recession of the mid-90s, said Vanhanen, who was prime minister for seven years in the early 2000s. This time, he promised, enough money will be earmarked for reconstruction and stimulus.
He promised more details about these plans when the five-party coalition meets in late summer to agree on the next budget framework.
“We won’t be able to completely avoid tax increases and spending cuts, but they can be reduced through reforms,” Vanhanen said.
“It now appears that we have gotten the epidemic situation under control, but we still don’t know about the bigger economic picture,” he pointed out.
Record 5.5bn euros
The supplementary budget totals a record 5.5 billion euros. Vanhanen noted that some of the extra spending will go to repairing the damage done by the corona crisis and some to stimulating the economy. He added that the measures now planned are nearly all temporary, and will not be added permanently to state expenditures.
Under the latest plan, municipalities and healthcare districts will get a support package worth 1.4 billion euros, while about a billion goes to economic stimulus, 756 million will go to transport projects and another 300 million to corporate subsidies.
This fourth supplementary budget, like those before it, will be financed through increasing the state debt. It estimates that expenditures will grow by about 4.1 billion euros while revenues will decline by some 1.2 billion euros. The state has already taken out 18.8 billion euros in new debt since the beginning of this year.
Opposition critical of spending under guise of corona
Speaking on behalf of the opposition Finns Party, MP Lulu Ranne criticised the government for only arranging direct support for companies now, saying the move was three months too late.
On the other hand, Ranne accused the cabinet of reckless spending, noting that the crisis is far from over and that temporary furloughs are turning into permanent redundancies.
“Now is not the time to splash money with a wide brush on all kinds of good projects. You are uncontrollably wasting the Finnish people’s money under the cover of the coronavirus. Our country cannot withstand this kind of reckless finance,” Ranne argued.
MP Timo Heinonen, who spoke for the other main opposition party, the conservative National Coalition (NCP), said his party has never been satisfied to just out hand billions of borrowed euros. Instead of just "wasting our children’s money ", the NCP always called for more revenues to offset increased spending, but this is completely absent from the government’s proposal, he said.