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PM mulls 3b more in cuts – more spending rollbacks and tax hikes likely

Government is considering additional economic adjustments to the tune of three billion euros to try and balance state finances. Attending the World Economic Forum in Davos, Switzerland Prime Minister Jyrki Katainen told Yle that on top of the five billion-euro adjustments already made, additional belt-tightening will be painful.

Jyrki Katainen.
According to Prime Minister Jyrki Katainen, Finland should brace for more spending cuts and tax hikes. Image: Yle

Speaking from the summit of world leaders in Davos, Switzerland, Prime Minister Jyrki Katainen said that the task of making further economic adjustments will be very difficult, but added that it cannot be avoided.

“We will have to see how to put things together to bring indebtedness under control. It’s necessary to get Finland in shape and we cannot shirk our responsibility,” Katainen said.

The premier said that government would be putting together a list of savings targets.

“Of course it will come. We will have to resort to spending cuts and tax hikes,” he warned.

He pointed out that tax increases in particular could impair economic growth.

“Now we will have to consider what kinds of increases are least disruptive to economic growth and job creation,” he added.

“We have asked economic researchers to evaluate Finland’s situation and to find the best way to make adjustments that would ensure that growth and job creation do not suffer,” Katainen concluded.

Urpilainen: 3 billion not the final figure

Yesterday Finance Minister Jutta Urpilainen said that the 3-billion-euro figure was not final – it could be more or less. At any rate it serves as a basis for government’s spring huddle on the issue, she noted.

Meanwhile chair of the opposition centre party Juha Sipilä, said that government had no one but itself to blame for the current situation. He added that the ongoing plugging of holes in state finances arose from an under-estimation of the so-called sustainability gap when the current government parties sat down to plan their five-year programme. The six-party coalition specifically targeted reducing the debt ration by the end of its term in 2015.

Sipilä said the government also disappointed with its weak performance in terms of job creation and spurring economic growth. However he did agree with the government on one point: that any new measures should not be allowed to interrupt recent signs of feeble economic growth.

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