Finnish government aims to curb state debt amid economic challenges
According to Päivi Puonti, the forecast manager at the Research Institute of the Finnish Economy (Etla), the government’s adjustment measures are in line with expectations. “These are the decisions implemented that were made in the spring, so there were no surprises,” Puonti commented during a special broadcast by Yle News.
The government’s goal is to halt the increase in state debt by the year 2027. However, this does not mean that the state will cease to borrow altogether. The budget for next year is set to have a deficit of €12.2 billion. “This means borrowing will be necessary to fund public expenditures, as tax revenues are insufficient. But we do not yet know exactly how much will be needed,” Puonti stated.
Mika Maliranta, head of Labor and an economist, considers this goal achievable, although he notes that the economic downturn has proven to be deeper and longer than previously thought, leading to further cuts. He expressed concerns about how these measures may lead to increased layoffs and rising unemployment. “For the public economy, it is very important that the economic structures are reformed, meaning that more people transition to other jobs. I am not entirely convinced that this adjustment amid the downturn is quite optimal,” he remarked.
Maliranta noted that while employment levels remain reasonable, unemployment is beginning to rise. He explained, “Cuts are happening extensively, and many cuts affect the same groups, which results in a deepening economic downturn across the nation.”
The government has made adjustment decisions totaling €9 billion. Maliranta added that without economic growth, the cuts will not be effective. He asserted, “Economic growth is essential. The focus on growth-promoting measures is logical, but the crucial question remains productivity growth.” He emphasized that the government’s current capacity to influence this is limited, and the critical issue going forward will be the strength of economic growth in the coming years.