The Government of Finland in March decided on its budget policy for the coming years. Compared to many other countries, Finland’s public finances are quite sound at the moment and its government bonds, for example, have been given the best possible credit rating. The state of the global economy and Finland’s growth prospects have nonetheless clearly weakened in the past year. Without the additional measures the government would not have reached its target of curbing public debt.
In March, the government decided on a total adjustment of more than two billion euros, around half of which consisted of spending cuts and half of tax hikes. Such decisions are always difficult, and the government’s solutions have garnered criticism, both from the opposition and from a number of interest groups. Among the decisions being contested are the tax hikes, which will inevitably have negative impacts on economic growth.
Criticism concerning the details is understandable, but almost everyone in Finland shares the government’s main goal. Balance must be restored in public finances in order to secure both confidence in Finland’s economic policy and the country’s high credit rating. There are certainly enough cautionary examples of crumbling confidence and financial difficulties experienced by European states. For that reason, reaching common ground on inevitable adjustment measures is a very positive thing.
The decisions also include some details that are favourable from the point of view of trade and industry, such as targeted tax incentives to promote investments by Finnish companies. In addition, the government decided on a number of significant transport investments, including turning route E18 into a highway up to Finland’s eastern border.