Editorial|Bruegel’s estimates of the need to adjust Finland’s public finances have startled many, but the think tank’s calculations are not the calculations of the EU Commission.
Ajatushautomo Bruegel has startled Finland’s economic policy with the following calculations. Bruegel has calculated that due to the EU’s new economic rules, Finland will have to adjust the public finances significantly more than what was agreed. Savings could total up to 10–15 billion euros.
The EU is renewing its financial rules. They define, among other things, when the euro country’s indebtedness is in a sustainable state and when it is not. The basis of the think tank’s calculations is that the Finnish economy looks inconsolable, because pension fund surpluses are not taken into account when calculating debt sustainability. Finland wanted and got the funds included in the public finances in connection with the EU negotiations, so that the so-called Emu criteria would be met.
However, the think tank is not the EU Commission that makes the official calculations. It is part of Finnish rule-following that the EU’s financial discipline rules have been treated as if they were set in stone.
For good reasons, the Commission has been flexible about numerical limits before. One good reason is already in Bruegel’s calculations: they do not take into account billions of savings that have already been made or agreed to be made in Finland.
SUomen’s problem is the safety clause in the economic rules, which compels a member state to quickly reduce its indebtedness if the debt ratio exceeds 60 percent of the gross domestic product. Finland is heading in the wrong direction, when the debt ratio in the EU is already going down in general. Countries placed in the excessive deficit procedure, i.e. in the “observation category”, receive more tailored instructions. Finland narrowly avoided the observation category and will therefore begrudgingly receive perhaps a harsher treatment.
Finland’s indebtedness must be stopped, whether or not the EU Commission finally approves of this. It is also essential whether the Finns were a little late again when a strange safety clause was hammered out in the economic regulation negotiations.
The editorials are HS’s positions on a current topic. The articles are prepared by HS editorial staff, and they reflect the magazine principle line.
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