Editorial Risk is risk even if it is swept under the rug

Editorial|Editorial

Finland according to many economic indicators, the economy has fared well throughout the coronavirus pandemic. Economic growth has already returned. However, the government does not deserve a commendable rating for its economic policy.

The Economic Policy Review Council raises a recent in its report It is pointed out in many different places that there are many risks threatening the Finnish economy and that they are not sufficiently prepared for.

Finland is moving towards a time of higher age-related expenditures, depressed by deficits and public debt. There should even be some kind of plan to change direction – to reduce risks – even if there are no immediate savings, the Council explains.

Instead of reducing the risks, the government has increased them. The loss of credibility of economic policy is a risk, and the risk was heightened as the government raised spending frameworks in the middle of the period. The cause of the pandemic was understandable, but after this alignment and subsequent exceptions to the framework, a return to more credible economic policies is even less likely.

Monetary policy does not belong to the government, but monetary policy affects the room for maneuver of public finances in the future. Now the direction of monetary policy is beginning to change, and debt will soon be priced again. Lack of credibility in the debt market of the future would be a risk.

Risks also increase as various contingent liabilities are added. Hidden responsibility is a much more comfortable thing politically than visible spending. Finland has such hidden liabilities, for example, in state guarantees, the number of which is growing rapidly.

The shipyards, among others, have received guarantees. Government guarantees amounted to EUR 62.7 billion in the second quarter of 2021 – the pot corresponds to a quarter of Finland’s gross domestic product, which is a European record.

The editorials are HS’s statements on a topical issue. The writings are prepared by HS’s editorial staff and reflect the magazine principle.