Editorial | The welfare regions are putting Finland in debt

Editorial|Editorial

QAt the end of last week, the officials of the Ministry of Finance received their completed economic review, they saw the economic threats as accumulating slow processes: Finland’s indebtedness, aging and the weakening of public finances. However, on Monday – the day the forecast was presented – the top threat was acute, the crisis in Israel.

The Ministry of Finance’s forecast was slightly more positive than that of many other economic forecasters. The ministry said that this year will go to waste, but that next year will already bring growth. According to the ministry, this year’s recession will turn into growth thanks to consumers. The factors that restrained consumption – high interest rates and expensive prices – are receding and wages are rising. The employment rate is rising after a slight weakening, as companies have used up their inventories and have to produce new ones.

The consumer gets refreshed and buys, and the economy recovers. This is how the ministry calculates. If the forecast comes true, inflation will be around two percent next year and the year after. It would mean that the European Central Bank would have finally managed to drag inflation down to a healthy level after the unhealthy period of zero interest rates and sick hyperinflation.

A challenger to the inflation estimate suddenly came from across the border, between the forecast being written and its presentation over the weekend. The terrorist organization Hamas’s attack on Israel and Israel’s response may increase the price of oil.

Fortunately, the global economy’s dependence on oil has decreased. Crises cause disturbances, but only fluctuations in energy prices.

SWeekend events do not pose a threat to Finland’s economy. The biggest threat is that the welfare regions will not be able to control their spending, and there is already evidence of this. When the public finances become indebted like this, the state does not have effective and fast enough means to correct the course.

Social security reform may turn out to be one of the most expensive solutions that have been made in Finland’s modern economic history.

The editorials are HS’s positions on a current topic. The articles are prepared by HS’s editorial department, and they reflect the magazine principle line.