The Ministry of Finance estimates that in order to avoid the EU's “observation category”, the government must decide on additional savings of no less than three billion euros already this year.
The Treasury minister Riikka Purra (ps) said over the weekend that the government must decide on new savings measures of up to three billion euros. In practice, they are spending cuts and tax extortion.
The statement surprised some of the government partners as well. At the end of the year, the government talked about additional savings of around one billion euros on top of the six billion agreed in the government program.
What is the reason for the sharp increase in the need for savings?
New the estimate is based on weakened economic forecasts and the EU deficit rule. The deficit of the public finances of the member state may exceed the limit of three percent in relation to the gross domestic product only temporarily.
According to the Ministry of Finance's most recent forecast, Finland's deficit will be 3.5 percent this year and 3.4 percent next year in relation to gross domestic product.
In order to avoid the EU's excessive deficit procedure, i.e. the “observation category”, Finland should reduce its deficit ratio for next year to approximately 2.8-2.9 percent. This is what the experts of the Ministry of Finance estimate, says the head of the chancellery Juha Majanen.
According to him, the government's planned public investments or additional budgets have not yet been included in the ministry's forecast for next year's deficit. When they are also taken into account, getting to a deficit ratio of 2.8–2.9 percent requires additional savings of about three billion already for next year.
of the EU the deficit rule is not a new thing. However, the risk of falling into the excessive deficit procedure has increased as economic forecasts have weakened. The savings measures agreed in the government program are not nearly enough.
After the government's program was drawn up, forecasts of state income have shrunk, and estimates of, for example, the need for money in welfare areas have increased.
In its forecast last summer, the Ministry of Finance predicted that Finland's deficit ratio would be 2.4 percent in 2024 and 3.0 percent in 2025. The forecast did not take into account the austerity measures of the government program that was being prepared.
In the most recent December forecast, the three percent limit of EU rules is clearly exceeded in both years, even though the savings decisions of the government program have been taken into account.
Finland of course, you can choose not to follow the deficit rule.
In the excessive deficit procedure, the European Commission would compel Finland to take additional measures to restore the economy. The fines made possible by the procedure have not yet been imposed on member states that violate the guidelines.
On the other hand, the government is under political pressure to make sufficient savings to avoid the procedure. The parties that promised to fix the economy hardly want to be taking Finland to the “observation class” for the first time.
The weekend due to ambiguities, the governing parties meet at Purra's initiative to review the need for savings and its reasons.
This week, the government will start looking for targets for cuts and tax extortion, the chairman of the parliamentary group of the coalition Matias Marttinen in the leading group.
If the government really aims for additional savings of up to three billion euros, there will inevitably be methods on the table that are unpleasant for all parties. Extortions in value added tax and cuts in pensions and education come to the fore.
According to the Ministry of Finance's Majanen, even additional savings of three billion are not necessarily enough for the entire election period. In order for the government to achieve its own deficit target at the end of its term and to also comply with the EU's new rule on reducing the debt ratio, new savings of at least one billion will be needed later.
Officials the new numbers of worms do not arouse enthusiasm in Finance Minister Purra's own party either.
Chairman of the parliamentary group of fundamental Finns Jani Mäkelä criticized the changed estimates of the Ministry of Finance message service in X on Monday.
“I think that somewhere else in the world, someone would ask the question, who was incompetent or was hiding something on purpose, if the public finances 'reveal' in less than a year a double need for adjustment compared to the original,” Mäkelä wrote.
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