Finland needs painful spending cuts after coronavirus crisis

HELSINKI: Finland’s government will have to implement a “pain package” of tax rises and spending cuts worth billions of euros to rebalance its finances after the coronavirus crisis, a group of leading economists warned on Friday. In a government-commissioned report, four of the Nordic country’s best-known economic thinkers warned of a “lost decade” of growth and a deep recession sparked by the economic standstill of the coronavirus crisis.

“The corona crisis will impoverish Finland and significantly weaken the balance of Finnish public finances in the medium term,” the authors, led by professor Vesa Vihriala, said in a statement. The report warned that spending cuts, tax hikes and structural changes, worth at least 3-4 percent of GDP, will be needed to address the shortfalls. “This will most likely be sufficient to keep the debt-to-GDP ratio below 90 percent during the 2020s,” the report said.

The prospect of further cuts to public finances is likely to be unwelcome to Finland’s centre-left coalition, whose leading Social Democrat party won last year’s election on a platform of opposition to the previous five years of austerity. Receiving the report on Friday, the finance ministry’s top civil servant, Martti Hetemaki, acknowledged that “being gloomy is being realistic,” and said that difficult decisions “cannot be left for tomorrow”. In the immediate term the report called for the safe lifting of restrictions in order to try and restore confidence in the market.