The government parties had agreed to balance the state budget by 2015 in order to stem the rise in public debt. Given the still-sluggish economic outlook, however, economists have differed on the savings required this year to achieve that goal. The government’s official target is three billion euros of austerity, achieved via a mix of savings and tax cuts.
Earlier this week Nordea’s chief economist Aki Kangasharju said that eight billion euros of cuts would be needed, as the government’s target was not ambitious enough. Finance minister Jutta Urpilainen, however, has now come out against the plan to balance the state finances this year.
"It is clear that we should stop getting into debt, but at the same time we should of course make sure that we don’t weaken the economic situation through our own actions, and that we don’t take the kind of measures that weaken economic growth or employment," Urpilainen said on Yle’s Aamu TV morning television programme.
Speaking after an economics seminar organised by the finance ministry, Urpilainen said that the assembled experts did not believe that more austerity would set the Finnish economy straight, and that the government should consider letting the timetable slide into the next parliamentary term.
Leadership challenge
Urpilainen also said that the matter had not yet been discussed within the government. The SDP chair has come under pressure recently as union firebrand Antti Rinne, who currently heads up the Pro trade union, has publicly pondered a leadership campaign aimed at unseating Urpilainen at the party conference in May.
In recent weeks he has repeatedly questioned SDP policy direction, suggesting that core social democrat voters have been neglected. Left Alliance leader and Culture Minister, Paavo Arhinmäki, has also questioned the need for three billion euros of austerity.
National Coalition party grandee Kimmo Sasi said on Thursday that he opposes any tinkering with the six-party government's budget-balancing timetable.
"It would be much better to make all the savings at once, so that afterwards we can offer positive solutions," said Sasi.
The government plans a budget review in the spring, during which economic and revenue projections will be assessed and the extent of any possible savings decided.
