A cross-party parliamentary working group has agreed the terms of a so-called 'debt brake' agreement that will extend across governmental terms of office, according to information obtained by Yle.
The debt brake, also known as a balanced budget amendment, is a fiscal rule that aims to keep government expenditure in line with revenue — thereby limiting the need to borrow money and keeping a country's state debt from spiralling out of control.
Finland's general government debt stood at 245.9 billion euros (88.3 percent of GDP) in the second quarter of this year, according to figures from the state treasury department.
Under pressure to bring this figure under control, the government of Prime Minister Petteri Orpo (NCP) proposed that Finland's main political parties should find a cross-party solution that would be adhered to regardless of which parties are in government.
Although the terms of the debt brake agreement have yet to be made public, Yle understands that in the future, parties will jointly decide at the beginning of each parliamentary term on the goals for reducing debt over the next four and eight years.
In practice, this would mean the parties setting agreed targets for debt-to-GDP ratios, as well as for the overall budget deficit, and these agreements would span electoral cycles.
Helsingin Sanomat wrote that such a move would represent a significant change to Finland's political culture.
According to Yle's information, the target for the debt-to-GDP ratio under the proposed model would be to reduce it in the short-to-medium term to 60 percent, from the current level of just over 88 percent, and eventually to about 40 percent.
However, sources from the opposition Left Alliance told Yle that the party would not support the agreement — citing the "overly ambitious" debt-to-GDP ratio targets as one of the main reasons.
The other opposition parties in parliament have also criticised the proposed targets, noting they are stricter than those set by the European Union.
Among other EU member states, similar debt brakes or balanced budget amendments have been added to the constitutions of countries such as Germany, Italy, Poland and Spain.
