Finland’s Orpo Targets More Measures to Revive Stagnant Economyby
Orpo says government should go ahead with plans to cut taxes
Targets more measures ready for August budget negotiations
Finland will need more tax relief and further structural measures to build momentum following years of protracted economic recession, according to the country’s presumptive finance minister.
The government coalition must “absolutely” go ahead with the planned 1 billion euros in tax cuts, half which can now be achieved after labor market parties agreed on a pact to cut costs, said Petteri Orpo, who over weekend unseated Alexander Stubb as head of the National Coalition party and is set to take over the Finance Ministry.
By August budget talks “we must come up with a package of new reforms,” the 46-year-old said in a telephone interview on Sunday. Finland needs to become more agile and to boost labor market flexibility to come out on top in "hard" international competition, he said.
Orpo, who is now Interior Minister, is set to take stewardship of an economy that just left a three-year recession behind in 2015 after being battered by a slump in its paper industry, slowing export demand and the demise of Nokia’s mobile phone business. The government this month persuaded trade unions and employers to agree on a pact that includes wage cuts, longer working hours and lower holiday bonuses in the public sector.
Despite a pick up in growth in the first quarter, during which the economy expanded 0.6 percent, Orpo said he won’t call off the government’s goal to balance the budget and that it can’t rely on borrowed money to fuel growth.
Finland was this month downgraded by Moody’s Investors Service, losing its last top credit rating. The country’s debt rating was cut to Aa1 from Aaa. Finland had a triple-A rating from Moody’s since 1998. The country lost its top grade from Fitch in March and from S&P Global Ratings in 2014.
The Organization for Economic Cooperation and Development predicts an expansion of just 1 percent this year as unemployment remains above 9 percent.
“Exports are sluggish because of a lack of competitiveness,” said Orpo. “That’s why we are in this situation. Our growth relies on borrowing -- it’s not sane. If competitiveness isn’t restored we will face new budget cuts. We’re walking on knife’s edge”