Finland’s biggest bankers group says the stable AAA-rated nation has failed to prepare for the ballooning costs generated by Europe’s fastest aging population.
“No increase of tax rates or reform of services will be enough to ensure this can be paid for by public funds,”
Piia-Noora Kauppi, managing director of the Federation of Finnish Financial Services, said in an interview this week. “We’ve made no preparations, we have no national funds to tap for future costs of elderly care.”
The financial lobby group says the government must now calculate and commit to how much of the burden it will share. Finland’s population is aging at the fastest pace in the European Union as people born after World War II retire. Two recessions in four years have pushed up job losses and depleted government coffers, resulting in five years of consecutive budget deficits.
Though the government has estimates for its pension burden, it hasn’t calculated the cost of covering its health-care obligations. The amount is at least 720 billion euros, a figure that dwarfs Finland’s 190 billion euro gross domestic product, according to Kauppi.
Accurately estimating the amount requires the government to say what it will pay for and what people will have to pay for themselves, Kauppi said. The Finance Ministry estimates age-related spending will grow to about 30.2 per cent of GDP by 2030 from 24.6 per cent in 2008.
Such an estimate is like an “income statement,” said Kauppi, who represents 418 banks and financial services firms in Finland. “We also need a balance sheet. Calculating the amount of health-care obligations would make it clearer for people that public finances alone aren’t enough to tackle this challenge.”
Finland’s pension obligations amount to about 500 billion euros this year, of which about 155 billion euros will be covered by pension funds and 360 billion euros are financed with a pay-as-you-go system, according to the federation. Care obligations are at least double the pay-as-you-go pensions, it said.
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Kati Pohjanpalo
WASHINGTON POST-BLOOMBERG
LEHTIKUVA / VESA MOILANEN
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