The entrance to the Ministry of Finance in Helsinki in April 2020. Economists on Wednesday highlighted that the ministry would receive considerable powers under the policy rules presented by its task force. (Heikki Saukkomaa – Lehtikuva)


ECONOMISTS on Wednesday commended the strict economic policy principles outlined by a task force at the Ministry of Finance, reports Helsingin Sanomat.

Led by Mika Niemelä, the head of the budget department at the Ministry of Finance, the task force published its final report on a series of principles designed to bring an end to the growth of central government debt by the end of the decade.

While commendable, the principles would require a degree of political commitment that may not be attainable in the present circumstances, economists estimated during a panel discussion organised by the Ministry of Finance on Wednesday.

Päivi Puonti, the head of forecasting at ETLA Economic Research, underlined that policy makers should realise that the responsible management of public finances is not an obstacle, but rather a precondition, to political aims such as increasing well-being.

“As long as we hear statements about pitting these against one another and delaying resuscitating the public economy because of other political goals, it’ll be hard to get the political commitment,” she was quoted saying by the daily newspaper.

Patrizio Lainà, the chief economist at the Finnish Confederation of Professionals (STTK), reiterated the trade union’s view that the framework for steering central government finances should account for not only expenditures, but also revenues. Incorporating taxation into the framework, he stated, is “an absolute requirement” for making the framework flexible enough to facilitate various political aims.

The need for greater flexibility was identified also by Markus Lahtinen, the managing director of Pellervo Economic Research.

“This takes control an inch too far and has an inch too little flexibility. No one knows what the next crisis will be like,” he commented at the panel discussion.

Lahtinen identified problems with the notion of introducing a separate budgetary provision to make sure the well-being services counties can respond to unexpected factors, estimating that specifying the size of the provision could prompt counties to operate as if the provision is part of their regular budget.

The next government, he added, has to set a precedence when it comes to practices concerning the well-being counties.

Matti Okko, the director of sustainable government finances at the National Audit Office (VTV), viewed that it is nonetheless positive that funding for the well-being counties was incorporated into the framework.

Many of the experts raised an eyebrow about the extent of power the proposal would grant to the Ministry of Finance. The task force is proposing, for example, that government decisions to derogate from the spending limits would be evaluated by the economics department at the ministry.

“You’re giving quite a lot of responsibility to the economics department,” noted Okko.

Aleksi Teivainen – HT