Finland must remain patient in addressing its growing public debt, emphasises Angel Gurriá, the Secretary-General of the Organisation for Economic Co-operation and Development (OECD).
“I'm not saying you shouldn't be worried about the growing debt. However, Finland should be proud that its debt ratio is only 60 per cent. Finland has the leeway and time to balance its public economy, and this flexibility should be taken into account,” Gurriá views in an interview with Helsingin Sanomat.
Gurriá visited Helsinki on Wednesday to present the OECD's report on the Finnish economy.
The Secretary-General also underlines that Finland must avoid the mistakes made while combating the eurozone debt crisis. “The multiplier effect of the fiscal policy was underestimated, despite our projections suggesting that the multiplier effect was substantially greater,” Gurriá reminds.
The multiplier effect of fiscal policy signifies the impact of changes in public spending on the national output.
During the eurozone debt crisis, policy-makers adopted strict fiscal policies that according to several studies and statistics were excessive in the volatile economic situation and thereby exacerbated the downturn and the debt situation of member states.
“It's not a question of trust but a fact. We have to learn from the eurozone debt crisis and find a compromise between ensuring economic growth and the timing of fiscal policy decisions through careful consideration,” Gurriá states.
The bedrock of the economic and monetary union, the Stability and Growth Pact, prescribes that the ratio of public debt to gross domestic product (GDP) shall not exceed 60 per cent. At present, the OECD expects Finland's debt-to-GDP ratio to grow to 60 per cent this year and to 63 per cent in 2015.
“I believe Finland can afford to temporarily depart from [the recommendations] and take time to create economic growth and secure the social position of the most disadvantaged. You should not go to the extreme,” views Gurriá.
Petri Sajari – HS
Aleksi Teivainen – HT
© HELSINGIN SANOMAT
Photo: Benjamin Suomela
