PRIME MINISTER Sanna Marin (SDP) has commented on her tweet about the inflation-control measures of central banks that drew criticism.
Marin stated in Prague, Czechia, on Thursday that her intention was not to question the independence of the European Central Bank (ECB). As inflation is presently driven by supply disruptions, she pointed out, interest-rate hikes alone will not succeed in putting a lid on soaring consumer prices.
“The root cause of inflation is high energy prices, and that’s why we’ll have to focus especially on two things. We’ll have to rapidly increase energy production so that we can address this supply-related problem. And the other thing we’ll have to discuss and find solutions on is energy price formation,” she was quoted saying by STT.
She argued that politicians should also be able to discuss the coordination of economic policy-making, which is currently “regrettably limited”, in order to ensure political decisions do not aggravate the situation further.
The European Political Community, she added, will likely discuss the aid packages independent countries have devised to support citizens struggling to cope with rising energy prices.
“This is precisely the kind of lack of coordination that we’re seeing today in Europe. When energy prices are high, states are naturally looking to offer compensation to consumers. This could perhaps worsen inflation, meaning there’s no common coordination,” she stated, adding that the price hikes accelerating further could drive the continent into a recession.
Marin’s statement strikes a contrast with decisions made by her government. The government last month unveiled its budget proposal for next year, describing it as an effort to secure purchasing power, compensate price hikes in electricity and strengthen the conditions for sustainable growth.
“We’re concerned about the purchasing power of people due to high inflation. We’re concerned about the ability of people to pay extremely high electricity bills this coming winter,” she said in a press conference on 1 September.
The 80.5-billion-euro budget has a deficit of 8.1 billion euros. It includes measures to support households facing the highest energy cost increases, be it through income tax deductions or direct financial support, and a temporary reduction in the value-added tax on electricity.
Finnish economists cautioned the government against adopting additional stimulus measures in the inflationary environment both before and after the release of the budget proposal.
“We have high inflation, tight labour markets. We don’t need additional stimulus,” Sanna Kurronen, an economist at the Finnish Business and Policy Forum (EVA), stated to Helsingin Sanomat in September. “Fuelling inflation while the EU is trying to tighten monetary policy is particularly irresponsible.”
“A depressing reaction from the government,” echoed Niku Määttänen, a professor of economics at the University of Helsinki. “Relaxing taxation should be combined with spending cuts.”
The European Central Bank has signalled that it intends to continue raising its reference rates in order to rein in inflation. Inflation in the eurozone is expected to have accelerated by 0.9 percentage points to 10.0 per cent in September, according to Eurostat.
In Finland, inflation is estimated to have risen by half a point to 8.4 per cent.
Aleksi Teivainen – HT