“It is possible to simultaneously decrease income gaps
and balance the State
STTK (06.06.2011) Although the
parliamentary elections were held on April 17, Finland is still without a
new government in early June. “What has gone wrong in the negotiations?”
Ralf Sund, the economic policy expert of the union confederation STTK, in
his recent column in the daily newspaper Kaleva.
state of the Finnish economy is much to blame for the slow progress in the
negotiations,” says Sund.
Finland’s severe recession in the 1990s, negotiations on forming a new
government began by agreeing on an economic frame, which was then filled in
by compromises made by various task forces. This time, the opposite has been
negotiators could not agree on the economic frame, other parts of the
government programme were nonetheless worked out. Without an economic frame,
however, work can only advance to a certain point - it cannot be finalised,”
opinion, the economic frame consists of the solutions to three major issues.
First, the parties have to agree on the adjustment needs
of the State economy. Then they should agree on the means of the adjustment,
i.e. on the expenditure savings or cuts, or tax rises. And third, the
parties must agree on how to refocus or redirect State expenditure. For each
additional expenditure the parties need to find a corresponding cut in
“The list of
smaller points of friction is long,” writes Sund. “The most important are
the focus of expenditure cuts and tax rises.”
As to the
adjustment of the State economy, one essential matter is its schedule. Is
the adjustment planned to be implemented in four or eight years? In the
latter, figures are cut by half. Although the forthcoming government cannot
decide on the programme of its successor, it can make a decision on what
shape the State economy is for the following term.
believes that the negotiations will lead to an adjustment plan that
stretches over two government periods (eight years). The publicly presented
estimate of an adjustment need from EUR 2 billion to EUR 4 billion is
be raised by EUR 1 or EUR 2 billion and expenditure cut by approximately the
same amount in four years. Such solutions will not prevent the government
from waging an economic policy that promotes growth and employment. This
will not hinder a policy that decreases income gaps and improves the social
character of society,” maintains Sund.