Finns braced for pay cuts as austerity bites
One of Germany's staunchest allies in backing Eurozone austerity is about to feel some of the pain the policy brings with it.
Finnish Prime Minister Juha Sipila, inset, will this month battle unions to reduce the cost of labour. Without the measure, he says Finland will need a €1.5bn austerity package to meet budget goals.
"Reducing labour costs is the first big challenge on the path of Finnish economic revival," Aktia chief economist Anssi Rantala said in an interview. "The country cannot afford to fail in this."
Sipila wants Finnish labour to cost 5pc less by 2019, a proposal unions already rejected in May, one month after the self-made millionaire won national elections on pledges to save Finland's economy. He's due to put forward a detailed plan on July 31 and unions have three weeks to respond.
Rantala at Aktia, a Finnish bank, says the fastest way to cut labour costs is to increase work hours without raising pay, in what amounts to an effective wage cut that might not look as bad on paper.
"Increasing hours worked would be a really strong measure," said Pasi Kuoppamaki, chief economist at Danske Bank A/S in Helsinki. "That would be a step in the right direction."
Sipila needs to push through the unpopular policy to try to revive competitiveness in Finland, which has yet to recover from the loss of a consumer electronics industry once led by Nokia and a faltering paper manufacturing sector. (Bloomberg)