Finland may need more austerity next year
Finland may need to trim a further €1bn from public spending next year to rein in its debt and must push through welfare reform despite opposition if it wants to keep its triple-A rating, a minister said.
Carl Haglund, defence minister and the leader of the small Swedish People's Party, said in an interview published in Helsingin Sanomat newspaper on Tuesday that further austerity was needed to sort out the country's finances.
The Nordic country's officials said last week Finnish debt was expected to breach the European Union's limit of 60 percent of gross domestic product next year, raising doubts over the economy's triple-A credit rating.
The six-party government has already announced spending cuts and tax hikes totalling 5 billion euros to rein in debt in a country, once hailed for its solid finances. Finland fell into recession earlier this year as the downturn in Europe hurt its exports of paper, machines and ships.
"Nothing indicates that growth would fill the gap between costs and revenue," Haglund said.
He said plans by the government, led by centre-right Prime Minister Jyrki Katainen, to scale back the generous Finnish welfare system should not be abandoned, but that several details needed further negotiation.
"I think there is a large risk that the government or the parliament loses courage, which would be a catastrophe," the minister said. "If we can't turn the debt down, the triple-A rating is in danger."