ETLA argued on Monday that the decision was not justified because, in light of the epidemiological situation, it would have been possible to return to the framework as early as next year. Vaccinations should help the country achieve herd integrity as early as next fall, boosting projected brisk economic growth.
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Exceeding the framework is therefore a serious threat to the credibility of the framework procedure, especially as it coincides with economic growth and the EU’s recovery system.
The approach chosen also raises concerns about a possible reluctance to comply with more legally binding EU rules in the post-pandemic world.
ETLA also estimates that the government has failed to achieve the objectives set for the framework procedure and, more broadly, for fiscal policy: to rebalance the business cycle and to promote the long-term sustainability of public finances.
Aki Kangasharju, The CEO of ETLA stated that the Board has mainly focused on cyclical policy and a group of different social goals.
“The interim fiscal policy has been the result of these uncoordinated actions, which means continuing the stimulus during the upturn and neglecting the sustainability aspects of public finances. Such a policy is destroying Finland’s future.” hit Kangasharju.
According to ETLA, more emphasis should have been placed on structural reforms to meet the challenges of an aging population.
“The current government’s term, and in particular the coronavirus crisis, has left public finances in a weaker position than ever since the 1970s, as shown by statistics adjusted for the business cycle and interest expenditure,” Tero Kuusi, Research Director at ETLA.
โThe fiscal adjustment has not been successful, so the debt-to-size ratio has not fallen in the same way as it did in the late 1990s,โ he commented.
Aleksi Teivainen – HT
Source: The Nordic Page