Business-backed think tank Etla (the Research Institute of the Finnish Economy) has sharply criticised the government of Prime Minister Sanna Marin (SDP) over plans to exceed the public expenditure framework.
Following tense budget negotiations earlier in the spring, the government announced the expenditure framework would be exceeded by 900 million euros next year and by 500 million euros in 2023. The dispute over the state’s spending plans for the next few years almost led to the breakup of the five party coalition.
In a report entitled "Fiscal policy sails without an anchor", Etla said that exceeding the expenditure limits in 2022 and 2023 cannot be considered justifiable as keeping spending within the framework would be entirely possible next year.
According to Etla, the current rate of vaccination will achieve herd immunity in Finland by as early as autumn 2021, and economic growth is expected to be strong.
The report was written by Etla's CEO Aki Kangasharju, research director Tero Kuusi and researcher Päivi Puonti.
"Such a policy will destroy Finland's future"
In Etla's view, the government's decision to exceed the spending framework poses a serious threat to the credibility of the entire framework process.
"It is especially harmful when the expenditure framework is raised during an [economic] upswing and expenditure is increased at the same time as the EU recovery package," the report said.
Etla added that compliance with the state expenditure framework and, more broadly, with fiscal policy objectives has failed during this government's term of office. CEO Kangasharju wrote that the government has mainly focused on a number of different social policy objectives.
"The fiscal policy appears to be an uncoordinated outcome of these measures, implying a continued recovery in the upswing and a failure to pursue a sustainable public finance perspective. Such a policy will destroy Finland's future," Kangasharju wrote in a press release.
Etla suggested that Finland's debt framework should be defined with a set target and a credible expenditure framework for all public finances.