The Finnish Fiscal Policy – A Ship Without an Anchor

Tero Kuusi, Päivi Puonti and Aki Kangasharju

No 96, ETLA Brief from The Research Institute of the Finnish Economy

Abstract: Abstract In Finland, ceilings for the central government budget spending are used is to limit the rise of public spending during parliamentary terms. In its unprecedented, mid-term decision, the current government renounced its commitment to return to the ceilings in the years 2022 and 2023. We argue that the decision seriously undermines the credibility of the budgeting process, especially because it will coincide with a post-pandemic, economic upturn and the roll out of the EU stimulus and recovery package. The exceptional decision also implies reluctance of the government to return to the EU fiscal rules after the Covid-19 crisis. This, in turn, is problematic, as Finland lacks adequate structural reforms to speed up its economic growth and improve its fiscal sustainability. We argue that the government should recommit to the ceilings and complement the current system with a debt anchor and an expenditure rule derived from the anchor. In the future, the ceilings should also cover the entire public sector.

Keywords: Fiscal policy; Fiscal fules; Ceiling for budget expenditure; Fiscal sustainability (search for similar items in EconPapers)
JEL-codes: H1 H3 H6 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2021-05-24
New Economics Papers: this item is included in nep-mac
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.etla.fi/wp-content/uploads/ETLA-Muistio-Brief-96.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rif:briefs:96

Ordering information: This working paper can be ordered from
https://www.etla.fi/ ... ilaa-ilman-ankkuria/

Access Statistics for this paper

More papers in ETLA Brief from The Research Institute of the Finnish Economy Contact information at EDIRC.
Bibliographic data for series maintained by Kaija Hyvönen-Rajecki ().