Finnish Coalition Strikes Deal to Salvage Cabinet From Brink
(Bloomberg) -- Finland’s ruling coalition came to an agreement on spending plans, averting a collapse of the Nordic nation’s Social Democrat-led government by a thin margin.
The five-party cabinet patched up its differences, forging a common vision of how Finland’s recovery from the pandemic should take place, Prime Minister Sanna Marin said on Wednesday. The broad outlines of the deal are now agreed, and the government will continue hammering out the details, she said.
The disagreement over four-year spending limits came to a head on the weekend, bringing the coalition close to a collapse, as tensions within the 2-year old government were exposed. The Center Party sought to drive a hard bargain, pushing for less stimulus than the coalition’s left-leaning members.
“There will never be a time of perfect agreement on everything, but finding enough common denominators and remembering the importance of stability, we reached this conclusion,” Center Party leader Annika Saarikko said. “It’s important that the government can send a message that we can take decisions.”
The deal also makes it easier to pass the European Union recovery fund in the Finnish parliament, where the constitutional committee on Tuesday ruled a supermajority was needed. An opposition party’s decision then reduced the total number of votes, and Marin signaled she was confident the requisite majority could be attained.
The budget talks should be finished on Thursday, Marin said. The focus is on supporting economic growth, boosting employment and achieving structural reforms. Budget cuts and tax increases cannot be avoided, she said.
The magnitude of the government’s task is illustrated by economic comparisons against its Nordic peers. Finland, the Nordic region’s only euro member, is rapidly falling behind in terms of prudent fiscal housekeeping: its public debt is growing faster from a higher level, it has the lowest employment rate and has run a consecutive deficit in public finances since 2008. It also has the oldest population that’s about to start shrinking as the number of babies dwindles.
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