Finland Times

Prime Minister Jyrki Katainen. Photo - Lehtikuva.

The Prime Minister, Jyrki Katainen on Monday said that the main objective of the government’s economic policy is to narrow down the debt.

 

Terming the country’s present fragile economic situation as the reason behind taking more and more loan, Katainen , also chief of the National Canalisation Party (Kokoomus) said that his government was trying to decrease significant amount of debt by the end of this regime.

 

“We are going through a tough time as the adjustment budget  put negative impact on economic growth for the short term,” the Premier told STT, adding that the cutting expenditure is, however, still important for long term to reach the target.

 

 He also said that the government had to compromise with the deficit target.

 

“The deficit target may be too ambiguous because it might create tax rises and cut expenditure,” said Katainen, adding that the unemployment would rise and economy would weaken.

 

Photo - AFP / Lehtikuva.

The ruling parties said that they would increase taxes and cut down expenses in such a way that the government deficit would not rise more than one per cent from gross domestic product.

 

Meanwhile, the two major components of the six-party alliance government- National Canalisation Party (Kokoomus) and Social Democratic Party (Sosialidemokraattinen)- are yet to reach an understanding over the issue of cutting costs and hiking taxes in the  budget for the year 2014 scheduled to be placed in the parliament this month.

 

Although the leaders of the main ally NDC are still thinking to continue the policy for cutting expenditure in the next year budget, SDP leaders said that the government should now be attentive in investing as there was enough expenditure cut this year, sources in the parties said.

 

Earlier, the coalition government on March 21 announced the budget planning in the parliament for the next fiscal aiming to adjust an amount of EUR 600 million.

 

Although the leaders of the ruling parties termed the budget as a financial solution and said that it would help boom the job market, the lawmakers of the opposition criticized the budget for cutting expenditure.

 

Government sources said that the final budget proposals would be presented in the parliament at the end of this month and will be approved in December after holding discussions throughout the month of September.

 

Earlier on July 28, experts feared that the country’s present excellent credit rating may deteriorate sharply after a couple of years due to the downward economical trend and gradual increase of public debt.

 

The economic researchers said that the present three A credit limit of Finland would not fall immediately but it might face dangerous situation gradually after 2015.

 

“The public debt should not cross the 60 percent of the gross domestic product but Finland´s debt will cross the limit of 60 percent in 2015,” said business researcher Markku Kotilainen, adding that the bank loan of the country would increase to 62 per cent of the gross domestic product.

 

Markku Kotilainen said that the increase of the credit limit would affect the credit rating seriously.

 

The researcher warned that the decrease of credit limit would increase the interest rate and crossing the limit of 60 percent of GDP would prompt the European Union to bring Finland under inspection.

 

“In that case EU would give instructions to Finland,” said Kotilainen, adding that if the instructions issued by the EU are not followed, Finland would get sanctions.