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3 The crisis has worsened the fiscal outlook, calling for a clear consolidation strategy supported by a stronger fiscal framework. The decline in potential output due to the crisis and the permanent nature of many of the stimulus measures have further undermined long–term fiscal sustainability that was already set to weaken by rapid ageing. The fiscal framework, including a central government expenditure ceiling and multiple targets, was severely tested in the recession and has been partially suspended. According to OECD and also to NAOF to restore sustainability Finland should show the same resolve as after the 1990s crisis: - a fiscal consolidation plan should be announced as soon as possible - include measures to increase the duration of working lives, - contain expenditures and raise taxes on consumption and property. - fast–growing municipal expenditures need to be restrained - the municipalities’ declining productivity can be enhanced by more ambitious mergers and structural reforms among local governments Economic Survey of Finland 2010, Summary
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INTOSAI Working Group on Public Debt
Mexico City 14.-15.6.2010
Hannu Rajamäki, NAOF
31.5.2010
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Economic Survey of Finland 2010, Summary
The worldwide recession hit Finland harder than most other OECD countries. (2009 GNP: - 7,8 %; EU - 4%, USA - 2,6%)
Export volumes fell by almost a third from their 2008 peakThe well supervised and prudent financial sector has weathered the crisis wellA significant fiscal stimulus and monetary loosening by the ECB have cushioned the downturnRecovery has been slow
- potentially dampened by deteriorating competitiveness due to an appreciating exchange rate, large industry–level bargained wage increases and slowing productivity growth
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The crisis has worsened the fiscal outlook, calling for a clear consolidation strategy supported by a stronger fiscal framework.
The decline in potential output due to the crisis and the permanent nature of many of the stimulus measures have further undermined long–term fiscal sustainability that was already set to weaken by rapid ageing.
The fiscal framework, including a central government expenditure ceiling and multiple targets, was severely tested in the recession and has been partially suspended. According to OECD and also to NAOF to restore sustainability Finland should show the same resolve as after the 1990s crisis:
- a fiscal consolidation plan should be announced as soon as possible - include measures to increase the duration of working lives, - contain expenditures and raise taxes on consumption and property. - fast–growing municipal expenditures need to be restrained - the municipalities’ declining productivity can be enhanced by more ambitious mergers and structural reforms among local governments
Economic Survey of Finland 2010, Summary
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Finland, Public sector’s EMU-deficit (-) and -debt, % of GNP
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Central Government Debt, Finland
Source: State Treasury of Finland
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Year %/GDP Eur Foreign-currency Total
2010 43,9* 68 768 - 68 768
2009 37,2 64 281 - 64 281
2008 29,4 54 382 - 54 382
2007 31,2 56 068 - 56 068
2006 35,3 58 859 45 58 904
2005 38,2 60 000 44 60 044
2004 41,9 63 745 43 63 788
2003 43,4 62 079 1 241 63 320
1978-2010 (milj.€)
Central Government Debt, Finland
Source: State Treasury of Finland
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Finland’s Interest Rate Spreads to Germany
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Interest Rate Sensitivity
Year
Source: State Treasury of Finland
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