The Finnish government under Prime Minister Petteri Orpo on Tuesday published 3 billion euros (3.21 billion U.S. dollars) worth of austerity measures to balance public finances.
The general value added tax (VAT) rate will increase from 24 percent to 25.5 percent and taxation of high-income pensioners will be tightened. Public spending will also be reduced and many state-funded services will be curtailed.
The new Finnish VAT rate will become the second highest in the EU after Hungary. The government anticipates an annual influx of over 1 billion euros into the state treasury due to the rise, according to Finnish newspaper Helsingin Sanomat.
In its press release on Tuesday, the government said that Finland’s public finances had recently weakened. The recent austerity measures that have already been decided will not be enough to ensure the stabilization of the expenditure to debt ratio by 2027. Without further measures, the public finances’ debt will approach 90 percent of the gross domestic product in 2028. The decisions made should prevent the economy from drifting into an uncontrollable slide, it said.
Orpo told a press conference on Tuesday that these measures would level off the growth of public debt and prevent Finland from facing the European Union’s excessive deficit procedure (EDP).
With the measures now announced, Orpo said the total envisaged cutback to state spending during his four-year parliamentary tenure will amount to 9 billion euros.
Minister of Finance Riikka Purra told the press that while most of the measures will take effect in 2025, the increase in VAT may come into force this year. (1 euro = 1.07 U.S. dollars) ■
