The anatomy of adjustment — how Finland navigates its way out of the public finance predicament

The article examines Finland’s public finance adjustment need and how to implement it sensibly.

The deficit is partly due to structural factors — demographic structure, increased interest expenditure, and defence spending pressures — and not solely to the economic cycle. The adjustment need required by the EU is approximately 10 billion euros, which is challenging but not unprecedented: Finland’s and Sweden’s experiences in the 1990s show that even major adjustments have been carried out without dismantling the welfare state.

Devaluation is no longer available as a tool, so productivity growth and wage restraint are of greater importance. Adjustment should be built on research evidence, avoiding measures that erode companies’ productivity growth — otherwise the risk is a negative spiral towards fiscal stagnation. (AI translation)

• Publication in PDF-format