When falling into a hole, it pays to stop digging

Finland’s economy is sliding into a deeper-than-expected downturn, while the structural public sector deficit proves difficult to resolve. Recessions weaken employment, tax revenues, and long-term productivity growth, which is why they should be mitigated where possible.

The article emphasizes the importance of automatic stabilisers in the welfare state, such as social security systems, in smoothing cyclical fluctuations. It warns against timing spending cuts at the onset of a downturn, as this can deepen and prolong the recession.

Fiscal consolidation is seen as necessary, but it should be carried out gradually and over the long term, using both expenditure reductions and tax increases in a balanced way so as not to undermine economic recovery. (AI translation)

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