The Government approved the Stability and Europe 2020 programmes
On 19 April 2012, the Government approved two national programmes, which will be delivered to the EU Commission. The Stability Programme describes the medium-term economic development of Finland’s economy, particularly its public finances. The Europe 2020 National Programme describes the government measures by which the national targets set on the basis of the Europe 2020 Strategy will be achieved. The programme responds to the structural reform recommendations given for Finland by the European Council.
The programmes are based on decisions made by the Government, including the decisions agreed in the March 2012 discussion on spending limits. The forecast figures presented in the programmes are consistent with the forecast figures of the Ministry of Finance’s Economic Survey published on 4 April 2012.
Stability Programme
Total output will grow by 0.8 per cent in 2012. In the medium term, i.e. in 2013-2016, gross domestic product is expected to grow, on average, by just under 2 per cent per year. In 2016 the financial position of general government finances (central government, local government and social security funds) is expected to be slightly in surplus. On the horizon, however, there is no prospect of a return to the economic growth path that preceded financial crisis or to large general government surpluses. Population ageing is beginning to reduce labour input and to slow economic growth at the same time as a rise in the proportion of the elderly population is increasing public expenditure.
With respect to general government finances, the 2009 Stability Programme set as Finland’s medium-term objective a structural surplus of 0.5 per cent of GDP. This objective is expected to be achieved in 2013. Central government debt as a proportion of GDP will also level off during the parliamentary term.
The strengthening of the general government financial position will not be sufficient, however, to remove the sustainability gap caused by demographic change. The updated sustainability evaluation indicates that the general government sustainability gap in 2016 will still be 3½ per cent of GDP.
Finland's stability programme 2012
Europe 2020 National Programme
The national targets set by Finland for 2020 exceed the headline targets agreed at the EU level. Finland aims to raise the employment rate of 20-64 year-olds from the present just over 73 per cent to 78 per cent. The target level of research and development expenditure has been set at 4 per cent of GDP. The goal is also to raise the proportion of 30–34 year-olds having completed tertiary education to 42 per cent and to reduce the proportion of early school-leavers to below 8 per cent. A further objective is to reduce the number of people at risk of poverty and social exclusion by 150,000. Finland is also committed to achieving the energy and climate targets set in the EU.
The programme has taken into account the recommendations given for Finland by the EU. The EU has urged Finland to continue fiscal consolidation to maintain the fiscal position above the medium-term objective, to improve the productivity of publicservices and to achieve cost savings, to improve the targeting of active labour market measures on the long-term unemployed and young people, to take measures to improve the employability of older workers and their participation in lifelong learning, and to consider a link between the statutory retirement age and life expectancy. In addition, Finland was urged to open the service sector to competition.
According to a report on the macroeconomic stability of Member States, published by the Commission in February, the development of the macroeconomic situation of Finland and 11 other Member States requires further investigation. In Finland, macroeconomic imbalance is indicated by a nearly 20 per cent loss of export market share in the period 2005–2010, growth of unit costs by over 12 per cent in the period 2008–2010, and increases in house prices faster than the general development of prices during the last ten years. The Commission will publish the results of a more thorough examination in May. Thereafter it will be possible to assess the significance that this new EU-level guidance has with respect to Finland’s programme.
Europe 2020 -strategy -Finland´s National Programme, Spring 2012
More effective coordination of economic policy in the EU
The European Semester was launched at the beginning of 2011. The goal of the annual Semester is to enhance coordination of economic policy in the EU. Member States’ economic and employment policies will be steered and assessed more effectively and shortcomings will be addressed, if necessary. The Euro-Plus Pact, approved in 2011, supplements and strengthens the Semester. The 2012 Semester will take into account EU regulations aimed at strengthening economic management and guidance, which were approved at the end of 2011.
The European Semester is initiated by a Growth Survey released by the Commission. Based on the survey, the European Council specifies in March the most important economic policy and employment challenges, and gives strategic guidance to Member States. In April, the Member States report to the EU in the form of a Stability Programme and a Europe 2020 National Programme. These programmes take into account the guidance given by the European Council and commitments according to the Euro-Plus Pact. In late May/early June, the Commission gives country-specific recommendations, which the Council approves in June. If a Member State deviates from that which is agreed, the EU may, if necessary, intervene in national decision-making.
For further information on the Stability Programme, please contact Senior Financial Adviser Mikko Spolander, tel. 358 29 55 30006 or 358 40 55 87457 and on the Europe 2020 National Programme, Ministerial Adviser Hannele Kerola, tel. 358 29 55 30199 or 358 40 828 9901