Finland’s government agrees on new budget, increases debt

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HELSINKI, April 29 (Reuters) – The Finnish government on Thursday evening reached an agreement on future public spending after difficult mid-term negotiations that lasted nine days instead of the planned two, Prime Minister Sanna Marin told a press conference.

The government decided to raise the limit for public spending by 0.9 billion euros in 2022 and 0.5 billion in 2023, Marin said and added the government has also agreed on permanent cost cuts of 0.37 billion euros.

The public spending, according to a statement by the government, would be 63.8 billion euros with a deficit of 7.6 billion in 2022 and 77 billion with a deficit of 8.9 billion in 2023.

“Already last fall we estimated that the debt ratio will grow for 10 years,” Minister of Finance Matti Vanhanen said.

The parliament in December approved a 65.2-million-euro budget for 2021 which required increasing debt by 11.7 billion to 138 billion euros, which is 57% of Finnish gross domestic product.

Finland’s centre left ruling coalition came close to collapsing on Tuesday after Centre Party leader, Science and Culture Minister Annika Saarikko, according to media reports, told Marin her party would leave the government.

Before that, the Centre Party had rejected several proposals the prime minister brought into the negotiations and clashed with other coalition members on how much the new budget could exceed previously agreed limits, reports said.

The negotiations over the fiscal plan marked a midpoint for Marin’s five-party coalition whose term ends in 2023.

Marin took office in December 2019 after her social democrat peer Antti Rinne had to resign after the Centre Party questioned his role in handling a strike that spread over several industries in Finland. (Reporting by Essi Lehto; Editing by Andrea Ricci)