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INTOSAI Working Group on Public Debt Mexico City 14.-15.6.2010

INTOSAI Working Group on Public Debt Mexico City 14.-15.6.2010. Hannu Rajamäki, NAOF 31.5.2010. Economic Survey of Finland 2010, Summary. The worldwide recession hit Finland harder than most other OECD countries . (2009 GNP: - 7,8 %; EU - 4%, USA - 2,6%)

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INTOSAI Working Group on Public Debt Mexico City 14.-15.6.2010

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  1. INTOSAI Working Group on Public Debt Mexico City 14.-15.6.2010 Hannu Rajamäki, NAOF 31.5.2010

  2. Economic Survey of Finland 2010, Summary • The worldwide recession hit Finland harder than most other OECD countries. (2009 GNP: - 7,8 %; EU - 4%, USA - 2,6%) • Export volumes fell by almost a third from their 2008 peak • The well supervised and prudent financial sector has weathered the crisis well • A significant fiscal stimulus and monetary loosening by the ECB have cushioned the downturn • Recovery has been slow • potentially dampened by deteriorating competitiveness due to an appreciating exchange rate, large industry–level bargained wage increases and slowing productivity growth

  3. Economic Survey of Finland 2010, Summary • The crisis has worsened the fiscal outlook, calling for a clear consolidation strategy supported by a stronger fiscal framework. • The decline in potential output due to the crisis and the permanent nature of many of the stimulus measures have further undermined long–term fiscal sustainability that was already set to weaken by rapid ageing. • The fiscal framework, including a central government expenditure ceiling and multiple targets, was severely tested in the recession and has been partially suspended. • According to OECD and also to NAOF to restore sustainability Finland should show the same resolve as after the 1990s crisis: • a fiscal consolidation plan should be announced as soon as possible • include measures to increase the duration of working lives, • contain expenditures and raise taxes on consumption and property. • fast–growing municipal expenditures need to be restrained • the municipalities’ declining productivity can be enhanced by more ambitious mergers and structural reforms among local governments

  4. Finland, Public sector’s EMU-deficit (-) and -debt, % of GNP

  5. Central Government Debt, Finland Source: State Treasury of Finland

  6. Central Government Debt, Finland 1978-2010 (milj.€) Source: State Treasury of Finland

  7. Finland’s Interest Rate Spreads to Germany

  8. Interest Rate Sensitivity Year Source: State Treasury of Finland

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