Finland needs welfare cuts, opposition leader says ahead of election

·3 min read

By Anne Kauranen

HELSINKI, March 28 (Reuters) - Finland should cut spending on unemployment benefits and other welfare programmes to stop public debt from creeping up, opposition leader Petteri Orpo told Reuters ahead of a closely fought election at the weekend.

National Coalition chief Orpo, 53, said cuts to housing benefits and subsidies to businesses were also required to make services viable for the Nordic nation's rapidly ageing population.

Career politician Orpo has previously accused the government of left-wing Sanna Marin, 37, of overspending in areas including pensions and education, and he has made economic management a central theme in his campaign ahead of the Sunday's election.

"The biggest change between Sanna Marin's government and a possible government of mine is the kind of economic policy we will do. (Her) policy is to solve all the problems with debt and to increase taxes," Orpo told Reuters in a March 14 interview.

Marin has also promised to run what she calls a balanced economy, but prefers finding more tax revenue to cuts. Orpo's plans for more austere spending have resonated with some voters.

Opinion polls show Orpo's National Coalition holding a very narrow lead in the latest poll with 19.8%, while Marin's Social Democrats shared second place with nationalist Finns Party, both at 19.2%.

Finland's debt-to-GDP ratio rose by 10 percentage points to 74% in 2020 during the Covid pandemic, but has declined since thanks to an economic recovery.

Finland's economy survived the COVID pandemic better than those of most European countries, but growth slowed down to 1.9% last year and the country is expected to tip into a mild recession this year.

The country's generous welfare system has faced pressures in recent years, similar to elsewhere in Europe's Nordic region where "cradle-to-grave" public services are stretched by falling birth rates. Costs have mounted in the wake of the COVID pandemic and rising energy costs and inflation.

Marin, who gained international attention as the world's youngest premier when she first took office at 34, has led a five-party, centre-left coalition, which invested in social reforms despite also having to spend on the costly pandemic and the energy crunch caused by neighbouring Russia's invasion of Ukraine.

Finland's debt-to-GDP ratio of 71.7% last year remained well below the eurozone average of 93.0%. However, Orpo said that without cuts, debt would rise in years to come as more people enter retirement and tax revenues diminish as a consequence.

"We want to boost the economy, boost economic growth. More jobs to people, more income to people. And fix the economy, I think this is the main difference between us," Orpo said, referring to Marin.

Orpo's ability to rein in fiscal policy will depend largely on what coalition he can put together to govern, if his party comes out on top on Sunday.

He has not ruled out joining hands with the nationalist Finns Party, which shares his austerity views, but which many Finnish politicians shun because of its calls for strict limits on immigration. (Reporting by Anne Kauranen, editing by Justyna Pawlak and Frank Jack Daniel)