Finland is in the midst of very diabolical problems.
This is what the president of the association has stated Petteri Orpo, which has been trying to form a government for the fourth week now. The outcome of the negotiations will determine what kind of decisions will be made in Finland in the following years.
Many of the devilish problems are connected to the economy. In the government negotiations, adjustments to the public finances of no less than six billion euros are aimed for.
But what is Finland’s real economic condition in the middle of government negotiations?
We compared Finland’s public finances with Sweden and Denmark using five measures. For many of them, Finland is lagging behind.
1. Finland is clearly the most indebted
Public debt in relation to gross domestic product (GDP) is clearly higher in Finland than in Denmark and Sweden.
Back in 2000, Finland’s public debt in relation to GDP was lower than these reference countries, but now the gap between the countries has grown.
Why is Finland in so much debt compared to Sweden and Denmark?
There are political decisions in the background, but one explanation can also be found in the fact that Finland’s economy has grown less than Sweden and Denmark. The aftereffects of the 2008 global financial crisis hit Finland much harder. In parts of these years, Finland’s large public debt has also been cancelled.
In Denmark, public debt is not a concern of politicians or economists, on the contrary, the situation is considered very good. Bigger restrictions on economic growth are availability problems with regard to certain materials or labor, for example.
Although the difference with Sweden and Denmark is large, compared to all EU countries, Finland’s public debt is below the average. Several economic experts have said that although the Finnish economy is facing challenges and there is a need for adaptation, there is no reason for fear or panic.
2. Finland has the largest public expenditures
In the government negotiations, the intention is to cut down Finland’s public spending properly.
In Sweden and Denmark, public revenues and expenditures are coordinated better than in Finland, The Bank of Finland has stated. This explains why Sweden and Denmark have also taken on less debt.
Last year’s budgets of the countries show a better balance. Finland’s budget has been in place since 2009 was in deficiti.e. expenses have been greater than income.
In Denmark, on the other hand, the budget has been in recent years was surplus. In Sweden, too, it has been customary to make surplus budgets. The economic crisis of the 1990s frightened the Swedish decision-makers, and after that a model was created in which a frame and an expenditure ceiling were defined for the budget.
When the measure of public spending is compared to the size of the country’s economy, i.e. GDP, Finland is ahead of Denmark and Sweden, according to data from the economic organization OECD. Finland therefore has the most public spending, although the differences are not huge.
One concern in Finland is the growing health costs. However, when Finland’s health spending is compared to Sweden and Denmark, the situation is not so bad. Of the three, Finland spent the least amount of money on health expenditure in relation to GDP.
However, statistics have their problems. The GDP comparison is strongly influenced by how the country’s economy develops. It is also good to remember that public spending is not financed from GDP, but from the state’s coffers.
3. Finland is the grayest
Population structure is one of the biggest problems of public finances. In Finland, a record low number of children are born, while the proportion of working-age people in the population is shrinking and the number of elderly people is increasing. This means less tax revenue and an increased need for, for example, social and health services.
The problems of Finland’s demographic structure are greater than in Sweden and Denmark. Although the birth rate has decreased in those countries as well, it has fallen most strongly in Finland.
However, the low birth rate also worries other Nordic countries. In Denmark, decision-makers have been criticized for not taking the low birth rate seriously enough. Although the Prime Minister of Denmark Mette Frederiksen has, according to his own words, promised to be the “prime minister for children”, family policy has focused more on children’s well-being than on the number of children.
In Sweden, birth rates have traditionally followed a rule of thumb: when the economy is doing well, more children are born, and when things are bad, fewer children are born. Last year, however, the rule no longer held true. Researchers think that this can be explained by general uncertainty.
Finland’s population situation is also complicated by the fact that emigration is clearly lower than in comparison countries. Came to Finland in 2021 According to Eurostat 6.6 immigrants per 1000 inhabitants. In Sweden, the corresponding figure was 8.7 and in Denmark 10.8.
See how Danes and Swedes comment on their country’s family policy in the video below.
4. Finland’s employment is extremely high, but it still lags behind
The incoming government wants to find 100,000 new jobs in Finland. The goal is tough, even though Finland’s employment development has been favorable in recent years. Still, Finland’s employment rate clearly lags behind Sweden and Denmark.
Several factors explain the better employment situation in Denmark and Sweden.
According to Arbejderbevägelsens Erhvervsråd, a think tank specializing in economic policy, one of the reasons lies in the Danish labor market model known as flexicurity. In many fields, it is possible to dismiss employees quickly, but you can get support from the authorities and unemployment funds as soon as you become unemployed.
In Denmark, the distances are also shorter, so you can grab a job opportunity quite easily even from outside your hometown. In addition, Danes stay in working life on average longer than, for example, in Finland.
In Sweden, on average, people retire later than in Finland, which means that there are more people in working life. In addition, in Sweden, older women in particular do more part-time work, which may explain the number of working hours.
5. Total taxation is the strictest in Denmark
Based on the figures for 2021, Denmark has a higher overall tax rate than Finland, and Sweden has about the same figure. The total tax rate indicates the amount of mandatory taxes and tax-related payments collected by the public sector in relation to the gross domestic product of the same period.
Orpo has stated that Finland’s overall tax rate will not rise either. In principle, it would be possible if we look at the situation in Denmark.
In Denmark, taxation is the highest of the EU countries, but the salary level is also high. For example, the basic salary of a nurse is around 5,000 euros per month, of which at least 35 percent income tax is paid. Denmark’s strict taxation has been considered one of the reasons why public expenditure and income are so well balanced.
See below what a Danish business student has to say about his country’s taxation.
What thoughts did the story evoke? You can discuss the topic until 23:00 on May 27.