COUNCIL OPINION of 12 October 1998 on the stability programme of Finland, 1998-2002
Date: 1998-10-12
Institutions: Council of the European Union
Subjects: Finland, budget policy, central government, draft budget, economic stabilisation, public expenditure

2.12.98

EN

Official  Journal  of  the  European  Communities

C  372/1

I

(Information)

COUNCIL

COUNCIL  OPINION

of  12  October  1998

on  the  stability  programme  of  Finland,  1998(cid:220)2002

(98/C  372/01)

THE  COUNCIL  OF  THE  EUROPEAN  UNION,

Having  regard  to  the  Treaty  establishing  the  European
Community,

Having  regard  to  Council  Regulation  (EC)  No  1466/97
of  7  July  1997  on  the  strengthening  of  the  surveillance  of
budgetary  positions  and  the  surveillance  and  coordi(cid:220)
nation  of  economic  policies(cid:216)(˛),  and  in  particular  Article
5(1)  and  (2)  thereof,

Having 
Commission,

regard 

to 

the 

recommendation  of 

the

After  consulting  the  Monetary  Committee,

HAS  DELIVERED  THIS  OPINION:

the 

covers 

On  12  October  1998,  the  Council  examined  Finland’s
Stability  Programme,  which 
period
1998(cid:220)2002.  The  Council  notes  with  satisfaction  that  the
Finnish  government  financial  balance  is  targeted  to  turn
into  a  surplus  in  1998  and  is  expected  to  post  surpluses
above  2(cid:216)%  of  GDP  throughout  the  period  1999(cid:220)2002
while  the  government  debt  to  GDP  ratio  is  projected  to
continue  to  decline.  Moreover,  the  Council  considers
that 
the  Broad
the  programme 
Economic  Policy  Guidelines.

is  consistent  with 

The  macroeconomic  scenario  presented  in  the  Stability
Programme  is  based  on  a  prudent  growth  forecast  in
which  GDP  growth  decelerates  rapidly  from  the  current
strong  rates.  Projected  GDP  growth  is  mainly  driven  by
in  particular  from  the
growth 
the  current
private 
comprehensive  wage  agreement,  which  secures  wage
moderation  and  low  inflation  until  January  2000.  Its
success  will  help  lower  inflationary  expectations  and  so
would  contribute  to  favourable  expectations  on  wages
and  inflation  in  the  subsequent  years.

in  domestic  demand, 
sector.  The  Council  welcomes 

(˛)(cid:217)OJ  L  209,  2.8.1997,  p.  1.

The  Council  commends  the  fiscal  strategy  of  the  Stability
Programme  which  aims  at  reaching  surpluses  above  2(cid:216)%
of  GDP  through  a  reduction  in  government  expenditure
but  at  the  same  time  reduces  the  tax  burden.  By  the  end
of  the  projection  period  in  2002,  government  expen(cid:220)
diture  is  projected  at  48(cid:216)%  of  GDP,  compared  to  56(cid:216)%
in  1997.  The  tax  to  GDP  ratio  is  expected  to  decline
from  the  current  47(cid:216)%  to  44(cid:216)%  by  2002,  mainly  as  a
result  of  reductions  in  income(cid:220)related  taxes,  particularly
on  labour.

the  emphasis 

the
The  Council  agrees  with 
programme  puts  on  fiscal  consolidation  in  the  central
government  given  its  still  unbalanced  position  and  the
its  debt  ratio.  It  therefore
need  to  reduce  further 
to  focus  future
recommends 
government
consolidation 
accounts.

the  Finnish  authorities 

efforts  on 

central 

that 

the 

the  budget  proposal  which  was 

The  Council  notes  that  while  the  annual  ceiling  set  on
central  government  expenditure  for  1999  was  respected
to
in 
Parliament,  the  ceilings  for  the  years  2000(cid:220)2002  are  a
non(cid:220)binding  guideline.  The  Council  urges  the  Finnish
Government  to  respect  firmly  these  guidelines  in  the
budget  proposals  for  those  years.

submitted 

The  underlying  budgetary  position  corresponding  to  the
surplus  target  of  2,3(cid:216)%  of  GDP  in  2002  is  sufficient  to
provide  a  safety  margin  against  breaching  the  3(cid:216)%  of
GDP  deficit  threshold  as  a  result  of  normal  cyclical  fluc(cid:220)
tuations.  In  this  sense  the  programme  is  in  line  with  the
requirements  of  the  Stability  and  Growth  Pact.  However,
in  view  of  the  future  effects  of  population  ageing  on  the
current  surplus  in  the  social  security  sector,  the  Council
recommends  a  continued  fiscal  consolidation  effort  in
order  to  improve  further  the  government  balance.

The  Council  notes  that  the  programme  does  not  address
the  issue  of  structural  reforms.  However,  the  Council
implementation  of  such  reforms,
considers 
labour  markets,  would
mainly  on  the  services  and 
contribute 
the
implementation  of 
successful 
to  a 
programme.

that 

the