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Finland tries to make out how deficit, debt exceed EU limit

Xinhua, March 11, 2015 Adjust font size:

Finnish Finance Minister Antti Rinne noted on Tuesday the actual reasons for the country's violation of EU Stability and Growth Pact (SGP) norms remain unclear, Finnish national radio reported.

Statistics Finland Centre said last week the public sector deficit of Finland had reached 3.4 percent of the Gross National Product at the end of last year. This was a clear infringement of the 3 percent limit expressed in the SGP.

Finland has also exceeded the limits in public debt. Statistics Finland said the debt of the public sector had surpassed the level of 60 percent of the GNP.

This was the first time since 1996 that the Finnish budget deficit has exceeded 3 percent of the GNP. At that time Finland was recovering from a major recession that followed the collapse of the bilateral trade with the Soviet Union.

The news about Finland breaking the limits surprised analysts as predictions last autumn had given the level of the deficit as 2.7 of the GNP only.

Rinne said on Tuesday that probably tax revenue had declined and government spending increased at the same time. Upon releasing the information, Statistics Finland experts said the clearest reason for the increase in the deficit was a reduction in the corporate tax rate in 2014.

Among other reasons, the public sector had been purchasing more services and spending more on unemployment benefits.

Finland is not expected to be punished on account of the infringements. The Finnish national broadcaster Yle reported that the EU commission has been satisfied with the view that the increase in debt is at least partially due to the country's contributions to EU funding used for helping troubled member countries.

Finland was by no means alone in failing to remain within limits last year. In 2014 a number of other EU countries violated the budget deficit limits.

The Stability and Growth Pact (SGP) is to ensure that countries in the EU pursue sound public finances and mind their fiscal policies. Endit