Finland’s Thatcher tests limits of local frugality

Few finance ministers would dare pose smiling with a pair of scissors before making cuts to the national budget, but Finland’s Riikka Purra did exactly that before a recent announcement of new spending cuts to trim the Nordic country’s deficit.Efforts to rein in debt levels by tightening purse strings tend to be politically dicey in Europe. However nationalist Finns Party leader Purra bets the typically frugal Finns will be happy to back her austerity cure.Likened by her political opponents to Britain’s pro-austerity late premier Margaret Thatcher, Purra in February posted on social media a picture of a gift she had received: two wooden chopping boards in the shape on an axe, with her face and the text "now is the time to cut” printed on them. Many viewers were shocked. But a few weeks later a member of Purra’s party posted another picture on social media with an unapologetic and smiley Purra holding a big pair of scissors."Think about how easy it is to distribute borrowed money here and there, but how incredibly difficult it is to tame a stubborn debt curve!” Purra, who has stressed the chopping board picture was just a joke, posted on X last week.She declined Reuters’ request for comment.Even more than other predominantly Protestant countries in northern Europe, Finland has a long tradition of emphasising frugality in both household and national finances.Finland’s economy has been one of the worst performing in the eurozone in recent years, putting pressure on its public finances, already strained by the Covid-19 pandemic and an ageing population.Headwinds from the energy crunch that followed Russia’s invasion of Ukraine, as well as rising defence spending and loss of business with Russia, have hit Finland particularly hard.As a result, Finland has found itself among the dozen or so EU member states that risk penalties set out in the bloc’s excessive deficit procedure for deficits above 3% of gross domestic product and overall debt above 60% of GDP.Purra and the four-party right-wing coalition have announced cuts to welfare benefits and social and healthcare services funding, plus a 1.5% point increase to Finland’s value added tax to 25%, and plans to shed potentially thousands of public sector jobs. Finland’s deficit is expected to grow to 3.5% of gross domestic product this year from 2.5% in 2023, but the government’s cuts will curb it to 2.8% in 2025. Public debt is still expected to rise to 82.8% of GDP next year. Many Finns — such as Juha Kuisma, the small entrepreneur who made and sent the chopping boards to Purra — are in favour."It’s crystal clear that in this situation, we are forced to make substantial cuts,” he told Reuters.Purra’s opponents accuse her of targeting the poorest to crumble Finland’s long-standing welfare model, which has earned it the title of the world’s happiest country for seven years in a row.She is no stranger to controversy. Within days of assuming power in June last year, the government was in turmoil after the media found online postings by ministers from the Finns Party, including Purra, that were deemed racist by critics. In July, Purra herself apologised for anonymous comments she acknowledged she had posted online about 15 years ago — though she said many had been taken out of context.So far the government’s supporters have taken the controversies and austerity plans in their stride.Polls have shown only a small drop in support for the government allies, the latest one by Finland’s largest daily Helsingin Sanomat seeing the Finns Party at 17.8%, down 2.3 percentage points (pps) from year-ago election results, and Prime Minister Petteri Orpo’s National Coalition at 19.9%, down 0.9 pps. Both are now narrowly behind opposition Social Democrats at 21.6%, who are up 1.7 pps from the election it lost.The Finns Party’s rising star, 28-year-old Miko Bergbom, who smiled together with Purra in the scissor picture, said he saw no reason to fear loss of voter support, pointing to the economic hardships faced by Greeks after their country’s debt crisis."If we do not succeed with these measures, then the outcome could practically be Greek-sized adjustments, and I do not believe that is in the interest of any low-income person. It seems that this view is quite strongly shared among our supporters,” he told Reuters.Yannick Lahti, an author and researcher on the politics of populism, said it remained to be seen whether the majority of Finns would accept Purra’s uncompromising take on frugality."There’s something about it that bites, but at the same time, it’s fair to remember that it’s immensely divisive,” he said. — Reuters