Finland to hike taxes, cut public spending

March 22, 2012 - 1:15 PM

HELSINKI (AP) — Finland's government on Thursday announced annual savings measures worth €2.7 billion ($3.5 billion) as the European financial crisis threatens the country's export-driven economy.

In what it called "challenging economic conditions," the government said it aims to achieve the tax hikes of €1.5 billion and spending cuts of €1.2 billion ($1.58 billion) by 2015.

The announcement follows fears that the Nordic country would fall into recession after the finance ministry slashed forecasts for economic growth for 2012 to 0.4 percent from an earlier predicted 1.8 percent.

Prime Minister Jyrki Katainen said the new measures were aimed at boosting the economy and reducing debt.

"We are going cut debt, increase economic growth and create new jobs with special emphasis on youth," Katainen said. "The measures will increase our credibility and strengthen the base of the Finnish economy."

The government expects unemployment to gradually grow and top 8 percent this year — from a three-year low of 6.2 percent in November. It said it would spend at least €45 million on providing more jobs, especially for young adults.

The finance ministry has warned that Finland, a eurozone member with a triple-A debt rating, might hit recession in 2012 unless growth in its main trading partners — Russia, Sweden and Germany — markedly improves and the financial crisis in Europe abates.

Other measures include a 1-percent increase in value added tax to 24 percent, income tax hikes for high-earners with an annual incomes of more than €100,000, investments of €30 million in the mining industry and €30 million on improving infrastructure.