Interest payments are approaching record highs in Finland, taking a “giant” three-fold leap compared to last year because of the pandemic and increased government borrowing, the Ministry of Finance’s Director General Mika Niemelä said in a recent interview.
State debt has been piling up in Finland which has faced several global financial crises in the past 20 years. Following the financial crisis of 2008, Finland dealt with the European debt crisis over the following decade and was then struck by the effects of the pandemic and Russia’s war on Ukraine.
Reiterating history in the YLE News interview, the Director General at the Ministry of Finance Mika Niemelä pointed out that the state debt has already increased for 15 years and especially since 2020.
Interest payments are thus taking a “giant leap” and will be as much as €2.6 billion in 2023, three times more than last year, Niemelä added.
Finland remains to be seen as a reliable borrower and pays around a 1% interest rate. Even if interest costs are expected to remain below 1990s-levels during the deep recession, the sum could reach €3.5 billion within a few years, reminded the budget chief Niemelä.
According to the majority of economists, borrowing must be leashed and cuts, maybe together with tax increases, are inevitable. The issue has also been addressed at the highest ladder of the political establishment.
Interviewed by the newspaper Turun Sanomat on Saturday, President Sauli Niinistö said Finns are used to keeping up a standard of living which has not been earned but instead paid with borrowed money.
Corrective measures are necessary, said Niinistö, adding that central banks are responsible for the mindset in the country that views money as free and debt as harmless.
