HELSINKI (Reuters) – Finland’s government reached a deal on Friday on parts of a long-term plan to scale back welfare spending in order to protect its triple-A credit rating as its population ages and the economy slows.
The government, made up of six parties with varying views, agreed to start removing some obligations from municipalities, targeting long-term cost cuts in services such as dental care, hospital care for the elderly and the secondary school network.
Finland’s tight spending policies have kept it among the few euro zone countries that have held on to top credit ratings through four years of crisis in the bloc. But its economy slid into recession early this year as weak European demand hit exports of paper, machines and ships, dragging down tax revenue.
The Nordic country’s debt is expected to breach the European Union’s limit of 60 percent of gross domestic product next year.
“The credit rating agencies have trusted that Finland is capable of agreeing on sufficient reforms, and the package agreed today is an exact answer to this,” Carl Haglund, defence minister and the leader of the small Swedish People’s Party, told a news conference.
Friday’s deal was part of a broader government plan that includes a hike in the effective retirement age to 62.4 in 2025 from a current 60.9, measures allowing more consolidation of municipalities and health care reforms.
Many Finns take pride in their welfare system, which includes free, high-quality education and egalitarian childcare services, and negotiations over the changes have been fraught.
(Reporting By Jussi Rosendahl; Editing by Ruth Pitchford)