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Unions pressure Finland's new SDP leader ahead of govt talks
May 22, 2014 / 2:21 PM / 4 years ago

Unions pressure Finland's new SDP leader ahead of govt talks

* Unions say coalition should revise planned cuts

* New SDP leader criticised cuts when a union leader

* Government due to update plans in mid-June

HELSINKI, May 22 (Reuters) - Finnish unions on Thursday demanded the government revise planned cuts to pensions and unemployment benefits, piling pressure on the new leader of the co-ruling Social Democrats as the economy falters.

The five-party government is due next month to update its cuts plans following key ministerial changes, and credit rating agencies are keeping a close eye on how the revamped coalition will react to recession and growing debt.

Antti Rinne, who as former leader of the country’s biggest white-collar union had criticised the spending cuts, was earlier this month voted to the helm of the SDP and expectations among unions have grown that the new coalition will change policy.

“We think this is the right time to revise decisions,” said Riku Aalto, chairman of the metalworkers’ union, referring to wage talks next year.

Unions feel the government broke their latest two-year deal as the coalition, with SDP as its second-biggest party, in March announced plans to cut unemployment benefits and trim cost-of-living increases to pensions.

“The saving impact of the decisions is questionable ... so the government would be wise to cancel cuts or moderate them substantially,” said Timo Vallittu, leader of the industrial union TEAM.

Union confederation SAK has said the government’s plans, if confirmed next month, could complicate pension reform talks.

The unions and business lobbies have been asked to come up with a plan this year to hike the effective retirement age to 62.4 in 2025 from the current 60.9.

The triple A-rated economy fell back into recession in the first quarter of the year, hit by weak exports, industry troubles and the Russian slowdown.

Standard & Poor’s recently cut its outlook on Finland’s rating, citing growing debt and political uncertainty. The country’s debt-to-GDP ratio is expected to reach the EU limit of 60 percent this year.

One prominent economic official on Thursday urged the government to keep up with planned reforms and spending cuts.

“Finland needs strict spending discipline ... expenditures should not grow in real terms,” said Tuomas Poysti, head of the National Audit Office.

The economy has contracted for two consecutive years amid the European slowdown and as its once-dominant mobile phone industry and paper sector have struggled.

“The problem is not just the business cycle, there are also structural problems. I am worried that the stimulus debate drowns out the debate on structural reforms,” Poysti said. (Reporting by Jussi Rosendahl; editing by Andrew Roche)

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