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Finnish government plans to trim generous welfare model
August 29, 2013 / 8:26 PM / 4 years ago

Finnish government plans to trim generous welfare model

HELSINKI (Reuters) - Finland’s government announced a long-term plan to start cutting down its welfare system, one of the most generous in the world, aiming to preserve its triple-A credit rating in the face of a slower economy and ageing population.

In a statement on Thursday, the government laid out a wide range of measures, including a hike to the effective retirement age to 62.4 in 2025 from a current 60.9. It also said it could force municipalities to consolidate and speed up health care reforms to improve the public sector’s efficiency.

Financial benefits for students will be cut to encourage them to look for work earlier, and childcare leave policies will also be changed to encourage mothers to return to work, it said.

The changes are not immediate but are likely to raise opposition among some voters who may see them as steps towards destroying a welfare model which, like those of its Nordic neighbours, emphasises social equality and well-being.

The plan comes after weeks of negotiations in which Prime Minister Jyrki Katainen’s conservative party faced resistance from left-leaning members of the ruling coalition.

It was announced along with the government’s official proposal of a 53.9 billion euro budget for 2014, down from 55.1 billion euros in 2013, with a combination of spending cuts and tax relief measures.

Finland was initially seen sheltered from Europe’s financial crisis due to its solid finances. But the prolonged downturn has hit exports and accelerated a decline in industries such as forestry, tipping the current account into deficit. The finance ministry forecast Finnish GDP to contract 0.5 percent this year.

Reporting by Jussi Rosendahl and Ritsuko Ando; Editing by Sonya Hepinstall

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