The document summarizes comments from the Ministry of Finance on the Economic Policy Council's 2019 report. The Ministry of Finance shares the overall economic assessment in the report and considers employment growth as key to addressing challenges. The Ministry will study the report's guidance on designing and measuring reforms. While building fiscal buffers is important, the Ministry believes structural reforms and job growth should be the main ways to improve sustainability. The Ministry does not see a lack of measures to reduce the sustainability gap, despite no specific targets being set, as reforms in health and social services and employment policy are ongoing.

1. Economic Policy Council Report 2019
Some comments
Dr. Markus Sovala
Director General, Economic Policy Coordination
January 29, 2020

2. 29.10.2019
EPC Report
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• Well written, based on solid arguments and empirical findings.
• Will again contribute positively to the quality of policy discussion.
Many observations of the Report are aligned with
those of Ministry of Finance
• MoF shares overall picture of economic prospects of Finland and main
challenges of the economic policy described in the Report.
• Both Council and MoF consider employment growth as a key for solving
challenges of the Public Finances.
• Chapter 3 of the Report provides valuable guidance for designing and
measuring impacts of the reforms. This will be studied carefully in the
Ministry.
• Also the descriptive analysis on mismatch is interesting, although the
Council’s conclusions are less clear. A concrete recommendation
based on this analysis would be interesting to see.

3. 29.10.2019
Fiscal policy stance is too lax?
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“Given the fact that there are also long-term reasons to consolidate public
finances, the fiscal policy stance can be considered to be too lax.” (Chapter 1.3)
• Building fiscal buffers is important. However, structural reforms and employment
increasing measures should be the main avenue to enhance sustainability.
• The Government aims at balancing public finances by 2023. Achieving this
through structural reform would mean stronger buffers and smaller sustainability
gap in the public finances.
• There are also uncertainties related to the real time estimates of fiscal policy
stance. As the Report observes itself, proper fiscal stance depends on cyclical
development. Only in ex-post one may conclude if the stance was right.

4. 29.10.2019 4
Medium-term plan for addressing sustainability?
“ … there should be a credible medium-term plan about how the sustainability
gap will be addressed. The Council sees merit in an arrangement where such
a plan would be discussed and decided in parliamentary negotiations … serve
as an anchor not only for the current but also future governments.”
• There is perhaps a slight misunderstanding. The fact that the Government
hasn’t set any specific target for sustainability gap reduction, doesn’t imply
that there are no measures in the pipeline. On the contrary, Social and
Health Services Reform, productivity enhancing measures and employment
policy reforms should be mentioned.
• The Government closely follows and evaluates how preparations for the
reforms are advancing.
• Mid-Term Assessment of the Government Program in the next winter
provides a natural occasion to decide additional measures and formulate a
more comprehensive framework or plan for the reforms.
• As the problem is of structural nature, a possible long-term political
commitment for the reforms would be warmly welcomed by the MoF. We
will see if this is politically feasible or not.