According to a statement issued last week by the Governing Council of the ECB, growth in the euro area will continue and remain broadly based, although the pace of growth will be slower than previously forecast, owing to global economic uncertainties. The Governing Council announced that key interest rates will remain at their present levels until at least through the summer of 2019. The Governing Council also confirmed its intention, announced in summer 2018, to phase out net purchases under the asset purchase programme by the end of the year. Thus, as of 2 January 2019, the volume of securities purchases will correspond with the amount of securities maturing. The Governing Council intends to continue full reinvestment of principal payments from maturing securities for an extended period of time, well past the date when the Governing Council starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
‘Low interest rate levels and the reinvestment of principal payments from maturing securities both contribute to an accommodative monetary policy. This supports our pursuit of price stability and fosters conditions that are favourable to growth and employment’, stated Bank of Finland Governor Olli Rehn at the press briefing for the publication of the new issue of the journal Euro & talous.
The euro area’s monetary policy stance is conducive to economic growth and employment also in Finland. The economic recovery witnessed in recent years and fiscal adjustments have improved the state of Finland's general government finances; however, their sustainability over the long term is not yet secure. Population ageing will increase age-related expenditure, and according to the latest population projection, the sustainability gap will widen further. ‘With the sustainability gap in mind, and given the current favourable economic cycle, a more determined strengthening of the public finances would be justified’, stressed Governor Rehn.
The development of labour productivity in Finland has been subdued over the past decade, both historically and compared with other countries. “Education, research and product development are the foundation for innovations that foster productivity growth. Successful policy measures in these areas would improve the potential for productivity growth’, underlined Governor Rehn.
Finland's prospects are also swayed by the decisions taken on international forums. ‘As Finland cannot hope to tackle climate change on its own, we must pursue an active role in shaping global climate policy and developing effective instruments for its implementation’, said Governor Rehn. Climate change is a case of extensive global market failure. A key factor in combatting climate change would be to introduce a robust pricing mechanism for greenhouse gas emissions, one that would apply extensively across countries.