Finland Mulls Tax, Bonds to Pay for New Ships, Fighters

The daily Helsingin Sanomat was the source of what is probably the most widely reported domestic item in Monday's Finnish newspaper press. The paper says that political party leaders had a closed-door meeting in late December to discuss plans for financing new naval vessels and a fleet of new fighter aircraft that could include a special, temporary defense tax.

According to Helsingin Sanomat, Prime Minister Juha Sipilä called a meeting just a few days before Christmas bringing together the heads of all eight of nation's political parties, including the opposition, to discuss upcoming defense spending. All were in attendance, with the exception of Finns Party chair Timo Soini who was represented by the party's parliamentary group leader Sampo Terho.

The Finnish Navy has been making initial preparations to acquire four new warships with a price tag of 1.2 billion euros. The base cost estimate for replacing Finland's aging F-18 fighters is between 7 and 10 billion.

A decision in principle on these purchases is expected soon. A final decision will be up to the next cabinet, but the present government is likely to make decisions on financing these projects as a part of this spring's public spending plan.

According to Helsingin Sanomat, party leaders agree on the need for the new military equipment, but not on how much is needed or how much should be spent. One other thing is that party leaders want to keep funding for these military acquisitions separate from the regular state budget in order to avoid any more austerity measures.

The EU's Stability and Growth Pact sets limits on how much debt the state can take on. The paper says that the Ministry of Finance is looking at three ways to work around this. One is to seek an exception from the EU rules. Another would be to classify the spending as non-budgetary, regardless of what the EU says. The third would be to take on debt outside normal budget channels and schedule repayment over several decades.

Rather than borrowing, one alternative reportedly put forth would supplement loans with revenues from a "defense tax" which could bring in 500 million euros a year over a ten-year period. Defense bonds could also be used to raise money.

Although the discussions were confidential, Left Alliance chair Li Andersson confirmed that the meeting discussed military acquisitions and that there was agreement among party leaders financing should not be allowed to decrease spending on basic social security or education.

(EDITOR’S NOTE: It is somewhat ironic to see Finland, which during the past decade has been a model of monetary orthodoxy and inflexibility, adopt the opposite view and now say that EU rules and regulations can be disregarded when its own interests are involved.)

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