Finland plans EUR 1.1 bn stimulus package

(HELSINKI) - Finland announced Thursday plans for a 1.1-billion-euro ($1.5-billion) stimulus package, including a mix of new spending and lower taxes, meant to revive its recession-hit economy.

The plan was announced by the five parties currently negotiating the creation of a new government led by conservative Alexander Stubb.

Stubb will replace Prime Minister Jyrki Katainen, known for pursuing austerity measures, who resigned on Monday.

"We have done what was needed and, if we have to do more, we'll continue with our work, in order to give Finland a new impulse," Stubb said at a press conference in Helsinki.

The five-year package would see taxes on labour should fall by 410 million euros, and the suppression of a tax on exceptional profits for power companies will cost another 200 million euros.

The coalition parties have agreed on public investments in infrastructure and housing for 340 million euros by 2018.

The capital's metro system will be expanded to the west.

Katainen's government, including right and left-wing parties, struggled to push through reforms the prime minister said the country was in desperate need for.

"All five parties have showed their capacity to find common solutions with which the state can help Finland take off again," Social Democratic Party president and outgoing Finance Minister Antti Rinne said.

The plan will increase Finland's already high debt level.

According to governmental estimates published on Wednesday, public debt will reach 60.4 percent of the country's gross domestic product (GDP) this year, exceeding the EU limit.

"In 2018, the state's debt would be 800 million euros higher than it would be without this plan," government spokesman Martti Hetemaeki said.

The government expects 0.2 percent growth in 2014 after GDP declined by 1.0 percent in 2012 and 1.4 percent in 2013.

According to Stubb, the stimulus plan will boost growth and employment and allow Finland to begin reducing debt in 2018.