trends and future of sustainable development - TransEco

which induced lower tax revenues – because of the demand shrinkage and the increased unemploymentrate – making unable the government to safely finance the expenditures which persistently outreachedthe expected volumes. Nonetheless, the emergence of the decrease in interest rate appreciated the valueof formerly started measures aiming at limiting the expenditures leading to improved fiscal latitude,and at the same time, revenues exceeded their expected volumes.The international climate, characterised by moderating interest rates, did not threat the occurrenceof such precisely coordinated fiscal policy which could be circumscribed by restrictive and also expansivefeatures. 1 One of the major antecedents of the coordinated expansionary mechanism was the crisis whichshed light on those policies that proved to be unsustainable. Coalition government intended to correctthem, and what is more, it put R&D and innovation into the focal point, thus that intensified fiscalconcentration brought anti-cyclical feature into the expenditure structure of the Finnish fiscal policy. 2This kind of governmental strategy accelerated the transformation of the Finnish society to be aknowledge-based information society (Benner, 2003). The fiscal consolidation, started in the first half ofthe respected decade, went through a significant character change and thus the coalition governmentalefforts were crowned by success. The consolidation became predominantly expenditure-sided. As acorollary, the deficit was converted into surplus (1.3% and 7% of GDP in 1998 and 2000, respectively).Meanwhile, government was able to keep the proportion of revenues to GDP remarkably stable. Andwhat is even more important, the level of revenues overcompensated that of the expenditures in theaftermath of 1997. As we indicated earlier, expenditure reductions inter alia were perceivable in thefields of education and health sector, as well. Since these sectors performed relatively well, they served assafeguards behind the reduction. Not to mention the fact that the financial basis of these sectors wereconsiderably good (local governments were much better financial position than the central governmentwas).Actually, the new coalition government, came into power in the midst of 1990s, followed the line ofconsolidation initiated by former government. It can be emphasised with reasonable certainty becausethe deficit- and debt reduction, the significant rationalisation of expenditures as well as theimprovement of international competitiveness were of key importance on the agenda of both coalitiongovernments. The first coalition government came into power in 1991 was not inclined to resort to suchstrategic game which will eventually deteriorate the fiscal latitude of the subsequent „rainbow coalition”government. And what is more, the first coalition government of the 1990s was about to build up andmaintain the trust level towards the state through austere behaviour. Almost 110 thousand publicservant was dismissed between 1988 and 1998 (Fregert, 2009) – which offered helping hand for thefollowing cabinet. And perhaps more importantly, governments always stressed that preserving thesocial market economy is a fundamental objective, which also nourished the trust level. Consequently,1By coordination we mean that the coalition government heightened the expenditure level in case of fields that havelong been already treated as priority such as innovation and R&D.2Actually, the innovation policy can be regarded as anti-cyclical; however, it was reached via fiscal policy. R&D andinnovation expenditures were incrementally increased in proportion of GDP (1993: 1.25% of GDP; 1996: 1.67% ofGDP (Eurostat, 2010).282