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The Finnish government’s tax policies raise the risk of deflation

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Finland, too, can take action against deflation

Despite warnings of deflation, the ECB kept the key interest rate at its all-time low last week.

The liberal daily Maaseudun Tulevaisuus complains that the Finnish government’s tax policies also raise the risk of deflation:

Even if Finland doesn’t follow its own monetary policy, national decisions have an influence on whether our country is hit by deflation. Decreasing buying power with tax hikes at a time when salaries remain fixed leads to a deflation-type situation. For this reason economists have warned the Finnish government against turning the taxation screw. Even if inflation has many disadvantages for the economy, deflation is even more dangerous. Both for the indebted euro countries and for our budget, deflation would be disastrous.

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