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Finnish govt to dampen housing market boom :Lipponen

HELSINKI: Finnish Prime Minister Paavo Lipponen said on Sunday that the Finnish government would take action soon to dampen the country's booming real estate market to counteract rising inflation.

But Lipponen said in a radio interview that he did not see room for big cuts in state spending, which some economists and the head of the Bank of Finland have suggested the economy needs to ensure that fast growth does not spark high inflation.

"Inflation has now acclerated mainly due to import prices for fuel and raw materials -- otherwise inflation is entirely under control," Lipponen told national broadcaster YLE.

Last week economic think-tank ETLA raised its forecast for consumer price inflation this year to 2.3 percent from an earlier projection of 2.1 percent.

The finance ministry last month upped its 2000 CPI forecast to 2.2 percent, which would put Finland above the European Central Bank's limit for inflation of two percent.

"Another worrisome phenomenon is the development of the housing market," Lipponen said.

The government would intervene in the situation by taking steps to promote the availability of building sites, especially in the Helsinki area, he said, but did not elaborate.

The government has earlier considered tax incentives to encourage landowners to put unbuilt property on the market and thereby ensure an adequate supply of building sites to keep prices from soaring.

While the housing market was now reminiscent of the boom-to-bust late 1980s, there was now no sign of the billowing household and corporate credit that marked the years before Finland plunged into recession in the early 1990s, he said.

"It is of course possible that there is a bubble on the bourse from which air will be let out at some point," he said. "But the situation now is decisively better (than at the end of the 1980s.

Lipponen said that Finland's recent wage agreements -- which have brought pay hikes of about 3.1 percent this year for most wage-earners -- were tolerable, but would now require that the country take steps to guard its international competitiveness.

Despite the worries about inflation, Lipponen reaffirmed the government's intention to reduce income taxes by 10 to 11 billion markka during its four-year term ending in 2003.-Reuters