HELSINKI (AFP) - Finland plans to raise its retirement age to strengthen public finances and encourage Finns to work more, Prime Minister Jyrki Katainen said after his coalition government clinched a deal late on Thursday.

The government plans to propose increasing the effective retirement age to 62.4 years by 2025, a year and a half higher than it is today.

The retirement age to obtain a full pension in the country is 65, but Finns stop working earlier on average, as in many other countries in the Organisation for Economic Cooperation and Development (OECD).

Finland's broad coalition government, which includes right and left-wing parties but not the eurosceptics and the centre, also plans to shorten the amount of time Finns spend in university studies.

It also intends to raise the compulsory education age from 16 to 17 and to make unpaid leaves of absence harder to obtain.

"We need to put to work all those people who are able to do so," Mr Katainen told reporters.

The government also plans to cut spending in local administrations and daycares, and facilitate the return of unemployed people to the job market.

The practical details of the reforms are expected to be hammered out with the unions and the ministries by the end of November.

The reform package is intended to stop rising public debt in a country that has shrinking tax revenue and growth.

The Bank of Finland has forecast public debt will increase to 59.8 per cent in 2014, approaching the 60 per cent limit allowed in the eurozone.

"We are living beyond our means now and we will still do in the coming years," Katainen said.

Finland's gross domestic product decreased by 0.8 per cent in 2012 and the government has warned of another 0.5 per cent contraction for 2013.