EU fiscal rules
Finland avoids EU excessive deficit procedure

The European Commission recommends that the Council of the EU activate the national escape clause for Finland. The recommendation is based on increasing defence spending. The Commission does not recommend opening an excessive deficit procedure.

“I am happy that Finland has avoided the excessive deficit procedure. The Commission understands the exceptional situation Finland has found itself in. Our security environment has changed, and we have to strengthen our defence. This is having a significant impact on Finland’s public finances,” said Minister of Finance Riikka Purra.

Activation of escape clause requested by 16 Member States

Finland requested coordinated activation of the national escape clause with 15 other Member States on 30 April, because the Government had decided to raise defence spending to 3 per cent of GDP. The request for activation covers 2025–2028. The Member States in question remain committed to compliance with the EU fiscal rules throughout the duration of the activation of the escape clause.

Under the EU’s new fiscal policy rules, a Member State may request activation of the national escape clause based on exceptional circumstances. While the escape clause is activated, a Member State may deviate from the net expenditure path approved by the Council of the EU. However, the deviation must not endanger fiscal sustainability over the medium term. 

Commission does not recommend opening excessive deficit procedure

Under the EU treaties, Member States are allowed a maximum general government deficit of 3 per cent of GDP.

The Commission and the Council may decide not to open an excessive deficit procedure if the national escape clause has been activated on the basis of increasing defence expenditure and if the excess over 3 per cent of GDP is due to the additional defence expenditure.

According to the Commission’s forecasts, Finland's defence expenditure will rise to 2.1 per cent of GDP this year and to 2.0 per cent next year, compared to 1.2 per cent in 2021. Without this increase in defence expenditure, Finland’s deficits would be below 3 per cent this year and next year. This being the case, the escape clause allows the Commission to not recommend opening an excessive deficit procedure for Finland.

Council to approve Commission recommendations in July

The European Commission published its assessment of the Member States’ requests on 4 June as part of its spring package for the European Semester. The Commission recommends activating the national escape clause for Finland.

The Commission published draft recommendations for Finland and each of the other Member States as part of its spring package. The package also includes a country report, which includes the Commission’s structural assessment of Finland's economy. 

The Council of the European Union is expected to approve the recommendations to activate the escape clauses on 8 July. 

Inquiries:
Marketta Henriksson, Head of the Secretariat for EU and International Affairs, tel. +358 295 530 441, marketta.henriksson(at)gov.fi
Antti Kekäläinen, Senior Ministerial Adviser, tel. +358 295 530 386, antti.kekalainen(at)gov.fi
Jari Mäkäräinen, Special Adviser, tel. +358 295 530 213, jari.makarainen(at)gov.fi