European Commission considers proposing to open excessive deficit procedure for Finland in December

Finland does not meet the EU’s criteria for public deficit, according to the European Commission. The Commission considers proposing that the EU open an excessive deficit procedure for Finland.

“The Commission’s assessment did not come as a surprise, as Finland’s public finances have continued to deteriorate. We will find out in December how quickly the EU expects us to correct the situation. The corrective measures will be up to us,” said Minister of Finance Riikka Purra.

Growth in defence spending not sufficient to explain deficit

The Commission considers proposing to open an excessive deficit procedure, because Finland does not meet the deficit criterion. Under the EU treaties, a maximum general government deficit of 3 per cent of GDP is allowed. Finland’s deficit already exceeded this reference value last year and will remain above it in the coming years. 

Finland has a national escape clause in force in 2025–2028 due to growing defence spending. However, the growth in defence spending is not enough to explain the excess deficit this year, so the conclusions of the Commission’s spring assessment no longer apply. In its newly published assessment, the Commission concluded that it would consider proposing to open an excessive deficit procedure for Finland.

The EU treaties obligate Member States to avoid excessive public deficits. The excessive deficit procedure determines how these deficits are to be corrected. The procedure can be opened based on either the deficit criterion or debt criterion.

At the moment there are nine countries in the procedure: Belgium, Italy, Austria, Malta, Poland, France, Romania, Slovakia and Hungary.

Council will adopt a decision and recommendations for rectifying the situation in January

The process involves several steps:

• In December, the European Commission will issue a proposal for a decision on the existence of an excessive deficit and recommendations for rectifying it. The recommendations will include a corrective net expenditure path and a deadline by when the deficit must be under 3 per cent.
• On 20 January, the EU’s Economic and Financial Affairs Council will adopt a decision to open the procedure and recommendations to rectify the situation. 
• Finland will have to submit the first report on the measures it has taken within three months.

Minister Purra emphasised that Finland must comply with the pace of adjustments recommended by the Council.

“The next government will have their work cut out for them to adjust public finances. The work will continue over several parliamentary terms.”

Commission assesses draft budgetary plans

The Commission published the autumn package for the European Semester for economic policy coordination on Tuesday 26 November. The package includes opinions on the euro area countries’ draft budgetary plans, a recommendation on the economic policy of the euro area, an Alert Mechanism Report and a European Macroeconomic Report.

The European Semester is an annual process in which the EU coordinates and monitors economic policy.

Inquiries:
Marketta Henriksson, Director, 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 
Jussi Lindgren, Economic Policy Adviser to the Minister of Finance, tel. +358 295 530 514, jussi.lindgren(at)gov.fi