EU fiscal rules

EU fiscal rules set a framework for the management of public finances in the Member States. The rules are part of economic governance. Key treaties include the Treaty on the Functioning of the European Union and the Stability and Growth Pact.

The Treaty sets the following reference values for Member States:

General government deficit cannot exceed 3 per cent of GDP (unless the deviation is small, temporary and exceptional).
General government debt cannot exceed 60 per cent of GDP (unless the amount of debt is decreasing and approaching the reference value at a sufficient rate).

The Stability and Growth Pact (SGP) is a rules-based framework for the coordination of national fiscal policies in the European Union. The SGP comprises two parts:

The cornerstone of the preventive arm is the Medium-Term Budgetary Objective (MTO) defined by the Member State for the structural balance of general government finances. The Commission and the Council monitor progress towards the MTO. A Member State is within the preventative arm if it is not in an Excessive Deficit Procedure (EDP).
The corrective arm of the SGP relates to the reference values of 3 per cent of GDP for general government deficit and 60 per cent of GDP for general government debt, as defined in the Treaty. If the Commission and the Council find that a Member State is in breach of the deficit or debt criteria, an EDP may be initiated. A Member State is within the corrective arm if is in an EPD.

The SGP is comprised of the Resolution of the European Council of 1997, Regulation 1466/97 regarding the preventive arm of the SGP and Regulation 1467/97 regarding the corrective arm of the SGP.

The EU revised the SGP in 2005 and 2011. The EU further supplemented the related legislation in 2013 with two regulations concerning euro-area countries. The inter-governmental Fiscal Compact entered into force at the start of 2013. The legislation is supplemented by a code of conduct clarifying the application of the law.

Finland passed the Financial Policy Act (2012) and the Government Decree on the General Government Fiscal Plan (2014), which implement the Fiscal Compact and the Budgetary Framework Directive.

Reformed rules

The fiscal rules were reformed in April 2024. One key reform is that every Member State must make a fiscal-structural plan spanning at least four years. In Finland, this plan is called the Medium-Term Plan.

It their plans, each Member State commits to complying with a net expenditure path, i.e. a maximum permitted growth rate for net expenditure. The net expenditure path is based primarily on the country’s debt sustainability. The plan also includes reforms and investments.

Member States are allowed to ask for an extension of the fiscal adjustment period by up to three years if they commit to structural reforms and investments. The EU monitors the implementation of these reforms and investments.

The European Commission assesses Member States’ fiscal-structural plans, and the Council of the EU endorses the net expenditure paths and extensions.

Minister of Finance Riikka Purra: Finland avoids EU deficit procedure, new measures may be needed in spring (press release 26 November 2024)

Finland's Medium-Term Plan 2025–2028

Government approves Finland's Medium-Term Plan (press release Oct 10th, 2024)

Press release on Finland's fiscal-structural plan (press release in Finnish, Sept 23rd, 2024)

Economic governance framework (Council of the EU)

Excessive deficit procedure (Council of the EU)

Stability and Growth Pact (European Commission)

European Commission reports on Finland

Financial Policy Act (Finlex)

Government Decree on the General Government Fiscal Plan (Finlex)

Contact information

Head of Secretariat for EU Affairs
Marketta Henriksson
Tel. +358 295 530 441
marketta.henriksson(at)gov.fi