EU to assess excessive deficit procedure for Finland in December

The European Commission (EC) considered that Finland did not meet the EU’s criteria for public deficit and is considering to propose that the EU open an excessive deficit procedure in December, said the Ministry of Finance on Tuesday referring to the EC.

“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 in a press release.

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, said the Ministry.

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.

In December, the 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 six months.

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,” she said.