BRUSSELS (Reuters) -The European Commission proposed on Tuesday to start disciplinary steps against Finland for running too high a budget deficit, that cannot be full explained by only higher defence
EU Commission to Address Finland's Excessive Budget Deficit
BRUSSELS (Reuters) -The European Commission on Tuesday proposed disciplinary action against Finland for running too high a budget deficit that cannot be fully explained by higher defence spending.
Under EU rules, governments cannot run budget deficits of more than 3% of national output. If they do, finance ministers, on a recommendation from the Commission, set a deadline for its reduction. Repeated failure to comply could result in fines.
Because of the perceived threat of a Russian attack, the Commission has allowed all European Union member states to spend an extra 1.5% of GDP on defence without it being included in the excessive deficit calculation.
Despite what the EU calls the national escape clause, Finland's 2025 deficit was still too high, the Commission said.
"Therefore ... the Commission will consider proposing to open an excessive deficit procedure for Finland," it added.
Finland, which is grappling with economic stagnation, rising joblessness and strained public finances, had a budget gap of 4.4% of GDP in 2024. This is expected to rise to 4.5% of GDP this year, remain at 4.0% next year and ease only to 3.9% in 2027, unless policies change.
"The Commission's assessment did not come as a surprise, as Finland’s public finances have continued to deteriorate," the country's finance minister Riikka Purra said in a statement, adding that the work to adjust public finances would continue over several parliamentary terms.
Finnish Prime Minister Petteri Orpo said on X the economy is sluggish mainly as a result of Russia's war in Ukraine.
The export-dependent economy has struggled since the phone business of Nokia, once Europe's most valuable company, collapsed in 2014. More recently, sanctions on neighbouring Russia have hit exports and tourism, while global trade uncertainty is also having an impact.
Germany, which is set to have a deficit of 3.1% this year, 4.0% in 2026 and 3.8% in 2027, is also above the 3% limit, but the Commission said all of the excess was explained by increased defence spending, so no disciplinary steps would follow.
(Reporting by Jan Strupczewski and Essi Lehto, editing by Anna Ringstrom and Alexander Smith)
