EN    EN EN 
 
EN    EN  EUROPEAN COMMISSION 
Brussels, 15.6.2010 
SEC(2010) 745 final 
  
COMMISSION OPINION 
on the existence of an excessive deficit in Finland 
 
EN 2   EN COMMISSION OPINION 
on the existence of an excessive deficit in Finland 
THE APPLICATION OF THE STABILITY AND GROWTH PACT IN THE CURRENT 
CRISIS SITUATION 
1. Many EU countries are presently facing gene ral government deficits above the 3% of 
GDP reference value set in the Treaty. The of ten strong deterioration in the deficit as 
well as the debt positions must be seen in the context of the unprecedented global 
financial crisis and economic downturn in 2008/09. Several f actors are at play. First, 
the economic downturn brings about declinin g tax revenue and ri sing social benefit 
expenditure (e.g. unemployment benefits ). Second, recognising that budgetary 
policies have an important role to play  in the current extraordinary economic 
situation, the Commission called for a fiscal stimul us in its November 2008 
European Economic Recovery Plan (EERP), endorsed by the European Council in December. The Plan explicated that the stimulus should be timely, targeted and 
temporary and differentiated acr oss Member States to reflect  their different positions 
in terms of public finance sustainability and competitiveness and should be reversed when economic conditions improve. Finally, several countries have taken measures 
to stabilise the financial sector, some of which have impacted on the debt position or 
constitute a risk of higher deficits and debt in the future, although some of the costs 
of the government support could be recouped in the future. 
2. The Stability and Growth Pact requires the Commission to initiate the excessive 
deficit procedure (EDP) whenever the defici t of a Member State exceeds the 3% of 
GDP reference value. The amendments to the Stability and Growth Pact in 2005 
aimed at ensuring that in particular  the economic and budgetary background was 
taken into account fully in al l steps in the EDP. In this way, the Stability and Growth 
Pact provides the framework supporting gover nment policies for a prompt return to 
sound budgetary positions taking account of the economic situa tion, and thereby 
ensuring long-term sustainability of public finances. 
LEGAL BACKGROUND 3. Article 126 of the Treaty on the Functioni ng of the European Union lays down an 
excessive deficit procedure (EDP). This procedure is further specified in Council 
Regulation (EC) No 1467/97 “on speeding up and clarifying the implementation of 
the excessive deficit procedure”
1, which is part of the Stability and Growth Pact. 
4. According to Article 126(2) of the Treaty, the Commission has to monitor 
compliance with budgetary discipline on th e basis of two criteria, namely: (a) 
whether the ratio of the planned or act ual government deficit to gross domestic 
                                                 
1 OJ L 209, 2.8.1997, p. 6. The report also takes into account the “Specifications on the implementation 
of the Stability and Growth Pact and guidelines on the format and content of stability and convergence 
programmes”, endorsed by th e ECOFIN Council of 10 November 2009, available at 
http://ec.europa.eu/economy_finance/sgp/legal_texts/index_en.htm. 
 
EN 3   EN product (GDP) exceeds the reference value of 3% (unless either the ratio has 
declined substantially and continuously a nd reached a level that comes close to the 
reference value; or, alternatively, the excess over the reference value is only exceptional and temporary and the ratio remain s close to the reference value); and (b) 
whether the ratio of government debt to GDP exceeds the reference value of 60% (unless the ratio is sufficiently diminishi ng and approaching the reference value at a 
satisfactory pace). 
5. Article 126(3) of the treaty stipulates th at, if a Member State does not fulfil the 
requirements under one or both of these cr iteria, the Commission has to prepare a 
report. This report also has to “take into account whether the government deficit 
exceeds government investment expenditure and take into account all other relevant factors, including the medium-term econom ic and budgetary position of the Member 
State”. 
6. On the basis of the data notified by the Finnish authorities in April 2010
2 and taking 
into account the Commission services’ spring 2010 forecast,  the Commission 
adopted a report under Article 126(3) for Finland on 12 May 20103. 
7. Subsequently, and in accordance with Artic le 126(4) of the treaty, the Economic and 
Financial Committee formulated an opi nion on the Commission report on 27 May 
2010. 
8. Article 126(5) of the Treaty requires th e Commission to address an opinion to the 
Council if the Commission considers that an  excessive deficit in a Member State 
exists or may occur. In order to reach a conclusion on whether an excessive deficit 
exists or may occur, the Commission cons iders that account shoul d be taken of: (i) 
the conclusions of its report under Artic le 126(3) and (ii) the opinion of the 
Economic and Financial Committee on this re port. On the basis of these elements, 
the Commission has established a numb er of considerations for Finland. 
CONSIDERATIONS CONCERNING FINLAND 9. According to the data notified by the Fi nish authorities in April 2010, the general 
government deficit in Finland is pla nned to reach 4.1% of GDP in 2010, thus 
exceeding the 3% of GDP reference valu e. The Commission report under Article 
126(3) considered that the planned deficit was not close to the 3% of GDP reference 
value. The third supplementary budget presen ted by the Ministry of Finance to the 
Parliament on 14 May 2010 suggests that tax revenues in 2010 could turn out by 
0.5% of GDP higher-than-planned, principa lly on account of stronger corporate tax 
accrual. This indicates upside risks to th e current public finance projections, but 
given that no full-fledged update of these projections has been made, the deficit 
target for 2010 has not been officially changed and the current assessment remains 
                                                
 
2 According to Council Regulation (EC) No 479/2009, Member States have to report to the Commission, 
twice a year, their planned and actual government deficit and debt levels. The most recent notification 
of Finland can be found at: 
 http://epp.eurostat.ec.europa.eu/portal/page/porta l/government_finance_statistics/excessive_deficit/edp_
notification_tables. 
3 All EDP-related documents for Finland can be found at the following website: 
 http://ec.europa.eu/ec onomy_finance/sgp/defic it/countries/index_en.htm. 
 
EN 4   EN valid. The planned excess over the referenc e value can be qualif ied as exceptional 
within the meaning of the Treaty and the Stab ility and Growth Pact. In particular, it 
does result from a severe economic downturn in the sense of the Treaty and the Stability and Growth Pact and the stimul us measures taken as a response to the 
economic downturn in line with the Eu ropean Economic Recovery Programme. 
According to the Commission services' spri ng 2010 forecast, real GDP contracted by 
7.8% in 2009 and is forecast to recover at  1.4% in 2010. Furthermore, the planned 
excess over the reference value can be c onsidered temporary. According to the 
Commission services’ spring 2010 forecast, the deficit will fall below the reference value in 2011, supported by the projected ec onomic recovery taki ng hold. The deficit 
criterion in the Treaty is not fulfilled. 
10. According to the EDP notification, the gene ral government gross debt remains below 
the 60% of GDP reference value at  49.9% of GDP in 2010. The Commission 
services’ spring 2010 forecast projects the de bt ratio to be at  50.5% of GDP in 2010 
and to increase to 54.9% of  GDP in 2011, still to remain below 60% of GDP. The 
debt criterion in the Treaty is fulfilled. 
11. In line with the provisions  in the Treaty and the Stab ility and Growth Pact, the 
Commission also analysed in its report “rel evant factors”. According to the Stability 
and Growth Pact, these can only be taken into account in the st eps leading to the 
decision on the existence of an excessive deficit if the deficit satisfies the double 
condition of closeness and temporarine ss. In the case of Finland, the double 
condition is not met. Considered on their own merit, the relevant factors in the 
current case on balance seem to be re latively favourable, based on the good track 
record of fiscal policy in Finland. 
12. The opinion of the Economic and Financ ial Committee in accordance with Article 
126(4) of the Treaty is c onsistent with the assessmen t in the Commission report 
under Article 126(3). 
CONCLUSION The monitoring of the budgetary si tuation in Finland and, in part icular, the examination of the 
compliance with the criteria laid down in Ar ticle 126(2) has led the Commission to prepare a 
report in accordance with Artic le 126(3) of the Treaty. The Commission, having taken into 
account its report and the opinion of the Economic and Financial Committee, is of the opinion 
that an excessive defi cit exists in Finland.