Recommendation for a COUNCIL RECOMMENDATION on Finland’s 2013 national reform programme and delivering a Council opinion on Finland’s stability programme for 2012-2017
Date: 2013-05-29
Institutions: European Commission
Subjects: Finland, administrative reform, free competition, innovation, public expenditure, retirement conditions, stability programme, tax reform

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
COM(2013) 376 final 

Recommendation for a 

COUNCIL RECOMMENDATION 

on Finland’s 2013 national reform programme  

and delivering a Council opinion on Finland’s stability programme for 2012-2017 

{SWD(2013) 376 final} 

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Recommendation for a 

COUNCIL RECOMMENDATION 

on Finland’s 2013 national reform programme  

and delivering a Council opinion on Finland’s stability programme for 2012-2017 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 5(2) thereof, 

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16  November  2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances2, and in particular Article 6(1) thereof, 
Having regard to the recommendation of the European Commission3, 
Having regard to the resolutions of the European Parliament4, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

After consulting the Economic and Financial Committee, 

Whereas: 

(1) 

(2) 

On  26  March  2010,  the  European  Council  agreed  to  the  Commission’s  proposal  to 
launch  a  new  strategy  for  growth  and  jobs,  Europe  2020,  based  on  enhanced 
coordination of economic policies, which will focus on the key areas where action is 
needed to boost Europe’s potential for sustainable growth and competitiveness. 

On 13 July 2010, on the basis of the Commission's proposals, the Council adopted a 
recommendation  on  the  broad  guidelines  for  the  economic  policies  of  the  Member 
States and the Union (2010 to 2014) and, on 21 October 2010, adopted a decision on 
guidelines  for  the  employment  policies  of  the  Member  States5,  which  together  form 
the  ‘integrated  guidelines’.  Member  States  were  invited  to  take  the  integrated 
guidelines into account in their national economic and employment policies. 

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4 
5 

OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
COM(2013) 376 final. 
P7_TA(2013)0052 and P7_TA(2013)0053. 
Council Decision 2013/208/EU of 22 April 2013. 

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(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

On 29 June 2012, the Heads of State or Government decided on a Compact for Growth 
and  Jobs,  providing  a  coherent  framework  for  action  at  national,  EU  and  euro  area 
levels using all possible levers, instruments and policies. They decided on action to be 
taken  at  the  level  of  the  Member  States,  in  particular  expressing  full  commitment  to 
achieving the objectives of the Europe 2020 Strategy and to implementing the country-
specific recommendations. 

On 6 July 2012, the Council adopted a recommendation on Finland’s national reform 
programme  for  2012  and  delivered  its  opinion  on  Finland’s  updated  stability 
programme for 2011-2015. 
On  28  November  2012,  the  Commission  adopted  the  Annual  Growth  Survey6, 
marking  the  start  of  the  2013  European  Semester  for  economic  policy  coordination. 
Also  on  28  November  2012,  the  Commission,  on  the  basis  of  Regulation  (EU)  No 
1176/2011,  adopted  the  Alert  Mechanism  Report7,  in  which  it  identified  Finland  as 
one of the Member States for which an in-depth review would be carried out. 

On  14  March  2013,  the  European  Council  endorsed  the  priorities  for  ensuring 
financial stability, fiscal consolidation and action to foster growth. It underscored the 
need  to  pursue  differentiated,  growth-friendly  fiscal  consolidation,  to  restore  normal 
lending conditions to the economy, to promote growth and competitiveness, to tackle 
unemployment  and  the  social  consequences  of  the  crisis,  and  to  modernise  public 
administration. 
On  10  April  2013,  the  Commission  published  the  results  of  its  in-depth  review8  for 
Finland,  under  Article  5  of  Regulation  (EU)  No  1176/2011.  The  Commission’s 
analysis leads it to conclude that Finland is experiencing macroeconomic imbalances, 
which deserve monitoring and policy action. In particular, the substantial deterioration 
in the current account position and the weak export performance, driven by industrial 
restructuring, as well as cost and non-cost competitiveness factors, deserve continued 
attention. 

On 18 April 2013, Finland submitted its 2013 stability programme covering the period 
2012-2017 and its 2013 national reform programme. In order to take account of their 
interlinkages, the two programmes have been assessed at the same time. 

Based  on  the  assessment  of  the  2013  stability  programme  pursuant  to  Council 
Regulation (EC) No 1466/97, the Council is of the opinion that the public finances in 
Finland have been overall sound and efforts have been made to increase revenues and 
to control expenditures in order to move towards the medium-term objective (MTO). 
The  macroeconomic  scenario  underpinning 
the 
programme is plausible. The growth projection for 2013 is similar to the Commission's 
spring  forecast,  whereas  the  one  for  2014  is  0.6  pp  higher  than  in  the  Commission's 
forecast.  The  objective  of  the  budgetary  strategy  outlined  in  the  programme  is  to 
balance the central government finances and to bring the central government debt to 
GDP ratio on a declining path by 2015. The programme incorporates a change in the 
medium-term objective (MTO) from 0.5% to -0.5%. The new MTO is in line with the 
requirements of the Stability and Growth Pact. The programme foresees reaching the 
MTO  by  2014  and  staying  at  the  MTO  until  2017.  Based  on  the  (recalculated) 

the  budgetary  projections 

in 

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COM(2012) 750 final. 
COM(2012) 751 final. 
SWD(2013) 123 final. 

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structural balance on the basis of information in the programme, Finland did not meet 
in  2012  the  previously-applicable  MTO  and  would  not  meet  the  new  MTO  in  2013. 
The programme projects the (recalculated) structural balance to improve from -1% of 
GDP  in  2012  to  -0.9%  of  GDP  in  2013.  Between  2014  and  2017,  it  would  remain 
between  -0.6%  and  -0.7%  of  GDP.  In  2012,  Finland's  net  expenditure  increased  by 
0.4%,  which  remains  below  the  applicable  reference  rate  of  the  expenditure 
benchmark.  Due  to  the  negative  real  GDP  growth  in  2012,  the  low  structural 
adjustment is deemed sufficient. In 2013, Finland's (recalculated) structural balance is 
improving and its net expenditure is projected to deviate by only 0.1% of GDP from 
the expenditure benchmark. In the light of Finland's large negative output gap this is 
deemed  to  be  appropriate.  In  2014,  Finland's  (recalculated)  structural  balance  is 
forecast to improve further, reaching -0.6% of GDP, thus getting sufficiently close to 
the  MTO  (moreover,  according  to  the  Commission's  spring  forecast  Finland  would 
fully reach it in 2014). Overall, this would entail compliance with the preventive arm 
of  the  Stability  and  Growth  Pact.  General  government  gross  consolidated  debt  was 
53%  of  GDP  in  2012  and  will  remain,  according  to  the  programme,  below  60%  of 
GDP  over  the  programme  horizon.  The  programme  foresees  reductions  in  the  debt 
level in 2016  and 2017. Long-term sustainability continues to be the most important 
challenge for fiscal policy. The ageing related sustainability gap, concerning pensions, 
healthcare and long-term care, has been recognised and needs constant monitoring.  

(10)  The productivity growth in public services has not matched the productivity growth in 
the  wider  economy  whilst  the  burden  linked  to  an  ageing  population  is  increasing. 
Whereas  the  principles  for  reforming  municipalities  have  been  established,  mergers 
will  remain  voluntary  although  financial  incentives  from  central  government  will  be 
available. It is expected that the on-going reform of social and health services will not 
lead to any significant reduction in the current number of health-care districts. 

(11)  Measures have been implemented to reduce youth and long-term unemployment such 
as the youth guarantee, the temporary skills programme for young adults and the pilot 
programme  for  the  long-term  unemployed.  These  were  supplemented  in  2013  by 
additional  financial  support  for  apprenticeships  as  part  of  the  youth  guarantee;  these 
are welcome in the context of an expected increase in the rate of unemployment. These 
measures now need to be implemented with a clear focus on improving the skills level 
and labour-market position of the target groups. Raising the employment rate of older 
workers is important to ensure sustainable public finances and to meet the demand for 
labour  in  the  future.  The  size  of  the  working  age  population  is  declining  in  Finland. 
Several  measures  have  been  agreed  to  address  pathways  to  early  retirement  such  as 
raising  the  age  for  access  to  part-time  pension,  removal  of  the  reduced  pension 
possibility and raising the age for retirement following unemployment. However, the 
increase  in  life  expectancy  has  been  more  rapid  than  envisaged  during  the  2005 
pension reform, and over time the current statutory retirement age range could turn out 
to be too low and pensions insufficient. In its programme, the government committed 
itself to increase the effective retirement age to 62.4 years by 2025, which remains low 
in the context of life expectancy and the demographic challenges. Implementing these 
agreed lines of action remains a priority in the short term. 

(12)  Regulatory  barriers  in  the  services  sector  in  Finland  are  still  restrictive  and  market 
concentrations are high in important sectors such as retail. The envisaged changes to 
the Competition Act in respect of the dominant position of grocery trade operators, the 
objectives of the programme on healthy competition in terms of greater supervision of 
this  sector  and  the  removal  of  unnecessary  restrictions  on  competition  in  existing 

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legislation,  such  as  that  on  spatial  planning  and  construction,  should  help  tackle 
current problems. The merger of the competition authority and the consumer agency, 
along with an increase in its budget and wider powers to cover competition neutrality 
between public and private actors, should also improve the effectiveness and benefits 
of  competition  policy  more  generally.  Competition-law  fines  in  Finland  have 
traditionally  been  low  and  the  survey  planned  for  2013  should  provide  a  basis  for 
further reforms to improve their deterrent effect. 

(13)  Productivity  growth  in  Finland  continues  to  lag  behind  the  growth  in  wages  while 
international competitiveness has weakened, as is shown by a decreasing market share 
for  Finnish  exports.  Whilst  investment  in  research,  development  and  innovation 
continues to be high, a critical issue remains the efficiency with which this research is 
translated into innovations and new high-growth companies, which can penetrate fast-
growing  export  markets  and  strengthen  international  competitiveness.  In  the  short 
term, Finland should implement recently adopted policies and measures to improve the 
research  and  innovation  system  such  as  the  new  action  plan,  and  propose  further 
reforms,  where  relevant,  based  upon  existing  evaluations  and  the  foresight  report 
currently under preparation. Prices for energy and labour have been identified among 
the input prices increasing the costs for the Finnish producers. Wage growth in recent 
years  has  been modest  due  to the current tripartite wage agreement which expires in 
2013. It is of concern, therefore, that no new agreement has yet been concluded by the 
social partners.  

(14) 

(15) 

(16) 

(17) 

In  the  context  of  the  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Finland’s  economic  policy.  It  has  assessed  the  stability 
programme and national reform programme, and presented an in-depth review. It has 
taken into account not only their relevance for sustainable fiscal and socio-economic 
policy  in  Finland  but  also  their  compliance  with  EU  rules  and  guidance,  given  the 
need  to  reinforce  the  overall  economic  governance  of  the  European  Union  by 
providing EU-level input into future national decisions. Its recommendations under the 
European Semester are reflected in recommendations (1) to (5) below. 

In  the  light  of  this  assessment,  the  Council  has  examined  Finland’s  stability 
programme, and its opinion9 is reflected in particular in recommendation (1) below, 

In the light of the Commission’s in-depth review and this assessment, the Council has 
examined  Finland’s  national  reform  programme  and  stability  programme.  Its 
recommendations under Article 6 of Regulation (EU) No 1176/2011 on the prevention 
and  correction  of  macroeconomic  imbalances  are  reflected  in  recommendations  (3), 
(4) and (5). 

In  the  context  of  the  European  Semester  the  Commission  has  also  carried  out  an 
analysis of the economic policy of the euro area as a whole. On this basis the Council 
has issued specific recommendations addressed to the Member States whose currency 
is  the  euro.  Finland  also  should  ensure  the  full  and  timely  implementation  of  these 
recommendations, 

HEREBY RECOMMENDS that Finland should take action within the period 2013-2014 to: 

1. 

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Pursue  a  growth-friendly  fiscal  policy  and  preserve  a  sound  fiscal  position  as 
envisaged,  ensuring  compliance  with  the  MTO  over  the  programme  horizon. 
Continue  to  carry  out  annual  assessments  of  the  size  of  the  ageing-related 
sustainability  gap  and  adjust  public  revenue  and  expenditure  in  accordance  with 

Under Article 5(2) of Council Regulation (EC) No 1466/97. 

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2. 

3. 

4. 

5. 

long-term  objectives  and  needs.  Ensure  the  cost-effectiveness  and  sustainability  of 
long-term care and put a stronger focus on prevention, rehabilitation and independent 
living.  

Ensure effective implementation of the on-going administrative reforms concerning 
the municipal structure, in order to deliver productivity gains and cost savings in the 
provision of public services, including social and healthcare services.  

Take  further  steps  to  increase  the  employment  rate  of  older  workers,  including  by 
improving  their  employability  and  reducing  early  exit  pathways,  and  align  the 
minimal  statutory  retirement  age  with  increased  life  expectancy.  Implement  and 
monitor  closely  the  impact  of  on-going  measures  to  improve  the  labour-market 
position of young people and the long-term unemployed, with a particular focus on 
the development of job-relevant skills.  

Continue efforts to enhance competition in product and service markets, especially in 
the  retail  sector,  by  implementing  the  new  programme  on  promoting  healthy 
competition.  

Boost  Finland's  capacity  to  deliver  innovative  products,  services  and  high-growth 
companies  in  a  rapidly  changing  environment,  and  continue  diversification  of  the 
low-growth 
industry 
environment,  support  the  alignment  of  real  wage  and  productivity  developments 
whilst fully respecting the role of social partners and in line with national practices. 

intensive  sectors.  In 

less  energy 

the  current 

towards 

Done at Brussels,  

For the Council 
The President 

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