Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Finland and delivering a Council opinion on the 2020 Stability Programme of Finland
Date: 2020-05-20
Institutions: European Commission, Secretariat-General
Subjects: Finland, economic policy, economic recovery, economic reform, employment policy, epidemic, health policy, infectious disease, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 20.5.2020  COM(2020) 526 final  Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Finland and delivering a Council opinion on the 2020 Stability Programme of Finland  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2020 National Reform Programme of Finland and delivering a Council opinion 
on the 2020 Stability Programme of Finland 

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 the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

(2) 

On  17  December  2019,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Strategy,  marking  the  start  of  the  2020  European  Semester  for  economic  policy 
coordination. It took due account of the European Pillar of Social Rights, proclaimed 
by the European Parliament, the Council and the Commission on 17 November 2017. 
On  17  December  2019,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission  also  adopted  the  Alert  Mechanism  Report,  in  which  it  did  not  identify 
Finland as one of the Member States for which  an in-depth  review would be carried 
out. On the same date, the Commission also adopted a recommendation for a Council 
recommendation on the economic policy of the euro area. 
The 2020 country report for Finland2 was published on 26 February 2020. It assessed 
Finland’s progress in addressing the country-specific recommendations adopted by the 
Council  on  9  July  20193,  the  follow-up  given  to  the  recommendations  adopted  in 
previous years and Finland's progress towards its national Europe 2020 targets.  

(3) 

On 11 March 2020, the World Health Organization officially declared the COVID-19 
outbreak  a  global  pandemic.  It  is  a  severe  public  health  emergency  for  citizens, 

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OJ L 209, 2.8.1997, p. 1. 
SWD(2020) 525 final. 
OJ C 301, 5.9.2019, p. 117. 

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societies  and  economies.  It  is  putting  national  health  systems  under  severe  strain, 
disrupting  global  supply  chains,  causing  volatility  in  financial  markets,  triggering 
consumer  demand  shocks  and  having  negative  effects  across  various  sectors.  It  is 
threatening  people’s  jobs,  their  incomes  and  companies’  business.  It  has  delivered  a 
major  economic  shock  that  is  already  having  serious  repercussions  in  the  European 
Union. On 13 March 2020, the Commission adopted a Communication4 calling for a 
coordinated economic response to the crisis, involving all actors at national and Union 
level. 

Several  Member States have declared a state of  emergency or introduced emergency 
measures.  Any  emergency  measures  should  be  strictly  proportionate,  necessary, 
limited in time, and in line with European and international standards. They should be 
subject to democratic oversight and independent judicial review. 

On  20  March  2020,  the  Commission  adopted  a  Communication  on  the  activation  of 
the general escape clause of the Stability and Growth Pact5. The clause, as set out in 
Articles 5(1), 6(3), 9(1) and 10(3) of Regulation  (EC) 1466/97 and Articles 3(5) and 
5(2) of Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in 
times  of  severe  economic  downturn.  In  its  Communication,  the  Commission  shared 
with the Council its view that, given the expected severe economic downturn resulting 
from  the COVID-19 outbreak, the  current  conditions  permit  activation of the clause. 
On  23  March  2020,  the  Ministers  of  Finance  of  the  Member  States  agreed  with  the 
assessment of the Commission. The activation of the general escape clause allows for 
a temporary departure from the adjustment path  towards the medium-term budgetary 
objective,  provided  that  this  does  not  endanger  fiscal  sustainability  in  the  medium 
term. For the corrective arm, the Council may also decide, on a recommendation from 
the Commission,  to  adopt  a revised  fiscal  trajectory. The  general  escape  clause does 
not suspend the procedures of the Stability and Growth Pact. It allows Member States 
to depart from the budgetary requirements that would normally apply while enabling 
the  Commission  and  the  Council  to  undertake  the  necessary  policy  coordination 
measures within the framework of the Pact. 

Continued  action  is  required  to  limit  and  control  the  spread  of  the  pandemic, 
strengthen  the  resilience  of  the  national  health  systems,  mitigate  the  socio-economic 
consequences through supportive measures for business and households and to ensure 
adequate  health  and  safety  conditions  at  the  workplace  with  a  view  to  resuming 
economic  activity.  The  Union  should  fully  use  the  various  tools  at  its  disposal  to 
support  Member  States’  efforts  in  those  areas.  In  parallel,  Member  States  and  the 
Union should work together to prepare the measures necessary to get back to a normal 
functioning of our societies and economies and to sustainable growth, integrating inter 
alia  the  green  transition  and  the  digital  transformation,  and  drawing  all  lessons  from 
the crisis. 

The  COVID-19  crisis  has  highlighted  the  flexibility  that  the  single  market  offers  to 
adapt  to  extraordinary  situations.  However,  in  order  to  ensure  a  swift  and  smooth 
transition to the recovery phase and the free movement of goods, services and workers, 
exceptional  measures that prevent  the single market  from  functioning  normally must 
be removed as soon as they are no longer indispensable. The current crisis has shown 
the  need  crisis  preparedness  plans  in  the  health  sector,  which  include  in  particular 
improved  purchasing  strategies,  diversified  supply  chains  and  strategic  reserves  of 

(4) 

(5) 

(6) 

(7) 

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COM(2020) 112 final. 
COM(2020) 123 final. 

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(8) 

(9) 

essential  supplies.  They  are  key  elements  for  developing  broader  crisis  preparedness 
plans. 
The  Union  legislator  has  already  amended  the  relevant  legislative  frameworks6  to 
allow  Member  States  to  mobilise  all  unused  resources  from  the  European  Structural 
and  Investment  Funds  so  they  can  address  the  exceptional  effects  of  the  COVID-19 
pandemic. Those amendments will provide additional flexibility, as well as simplified 
and streamlined procedures. To alleviate cash flow pressures, Member States can also 
benefit  from  a  100%  co-financing  rate  from  the  Union  budget  in  the  2020-2021 
accounting year. Finland is encouraged to make full use of those possibilities to help 
the individuals and sectors most affected by the challenges. 

The  socio-economic  consequences  of  the  pandemic  are  likely  to  be  unevenly 
distributed  across  sectors  and  regions  due  to  different  specialisation  patterns.  This 
entails  a  risk  of  widening  disparities  within  Finland.  Combined  with  the  risk  of  a 
temporary unravelling of the convergence process between Member States, the current 
situation calls for targeted policy responses. 

(10)  On  30  April  2020,  Finland  submitted  its  2020  National  Reform  Programme  and  its 
2020  Stability  Programme.  In  order  to  take  account  of  their  interlinkages,  the  two 
programmes have been assessed at the same time. 

(11)  Finland is currently in the preventive arm of the Stability and Growth Pact and subject 

to the debt rule.   

(12) 

(13) 

In  its  2020  Stability  Programme,  the  government  plans  the  headline  balance  to 
deteriorate from a deficit of 1,1% of GDP in 2019 to a deficit of 7,2% of GDP in 2020. 
The deficit is projected to decline to 4,0% of GDP in 2021. After increasing to 59,4% 
of GDP in 2019, the general government debt-to-GDP ratio is expected to increase to 
69,1% in  2020 according to  the 2020 Stability Programme. The macroeconomic and 
fiscal outlook is affected by high uncertainty due to the COVID-19 pandemic. 

In response to the COVID-19 pandemic, and as part of a coordinated Union approach, 
Finland has adopted budgetary measures to increase the capacity of its health system, 
contain  the  pandemic,  and  provide  relief  to  those  individuals  and  sectors  that  have 
been  particularly  affected.  According  to  the  2020  Stability  Programme,  those 
budgetary measures amounted to 1,7% of GDP. The measures include both emergency 
spending for protection of health and public order and support measures for businesses 
and employees. In addition, Finland has announced measures that, while not having a 
direct  budgetary  impact,  will  contribute  to  support  liquidity  to  businesses,  which  the 
2020  Stability  Programmes  estimates  at  5%  of  GDP.  Those  measures  include  loan 
guarantees  for  companies,  mainly  targeting  SMEs,  as  well  as  specific  guarantee 
schemes for Finnair and shipping companies ensuring security of supply. In addition, 
other  liquidity-enhancing  measures,  not  reported  in  the  Stability  Programme,  have 
been  adopted  in  Finland,  including  tax  deferrals  for  corporate  income  taxes.  Those 

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Regulation (EU) 2020/460 of the European Parliament and of the Council of 30 March 2020 amending 
Regulations  (EU)  No  1301/2013,  (EU)  No  1303/2013  and  (EU)  No  508/2014  as  regards  specific  measures  to 
mobilise  investments  in  the  healthcare  systems  of  Member  States  and  in  other  sectors  of  their  economies  in 
response to the COVID-19 outbreak (Coronavirus Response Investment Initiative) (OJ L 99, 31.3.2020, p. 5) and 
Regulation  (EU)  2020/558  of  the  European  Parliament  and  of  the  Council  of  23  April  2020  amending 
Regulations  (EU)  No  1301/2013  and  (EU)  No  1303/2013 as  regards  specific  measures  to  provide  exceptional 
flexibility for the use of the European Structural and Investments Funds in response to the COVID-19 outbreak 
(OJ L 130, 24.4.2020, p. 1). 

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additional  measures  are  estimated  at  15%  of  GDP.  Overall,  the  measures  taken  by 
Finland are in line with the guidelines set out in the Commission Communication on a 
coordinated  economic  response  to  the  COVID-19  outbreak.  The  full  implementation 
of  those  measures,  followed  by  a  refocusing  of  fiscal  policies  towards  achieving 
prudent medium-term fiscal positions when economic conditions allow, will contribute 
to preserving fiscal sustainability in the medium term. 

(14)  Based  on  the  Commission  2020  spring  forecast  under  unchanged  policies,  Finland’s 
general government balance is forecast at -7,4% of GDP in 2020 and -3,4% in 2021. 
The  general  government  debt  ratio  is  projected  to  reach  69,4%  of  GDP  in  2020  and 
69,6% in 2021.  

(15)  On 20 May 2020, the Commission issued a report prepared in accordance with Article 
126(3)  of  the  Treaty  due  to  Finland’s  projected  breach  of  the  3%  of  GDP  deficit 
threshold in 2020. Overall, the analysis suggests that the deficit criterion as defined in 
the Treaty and in Regulation (EC) No 1467/1997 is not fulfilled.   

(16) 

In response to the crisis, Finland has taken comprehensive action to support its health 
system  and  its  economy.  For  example,  the  Finnish  government  adopted  several 
supplementary  budgets  and  decided  to  improve  job  security  for  employees,  while 
conditions  for  receiving  unemployment  benefits  have  been  relaxed.  Access  to 
unemployment benefits has been made easier for freelancers and entrepreneurs. Social 
security  measures  amount  to  EUR  1,6  billion.  Direct  business  grants  amounting  to 
EUR  1  billion  have  been  made  available  in  addition  to  EUR  10  billion  in  state-
guaranteed  loans.  The  government  has  temporarily  reduced  the  employer's  pension 
contribution  by  2,6 percentage  points  and  has  allocated  at  least  EUR  1  billion  to  a 
municipal  support  package.  The  Finnish  Financial  Supervisory  Authority  lowered 
Finnish credit institutions’ capital requirements by removing the systemic risk buffer 
and by adjusting credit institution-specific requirements. The government nominated a 
working group led by the Ministry of Finance and the Ministry of Social Affairs and 
Health to prepare Finland's COVID-19 crisis exit strategy. The government adopted a 
staged  exit  plan  in  early  May,  based  on  the  first  report  of  the  working  group.  The 
working group will further propose relevant measures to address the health, social and 
economic  impact  of  the  crisis.  It  has  consulted  social  partners,  municipalities,  civil 
society and environmental organisations. 

(17)  While  Finland  has  shown  a  general  readiness  to  deal  with  the  COVID-19  crisis,  its 
health  system  could  benefit  from  being  made  more  resilient.  Hospital  districts  have 
had  to  reallocate  medical  staff  to  treat  coronavirus  patients  and  deviate  from  the 
previously established legal time limits for non-urgent healthcare. The current system 
of health services delivered by various providers has led to an uneven density of health 
workers  across  the  country.  The  fragmentation  of  service  provision  and  the  unequal 
access  to  social  and  primary  healthcare  services  is  expected  to  remain  an  issue  after 
the  crisis,  particularly  for  unemployed  and  retired  people,  including  persons  with 
disabilities.  With  the  rise  in  unemployment  due  to  the  COVID-19  crisis,  both  short- 
and  medium-term  policy  action  should  be  focused  on  improving  equal  access  to 
primary healthcare. In the medium term, it remains important to pursue the social and 
health reform plans considered by successive Finnish governments, especially as they 
prepare  Finland  for  far-reaching  demographic  changes  and  would  help  the  country 
maintain the quality of its health system in the future while improving its accessibility. 
The long-term sustainability of Finland’s public finances continues to be at risk due to 
the projected rise in ageing costs, in particular social and health care. 

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(18)  According to the Commission forecast, unemployment is expected to rise to 8,3% in 
2020 and recover to 7,7% in 2021. Effective short- and medium-term policy actions, 
designed in close cooperation with the social partners, are needed to curb increases in 
the unemployment rate and to re-integrate into the labour market those who have lost 
their jobs due to the COVID-19 crisis. These efforts should also support groups at risk 
of  poverty  and  social  exclusion,  such  as  the  low-skilled,  persons  with  disabilities, 
people  with  partial  work  ability  and  people  with  a  migrant  background.  Finland  has 
short-time work schemes in place that have put many employees on furlough. Active 
labour  market  policies,  including  upskilling  and  reskilling  measures  could  ensure 
quick  and  sustainable  re-entry  into  the  labour  market.  Subsidised  salaries  could  be 
targeted  and  coupled  with  training  and  follow-up  by  public  employment  services. 
Reskilling and upskilling are key to maintaining the employability of the labour force 
in  an  increasingly  digital  and  green  economy.  The  continuous  learning  reform  could 
help address the need for skills enhancement of adults, including those with low skills, 
in  labour  market-relevant  sectors  such  as  the  Information  and  Communication 
Technology  (ICT)  sector.  In  order  to  provide  the  market  with  the  skills  it  needs  in 
times of demographic and technological changes, it will be important to maintain the 
labour market relevance of education, also by ensuring sufficient university places in 
line with employment foresight  for each sector and region. To avoid aggravating the 
socio-economic situation of the most vulnerable groups in the wake of the COVID-19 
crisis,  addressing  the  digital  divide  will  be  key,  particularly  in  ensuring  that 
disadvantaged learners have access to quality education. The complex benefit system 
creates  barriers  to  taking  up  work.  To  encourage  the  take-up  of  short-time  and  part-
time  work,  the  income  register  containing  real-time  information  on  salaries  and 
benefits  should be efficiently deployed together  with  accelerating the handling times 
of  social  security  benefits.  In  the  medium  term,  it  will  be  important  for  Finland  to 
reform  the  social  benefits  system  to  boost  employment  and  to  prepare  the  country’s 
welfare system for the future. 

(19)  Helping  businesses,  especially  small  and  medium-sized  enterprisess  (SMEs),  to  stay 
afloat during the crisis is essential to stimulating the economy following the lifting of 
the lockdown measures currently in place. Temporary liquidity support through loans, 
grants and guarantees could help tide businesses over this period of high uncertainty 
and substantially lower revenues. In the process of designing and implementing these 
measures the resilience of the banking sector needs to be taken into account.  

(20)  To  foster  the  economic  recovery,  it  will  be  important  to  front-load  mature  public 
investment  projects  and  promote  private  investment,  including  through  relevant 
reforms. Investment in Finland remains below the EU average for categories that most 
support  productivity  growth,  notably  investment  in  equipment  and  in  intellectual 
property.  This  can  limit  the  country’s  long-term  growth  potential  and  weigh  on  its 
competitiveness and recovery. More investment in research and development is a key 
factor  enabling  structural  change  to  favour  knowledge-intensive  sectors  of  the 
economy  and  strengthen  long-term  growth  potential.  The  planned  move  towards 
climate  neutrality  by  2035  also  reflected  in  Finland’s  National  Energy  and  Climate 
Plan  will  require  substantial  investment,  particularly  in  electricity  networks  and  in 
sustainable  transport.  A  new  national  transport  system  for  2021  is  being  developed 
under the lead of a parliamentary steering group. Amid health, environmental, regional 
and  productivity  concerns,  continued  efforts  are  needed  to  roll  out  high-speed 
broadband  and  to  improve  other  digital  infrastructure,  with  a  view  to  rationalise 
logistics and maintain economic activity in remote areas. The programming of the Just 
Transition Fund for the period 2021-2027 could  help Finland to address  some of the 

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challenges  posed  by  the  transition  to  a  climate  neutral  economy,  in  particular  in  the 
territories  covered  by  Annex  D  to  the  country  report7.  This  would  allow  Finland  to 
make the best use of that fund. 

(21)  Finland’s national risk assessment on anti-money laundering is currently outdated and 
will  be  updated  in  2020.  The  Finnish  financial  supervisory  authority  has  recently 
improved its supervisory capacity. However, staffing is still inadequate, and the ‘risk-
based’  approach  to  supervision  is  not  yet  correctly  applied.  While  several  cases  of 
suspected  violations  have  been  investigated,  the  establishment  of  a  dissuasive 
sanctioning policy remains another priority area. Reporting of suspicious transactions 
has sharply increased in recent months and tools within the Financial Intelligence Unit 
appear insufficient to analyse this information. Exchange of information between the 
Financial  Intelligence  Unit  and 
the  financial  supervisory  authority  remains 
insufficient. 

to  address  medium- 

(22)  While the present recommendations focus on tackling the socio-economic impacts of 
the  pandemic  and  facilitating  the  economic  recovery,  the  2019  country-specific 
recommendations adopted by the Council on 9 July 2019 also covered reforms that are 
essential 
structural  challenges.  Those 
recommendations remain pertinent and will continue to be monitored throughout next 
year’s  European  Semester  annual  cycle.  That  also  applies  to  recommendations 
regarding investment-related economic policies. The latter recommendations should be 
taken  into  account  for  the  strategic  programming  of  cohesion  policy  funding  post-
2020, including for mitigating measures and exit strategies with regard to the current 
crisis. 

long-term 

to 

(23)  The  European  Semester  provides  the  framework  for  continuous  economic  and 
employment  policy  coordination  in  the  Union,  which  can  contribute  to  a  sustainable 
economy.  Member  States  have  taken  stock  of  progress  regarding United  Nations’ 
Sustainable  Development  Goals  (SDGs)  implementation  in  their  2020  National 
Reform  Programmes.  By  ensuring  the  full  implementation  of  the  recommendations 
below, Finland will contribute to  the progress  towards the SDGs and to  the common 
effort of ensuring competitive sustainability in the Union.  

(24)  Close coordination between economies in the economic and monetary union is key to 
achieve a swift recovery from the economic impact of the COVID-19. Finland should, 
as  a  Member  State  whose  currency  is  the  euro  –  and  taking  into  account  political 
guidance by the Eurogroup – ensure its policies remain consistent with the euro area 
recommendations and coordinated with those of the other euro area Member States. 

(25) 

In  the  context  of  the  2020  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Finland’s  economic  policy  and  published  it  in  the  2020 
country  report.  It  has  also  assessed  the  2020  Stability  Programme  and  the  2020 
National  Reform  Programme  and  the  follow-up  given  to  the  recommendations 
addressed  to  Finland  in  previous  years.  It  has  taken  into  account  not  only  their 
relevance  for  sustainable  fiscal  and  socioeconomic  policy  in  Finland,  but  also  their 
compliance with Union rules and guidance, given the need to strengthen the Union’s 
overall  economic  governance  by  providing  Union-level  input  into  future  national 
decisions.  

(26) 

In  the  light  of  that  assessment,  the  Council  has  examined  the  2020  Stability 
Programme and its opinion8 is reflected in particular in recommendation (1) below,  

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SWD(2020) 525 final. 

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HEREBY RECOMMENDS that Finland take action in 2020 and 2021 to: 

1. 

2. 

3. 

4. 

In  line  with  the  general  escape  clause,  take  all  necessary  measures  to  effectively 
address the pandemic, sustain the economy and support the ensuing recovery. When 
economic  conditions  allow,  pursue  fiscal  policies  aimed  at  achieving  prudent 
medium-term  fiscal  positions  and  ensuring  debt  sustainability,  while  enhancing 
investment.  Address  shortages  of  health  workers  to  strengthen  the  resilience  of  the 
health system and improve access to social and health services. 

Strengthen  measures  to  support  employment  and  bolster  active  labour  market 
policies. 

Take  measures  to  provide  liquidity  to  the  real  economy,  in  particular  to  small  and 
medium-sized enterprises. Front-load mature public investment projects and promote 
private  investment  to  foster  the  economic  recovery.  Focus  investment  on  the  green 
and  digital  transition,  in  particular  on  clean  and  efficient  production  and  use  of 
energy, sustainable and efficient infrastructure as well as research and innovation.  

Ensure  effective  supervision  and  enforcement  of  the  anti-money  laundering 
framework. 

Done at Brussels, 

For the Council 
The President 

8 

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

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