Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Finland and delivering a Council opinion on the 2023 Stability Programme of Finland
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: Finland, economic policy, economic recovery, economic reform, energy policy, fiscal policy, green economy, labour market, renewable energy, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 24.5.2023  COM(2023) 626 final  Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Finland and delivering a Council opinion on the 2023 Stability Programme of Finland {SWD(2023) 626 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2023 National Reform Programme of Finland and delivering a Council opinion 
on the 2023 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) 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council2,  which 
established  the  Recovery  and  Resilience  Facility,  entered  into  force  on  19  February 
2021. The Recovery and Resilience Facility provides financial support to the Member 
States  for  the  implementation  of  reforms  and  investment,  entailing  a  fiscal  impulse 
financed  by  the  EU.  In  line  with  the  European  Semester  priorities,  it  contributes  to 
economic  and  social  recovery  and  to  the  implementation  of  sustainable  reforms  and 
investments,  in  particular  to  promote  the  green  and  digital  transition  and  make  the 
Member States’ economies more resilient. It also helps strengthen public finances and 
boost  growth  and  job  creation  in  the  medium  and  long  term,  improve  territorial 
cohesion  within  the  EU  and  support  the  continued  implementation  of  the  European 
Pillar of Social Rights. The maximum financial contribution per Member State under 
the Recovery and Resilience Facility was updated on 30 June 2022 in accordance with 
Article 11(2) of Regulation (EU) 2021/241.  

(2) 

On 22 November 2022, the Commission adopted the 2023 Annual Sustainable Growth 
Survey3,  marking  the  start  of  the  2023  European  Semester  for  economic  policy 
coordination. The European Council endorsed the priorities of the survey around the 

1 
2 

3 

OJ L 209, 2.8.1997, p. 1. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17). 
COM(2022) 780 final. 

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four  dimensions  of  competitive  sustainability  on  23  March  2023.  On  22  November 
2022,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the  Commission  also  adopted 
the 2023 Alert Mechanism Report, in which it did not identify Finland as one of the 
Member States that may be affected or may be at risk of being affected by imbalances, 
and for which an in-depth review would be needed. On the same date, the Commission 
also adopted an opinion on Finland’s 2023 draft budgetary plan. The Commission also 
adopted a recommendation for a Council recommendation on the economic policy of 
the euro area, which the Council adopted on 16 May 2023, as well as the proposal for 
the 2023 Joint Employment Report analysing the implementation of the Employment 
Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights,  which  the 
Council adopted on 13 March 2023.  

(3)  While the EU economies  are showing remarkable resilience, the  geopolitical  context 
continues  to  have  a  negative  impact.  As  the  EU  stands  firmly  with  Ukraine,  the  EU 
economic  and  social  policy  agenda  is  focused  on  reducing  the  negative  impact  of 
energy shocks on both vulnerable households and companies in the short term, and on 
keeping  up  efforts  to  deliver  on  the  green  and  digital  transition,  support  sustainable 
and inclusive growth, safeguard macroeconomic stability and increase resilience in the 
medium  term.  It  also  focuses  heavily  on  increasing  the  EU’s  competitiveness  and 
productivity. 

(4) 

(5) 

On  1  February  2023,  the  Commission  issued  the  Communication  A  Green  Deal 
Industrial  Plan  for  the  Net-Zero  Age4  to  boost  the  competitiveness  of  the  EU’s  net-
zero  industry  and  support  the  fast  transition  to  climate  neutrality.  The  plan 
complements  ongoing  efforts  under  the  European  Green  Deal  and  REPowerEU.  It 
aims to provide a more supportive environment for scaling up the EU’s manufacturing 
capacity  for  the  net-zero  technologies  and  products  required  to  meet  the  EU’s 
ambitious climate targets, as well as ensuring access to relevant critical raw materials, 
including  by  diversifying  sourcing,  properly  exploiting  geological  resources  in 
Member States and maximising the recycling  of raw materials. The plan  is  based on 
four pillars:  a predictable and simplified regulatory  environment,  speeding up access 
to finance, enhancing skills, and open trade for resilient supply chains.  On 16 March 
2023, the Commission  also  issued the Communication  Long-term  competitiveness  of 
the EU: looking beyond 20305, structured along nine mutually reinforcing drivers with 
the objective to work towards a growth enhancing regulatory framework. It sets policy 
priorities aimed at actively ensuring structural improvements, well focused investment 
and regulatory measures for the long-term competitiveness of the EU and its Member 
States. The recommendations below help address those priorities. 

In 2023, the European Semester for economic policy coordination continues to evolve 
in  line  with  the  implementation  of  the  Recovery  and  Resilience  Facility.  Fully 
implementing  the  recovery  and  resilience  plans  remains  essential  for  delivering  the 
policy priorities under the European Semester, as the plans address all or a significant 
subset  of  the  relevant  country-specific  recommendations  issued  in  recent  years.  The 
2019, 2020 and 2022 country-specific recommendations remain equally relevant also 
for  recovery  and  resilience  plans  revised,  updated  or  amended  in  accordance  with 
Articles 14, 18 and 21 of Regulation (EU) 2021/241.  

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COM(2023) 62 final.  
COM(2023) 168 final.  

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(6) 

(7) 

(8) 

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8 

The REPowerEU Regulation6 adopted on 27 February 2023 aims to rapidly phase out 
the  EU’s  dependence  on  Russian  fossil  fuel  imports.  This  will  contribute  towards 
energy security and the diversification of the EU’s energy supply, while increasing the 
uptake of renewables, energy storage capacities and energy efficiency. The Regulation 
enables  Member  States  to  add  a  new  REPowerEU  chapter  to  their  national  recovery 
and  resilience  plans  in  order  to  finance  key  reforms  and  investments  that  will  help 
achieve the REPowerEU objectives. They will also help boost the competitiveness of 
the EU’s net-zero industry as outlined in the Green Deal  Industrial Plan for the Net-
Zero Age and address the energy-related country-specific recommendations issued to 
the  Member  States  in  2022  and,  where  applicable,  in  2023.  The  REPowerEU 
Regulation  introduces  a  new  category  of  non-repayable  financial  support,  made 
available  to  Member  States  to  finance  new  energy-related  reforms  and  investments 
under their recovery and resilience plans.  

On 8 March 2023, the Commission adopted a communication providing fiscal policy 
guidance for 2024. It aims to support the preparation of Member States’ stability and 
thereby  strengthen  policy  coordination7.  The 
convergence  programmes  and 
Commission recalled that the general escape clause of the Stability and Growth Pact 
will be deactivated at  the end of 2023.  It  called  for fiscal  policies in  2023-2024 that 
ensure  medium-term  debt  sustainability  as  well  as  raise  potential  growth  in  a 
sustainable manner. Member States were invited to set out in their 2023 stability and 
convergence programmes how their fiscal plans will ensure that the 3% of GDP deficit 
reference value is adhered to as well as plausible and continuous debt reduction, or for 
debt  to  be  kept  at  prudent  levels  in  the  medium  term.  The  Commission  invited 
Member States to phase out national fiscal measures introduced to protect households 
and  firms  from  the  energy  price  shock,  starting  with  the  least  targeted  ones.  It 
indicated that, if support measures needed to be extended because of renewed energy 
price  pressures,  Member  States  should  target  such  measures  much  better  than  in  the 
past  towards  vulnerable  households  and  firms.  The  Commission  proposed  that  the 
fiscal  recommendations would be quantified and differentiated and be formulated on 
the basis of net primary expenditure, as proposed in its Communication on orientations 
for  a  reform  of  the  EU  economic  governance  framework8.  It  recommended  that  all 
Member States should  continue to  protect  nationally  financed investment and ensure 
the  effective  use  of  the  Recovery  and  Resilience  Facility  and  other  EU  funds,  in 
particular  in  light  of  the  green  and  digital  transition  and  resilience  objectives.  The 
Commission  indicated  that  it  will  propose  to  the  Council  to  open  deficit-based 
excessive deficit procedures in spring 2024 on the basis of the outturn data for 2023, in 
line with existing legal provisions. 

On  26  April  2023,  the  Commission  presented  legislative  proposals  to  implement  a 
comprehensive  reform of the EU's economic  governance rules.  The central  objective 
of the proposals is to strengthen public debt sustainability and promote sustainable and 
inclusive growth in all Member States through reforms and investment. The proposals 
aim at providing Member States with more control over the design of their medium-
term plans, while putting in place a more stringent enforcement regime to ensure that 

Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council  of  27  February  2023 
amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans 
and  amending  Regulations  (EU)  No  1303/2013,  (EU)  2021/1060  and  (EU)  2021/1755,  and  Directive 
2003/87/EC (OJ L 63, 28.2.2023, p. 1). 
COM(2023) 141 final. 
COM(2022) 583 final. 

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(9) 

Member  States  deliver  on  the  commitments  they  undertake  in  their  medium-term 
fiscal-structural plans. The objective is to conclude the legislative work in 2023. 

On  27  May  2021,  Finland  submitted  its  national  recovery  and  resilience  plan  to  the 
Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241. Pursuant 
to  Article  19  of  Regulation  (EU)  2021/241,  the  Commission  assessed  the  relevance, 
effectiveness,  efficiency  and  coherence  of  the  recovery  and  resilience  plan,  in 
accordance  with  the  assessment  guidelines  of  Annex  V  to  that  Regulation.  On  29 
October 2021, the Council adopted its Decision on the approval of the assessment of 
the recovery and resilience plan for Finland9. The release of instalments is conditional 
on  a  decision  by  the  Commission,  taken  in  accordance  with  Article  24(5)  of 
Regulation  (EU)  2021/241,  that  Finland  has  satisfactorily  fulfilled  the  relevant 
milestones  and  targets  set  out  in  the  Council  Implementing  Decision.  Satisfactory 
fulfilment  presupposes  that  the  achievement  of  preceding  milestones  and  targets  has 
not been reversed.  

(10)  On  23  March  2023,  Finland  submitted  its  2023  National  Reform  Programme  and 
Stability Programme, in line with Article 4(1) of Regulation (EC) No 1466/97. To take 
account  of  their  interlinkages,  the  two  programmes  have  been  assessed  together.  In 
accordance with  Article  27 of Regulation  (EU) 2021/241,  the 2023 National  Reform 
Programme  also  reflects  Finland’s  biannual  reporting  on  the  progress  made  in 
achieving its recovery and resilience plan.   

in 

addressing 

(11)  The Commission published the 2023 country report for Finland10 on 24 May 2023. It 
assessed  Finland’s  progress 
country-specific 
recommendations adopted by the Council between 2019 and 2022, and took stock of 
Finland’s implementation of the recovery and resilience plan. Based on this analysis, 
the  country  report  identified  gaps  with  respect  to  those  challenges  that  are  not 
addressed  or  only  partially  addressed  by  the  recovery  and  resilience  plan,  as  well  as 
new and emerging challenges. It also assessed Finland’s progress on implementing the 
European  Pillar  of  Social  Rights  and  on  achieving  the  EU  headline  targets  on 
employment, skills and poverty reduction, as well as progress in  achieving the UN’s 
Sustainable Development Goals.   

relevant 

the 

(12)  Based on data validated by Eurostat,11 Finland’s general government deficit decreased 
from 2.8% of GDP in 2021 to 0.9% in 2022, while general government debt rose from 
72.6% of GDP at the end of 2021 to 73.0% at the end of 2022. On 24 May 2023, the 
Commission published a report under Article 126(3) TFEU;12 the report discussed the 
budgetary  situation  of  Finland,  as  its  general  government  debt  in  2022  exceeded  the 
60% of GDP Treaty reference value and did not respect the debt reduction benchmark. 
The  report  concluded  that  the  debt  criterion  was  not  fulfilled.  In  line  with  the 
Communication  of  8  March  2023,13  the  Commission  did  not  propose  to  open  new 
excessive  deficit  procedures  in  spring  2023;  in  turn,  the  Commission  stated  that  it 
would  propose  to  the  Council  to  open  deficit-based  excessive  deficit  procedures  in 

9 

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11 

12 

13 

Council Implementing Decision of 25 October 2021 on the approval of the assessment of the recovery 
and resilience plan for Finland (ST 12524/21; ST 12524/21 ADD 1). 
SWD(2023) 626 final. 
Eurostat-Euro Indicators, 47/2023, 21.4.2023 

COM(2023) 631 final, 24.5.2023. 

COM(2023) 141 final, 8.3.2023. 

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spring 2024, on the basis of the outturn data for 2023. Finland should take account of 
this in the execution of its 2023 budget and in preparing the Draft Budgetary Plan for 
2024. 

(13)  The  general  government  balance  has  been  impacted  by  the  fiscal  policy  measures 
adopted to mitigate the economic and social impact of the increase in energy prices. In 
2022, such revenue-decreasing measures included a temporary increase of deductible 
commuting expenses and an increase in  household  tax deductions on heating system 
renovations; while such expenditure-increasing measures included an index increase in 
social  benefits  and  the  payment  of  additional  child  benefits,  aiming  to  improve  the 
purchasing power of low-income households and address the inflation-induced costs. 
The Commission estimates the net budgetary cost of these measures at 0.1% of GDP 
in  2022.  The  general  government  balance  has  also  been  impacted  by  the  budgetary 
cost of temporary protection to displaced persons from Ukraine, which is estimated at 
0.1% of GDP in 2022. At the same time, the estimated cost of COVID-19 temporary 
emergency measures dropped to 0.2% of GDP in 2022, from 2.0% in 2021. 

(14)  On  18  June  2021,  the  Council  recommended  that  in  2022  Finland14  maintain  a 
supportive  fiscal  stance,  including  from  the  impulse  provided  by  the  Recovery  and 
Resilience Facility, and preserve nationally financed investment. 

(15)  According  to  the  Commission  estimates,  the  fiscal  stance15  in  2022  was  broadly 
neutral,  at -0.1% of GDP,  as recommended by the Council. As recommended by the 
Council, Finland continued to support the recovery with investments to be financed by 
the  Recovery  and  Resilience  Facility.  Expenditure  financed  by  Recovery  and 
Resilience  Facility  grants  and  other  EU  funds  amounted  to  0.3%  of  GDP  in  2022 
(0.2%  of  GDP  in  2021).  Nationally  financed  investment  provided  a  neutral 
contribution of 0.0 percentage points to the fiscal stance.16 Finland therefore preserved 
nationally financed investment, as recommended by the Council. At the same time, the 
growth  in  nationally  financed  primary  current  expenditure  (net  of  new  revenue 
measures) provided a broadly neutral contribution of 0.1 percentage points to the fiscal 
stance.  Finland  therefore  sufficiently  kept  under  control  the  growth  in  nationally 
financed current expenditure. 

(16)  The macroeconomic scenario underpinning the budgetary projections in  the Stability 
Programme is realistic in both 2023 and 2024. The government projects real GDP to 
slightly contract by 0.2% in 2023 and then to grow by 1.3% in 2024. By comparison, 
the Commission 2023 spring forecast projects a positive real GDP growth of 0.2% in 
2023  and  1.4%  in  2024.  Both  sets  of  forecasts  project  net  exports  to  be  the  main 
growth driver in  2023,  while in  2024 a more broad-based improvement  in  economic 
performance is anticipated as domestic demand is set to recover as well. 

14 

15 

16 

Council  Recommendation  of  18  June  2021  delivering  a  Council  opinion  on  the  2021  Stability 
Programme of Finland, OJ C 304, 29.7.2021, p. 126. 
The  fiscal  stance  is  measured  as  the  change  in  primary  expenditure  (net  of  discretionary  revenue 
measures), excluding Covid-19 crisis-related temporary emergency measures but including expenditure 
financed  by  non-repayable  support  (grants)  from  the  Recovery  and  Resilience  Facility  and  other  EU 
funds, 
in 
the Fiscal Statistical Tables.   
Other nationally financed capital expenditure provided an expansionary contribution of 0.2 percentage 
points of GDP. 

growth. For  more 

to  medium-term 

see  Box 1 

potential 

relative 

details 

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(17) 

In its 2023 Stability Programme, the government expects that the general government 
deficit  ratio  will  increase  to  2.6%  of  GDP  in  2023.  The  increase  in  2023  mainly 
reflects  the  indexation  of  social  benefits,  central  government  funding  to  local 
authorities, higher interest expenses, as well as additional defence spending and R&D-
related  investments.  According  to  the  Programme,  the  general  government  debt-to-
GDP ratio is expected to increase from 73.0% at the end of 2022 to 74.4% at the end 
of 2023. The Commission 2023 spring forecast projects a government deficit of 2.6% 
of GDP for 2023. This is in line with the deficit projected in the Stability Programme. 
The  Commission  2023  spring  forecast  projects  a  lower  general  government  debt-to-
GDP  ratio,  of  73.9%  at  the  end  of  2023.  The  difference  is  due  to  a  slightly  higher 
deflator assumed by the Commission 2023 spring forecast. 

(18)  The government balance in 2023 is expected to continue to be impacted by the fiscal 
measures adopted to mitigate the economic and social impact of the increase in energy 
prices.  They  consist  of  measures  extended  from  2022  (in  particular:  additional 
temporary increases of deductible commuting expenses and household tax deductions 
on heating system renovations) and new measures such as temporary reimbursements 
on  electricity  bills  and  tax  credits  on  electricity,  as  well  as  a  temporary  VAT  rate 
reduction  on  electricity.  The  cost  of  these  measures  is  partly  offset  by  taxes  on 
windfall  profits  of  energy  suppliers,  namely  a  temporary  profit  tax  for  electricity 
companies. Taking these revenues into account, the net budgetary cost of the support 
measures  is  projected  in  the  Commission  2023  spring  forecast  at  0.3%  of  GDP  in 
202317.  Most  measures  in  2023  do  not  appear  targeted  to  the  most  vulnerable 
households  or  firms,  and  do  not  fully  preserve  the  price  signal  to  reduce  energy 
demand  and  increase  energy  efficiency.  As  a  result,  the  amount  of  targeted  support 
measures,  to  be  taken  into  account  in  the  assessment  of  compliance  with  the 
recommendation  for  2023,  is  estimated  in  the  Commission  2023  spring  forecast  at 
0.1%  of  GDP  in  2023  (compared  to  0.0%  of  GDP  in  2022).  The  budgetary  cost  of 
temporary protection to displaced persons from Ukraine is projected to increase by 0.2 
percentage points of GDP compared to 2022. 

(19)  On  12  July  2022,  the  Council  recommended18  that  Finland  take  action  to  ensure  in 
2023 that the growth of nationally financed primary current expenditure is in line with 
an  overall  neutral  policy  stance19,  taking  into  account  continued  temporary  and 
targeted support to households and firms most vulnerable to energy price hikes and to 
people  fleeing  Ukraine.  Finland  should  stand  ready  to  adjust  current  spending  to  the 
evolving situation. Finland was also recommended to expand public investment for the 
green  and  digital  transitions,  and  for  energy  security  taking  into  account  the 
REPowerEU  initiative,  including  by  making  use  of  the  Recovery  and  Resilience 
Facility and other EU funds. 

(20) 

In  2023,  the  fiscal  stance  is  projected  in  the  Commission  2023  spring  forecast  to  be 
expansionary  (-1.0%  of  GDP),  in  a  context  of  high  inflation.  This  follows  a  broadly 
neutral  in  2022  (-0.1%  of  GDP).  The  growth  in  nationally  financed  primary  current 
expenditure (net of discretionary revenue measures) in 2023 is projected to provide an 

17 

18 

19 

The  figure represents the level of annual budgetary cost of those  measures, including current revenue 
and expenditure as well as – where relevant – capital expenditure measures. 
Council  Recommendation  of  12  July  2022  on  the  National  Reform  Programme  of  Finland  and 
delivering a Council opinion on the 2022 Stability Programme of Finland, OJ C 334, 1.9.2022, p. 213. 
Based  on  the  Commission  spring  2023  forecast,  the  medium-term  (10-year  average)  potential  output 
growth of Finland, which is used to measure the fiscal stance, is estimated at 5.6% in nominal terms. 

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expansionary  contribution  of  0.6%  of  GDP  to  the  fiscal  stance.  This  includes  the 
broadly  stable  costs  of  the  targeted  support  measures  to  households  and  firms  most 
vulnerable to energy price hikes. This also includes the higher costs to offer temporary 
protection  to  displaced  persons  from  Ukraine  (by  0.2%  of  GDP).  The  expansionary 
contribution  of  nationally  financed  net  primary  current  expenditure  is  therefore  only 
partly due to the targeted support to households and firms most vulnerable to energy 
price  hikes  and  to  people  fleeing  Ukraine.  The  expansionary  growth  in  nationally 
financed  primary  current  expenditure  (net  of  discretionary  revenue  measures)  is  also 
driven  by  the  indexation  of  social  benefits,  central  government  funding  to  local 
authorities,  as  well  as  additional  defence  spending  and  R&D-related  investments.  In 
sum, the projected growth of nationally financed primary current expenditure is not in 
line  with  the  Council  recommendation.  Expenditure  financed  by  Recovery  and 
Resilience  Facility  grants  and  other  EU  funds  amounted  to  0.4%  of  GDP  in  2023, 
while  nationally  financed  investment  provided  an  expansionary  contribution  to  the 
fiscal stance of 0.4 percentage points20. Therefore, Finland plans to finance additional 
investment through the Recovery and Resilience Facility and it is projected to preserve 
nationally financed investment. It plans to finance public investment for the green and 
digital  transitions,  and  for  energy  security,  such  as  subsidies  for  the  replacement  of 
fossil oil boilers and electric vehicle charging points, and electricity networks, and the 
Digirail project aiming to renew the train control system, the Virtual Finland portal to 
facilitate  labour-based  immigration  and  the  real-time  economy  (RTE)  project  aiming 
to  digitise  business  transactions,  which  are  partly  funded  by  the  Recovery  and 
Resilience Facility and other EU funds. 

(21)  According  to  the  Stability  Programme  the  general  government  deficit  is  expected  to 
remain at 2.6% of GDP in 2024. Tax revenue growth is expected to slow down while 
interest  expenses  are  expected  to  be  higher.  The  programme  expects  the  general 
government  debt-to-GDP  ratio  to  increase  to  76.9%  at  the  end  of  2024.  Based  on 
policy measures known at the cut-off date of the forecast, the Commission 2023 spring 
forecast projects a government deficit of 2.6% of GDP in 2024. This is in line with the 
deficit projected in  the programme. The Commission  2023 spring forecast  projects  a 
lower general government debt-to-GDP ratio, of 76.2% at the end of 2024. 

(22)  The  Stability  Programme  envisages  the  phasing  out  of  all  of  the  energy  support 
measures  in  2024.  The  Commission  currently  assumes  full  phasing  out  of  energy 
support  measures  in  2024.  This  hinges  upon  the  assumption  of  no  renewed  energy 
price increases. 

(23)  Council Regulation (EC) No 1466/97 calls for an annual improvement in the structural 
budget balance toward the medium-term objective by 0.5% of GDP as a benchmark.21 
Taking  into  account  fiscal  sustainability  considerations,22  an  improvement  in  the 

20 

21 

22 

Other  nationally  financed  capital  expenditure  is  projected  to  provide  a  neutral  contribution  of  0.0 
percentage points of GDP. 
Cf. Article 5 of Council Regulation (EC) No 1466/97, which also requires an adjustment of more than 
0.5%  of  GDP  for  Member  States  with  a  government  debt  exceeding  60%  of  GDP,  or  with  more 
pronounced debt sustainability risks. 
The  Commission  estimated  that  Finland  would  need  an  average  annual  increase  in  the  structural 
primary  balance  as  a  share  of  GDP  of  0.2  percentage  points  to  achieve  a  plausible  debt  reduction 
orensure that government debt is kept at prudent levels in the medium term. This estimate was based on 
the  Commission  autumn  2022  forecast.  The  starting  point  for  this  estimate  was  the  projected 
government  deficit  and  debt  for  2024  which  assumed  the  withdrawal  of  energy  support  measures  in 
2024.  

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structural balance of at least 0.3% of GDP for 2024 would be appropriate. To ensure 
such  an  improvement,  the  growth  in  net  nationally  financed  primary  expenditure  in 
2024 should not exceed 2.2%, as reflected in this recommendation. At the same time, 
the  remaining  energy  support  measures  (currently  estimated  by  the  Commission  at 
0.3% of GDP in 2023) should be phased out, and starting from the least targeted ones, 
contingent on energy market developments, and the related savings should be used to 
reduce the government deficit. According to the Commission 2023 spring forecast, the 
growth  in  net  nationally  financed  primary  current  expenditure  in  2023  is  not  in  line 
with  the  recommendation  of  the  Council.  If  this  is  confirmed,  lower  growth  in  net 
primary expenditure in 2024 would be appropriate. 

(24)  Assuming  unchanged  policies,  the  Commission  2023  spring  forecast  projects  net 
nationally financed primary expenditure to grow at 2.8% in 2024, which is above the 
recommended growth rate.  

(25)  According to the programme, government investment is expected to remain at 4.5% of 
GDP  in  2023  and  2024.  This  reflects  nationally  financed  investment  and  investment 
financed  by  the  EU,  namely  through  the  Recovery  and  Resilience  Facility.  The 
programme refers to reforms and investments, that are expected to contribute to fiscal 
sustainability  and  sustainable  and  inclusive  growth.  These  include  the  health  and 
social  services  reform,  which  is  also  part  of  the  Recovery  and  Resilience  Plan, 
although estimates on future savings to be derived from the reform are still uncertain. 

(26)  The Stability Programme outlines a medium-term fiscal path until 2027. According to 
the programme, the general government deficit is expected to increase to 3.1% of GDP 
in 2025 and to subsequently slightly decline to 2.9% by 2026. The general government 
deficit  is  therefore  planned  to  be  below  3%  of  GDP  in  2026.  According  to  the 
programme,  the  general  government  debt-to-GDP  ratio  is  expected  to  increase  from 
76.9% at the end of 2024 to 80.7% by the end of 2026. 

(27)  Finland has an effective and inclusive social welfare system with a high level of social 
protection, but  it is  complex and includes some incentive traps.  In 2020, a dedicated 
parliamentary committee was tasked with  designing the reform of the social security 
system by 2027. In January 2022, the committee published the results of its problem 
mapping work and, in March 2023, it presented its interim report, which contained 31 
proposals  for  studies,  legislative  drafting  and  development  projects  for  future 
governments. The next steps would include initiating legislative work for streamlining 
the  system  and  for  increasing  incentives  to  work,  while  preserving  social  protection 
and  raising  the  employment  rate.  The  continuation  of  the  work  to  reform  the  social 
security  system  is  important  for  supporting  the  long-term  sustainability  of  public 
finances. 

(28) 

In accordance with Article 19(3), point (b), and Annex V, criterion 2.2 of Regulation 
(EU) 2021/241, the recovery and resilience plan includes an extensive set of mutually 
reinforcing reforms and investments to be implemented by 2026. The implementation 
of  Finland’s  recovery  and  resilience  plan  is  underway.  Still,  the  Operational 
Arrangements  between  the  Commission  and  Finland  have  not  been  signed  yet.  This 
step  is  necessary  for  the  submission  of  the  first  payment  request  under  the  recovery 
and resilience plan and to allow Finland to catch up with the agreed payment request 
schedule.  Finland  submitted  an  amendment  of  its  plan  in  January  2023,  which  was 
approved by the Council on 14 March 2023. This amendment was done in the context 
of the update of the maximum financial contribution available for Member States from 
the Recovery and Resilience Facility and consisted in reducing funding proportionally 

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across the four pillars of the plan. To cater for the funding under REPowerEU, another 
amendment  to  the  RRP  is  planned  in  2023.  The  swift  inclusion  of  the  new 
REPowerEU chapter in the recovery and resilience plan will allow additional reforms 
and investments to be financed in support of Finland’s strategic objectives in the field 
of energy and the green transition. The systematic and effective involvement of local 
and  regional  authorities,  social  partners  and  other  relevant  stakeholders  remains 
important  for  the  successful  implementation  of  the  recovery  and  resilience  plan,  as 
well  as  other  economic  and  employment  policies  going  beyond  the  plan,  to  ensure 
broad ownership of the overall policy agenda.   

(29)  The  Commission  approved  Finland’s  cohesion  policy  programming  documents  in 
2022. Proceeding with the swift implementation of the cohesion policy programmes in 
complementarity  and  synergy  with  the  recovery  and  resilience  plan,  including  the 
REPowerEU  chapter,  is  key  to  achieving  the  green  and  digital  transition,  increasing 
economic and social resilience as well as achieving balanced territorial development in 
Finland.  

(30)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan,  Finland  faces  a  number  of  additional  challenges  related  to  skills  shortages, 
education and training policies, energy policy and the green transition.    

(31)  While  the  Finnish  labour  market  performed  strongly  in  2022,  the  number  of  open 
vacancies  has  increased  rapidly,  reflecting  skills  mismatches  and  labour  shortages 
across  different  sectors,  in  particular  services,  construction,  ICT  and  technology, 
education,  healthcare  and  social  care.  The  supply  of  skilled  labour  is  constrained  by 
the  relatively  low  number  of  higher  education  graduates  in  the  study  fields  most  in 
demand in the labour market, as well as a relatively low level of labour immigration. 
At the same time, tertiary  educational  attainment for people aged 25-34 is below the 
EU average. Labour and skills shortages pose challenges to Finland’s competitiveness 
and long-term growth and will be further aggravated by population ageing, relatively 
low regional labour mobility and the increased demand for new skills in the context of 
the green and digital transition. 

(32)  Finland’s  new  Climate  Act  entered  into  force  on  1  July  2022,  anchoring  in  national 
law Finland’s objective to become the first fossil-free welfare society by 2035, as well 
as setting climate targets for 2030, 2040 and 2050. However, the Finnish economy is 
still  among  the  most  energy-intensive  in  the  EU.  Energy,  industry,  transport  and 
buildings  are  the  main  sectors  that  will  need  to  contribute  to  major  reductions  in 
greenhouse  gas  emissions.  In  2021,  renewable  energy  sources  made  up  a  significant 
part of Finland’s energy mix, reaching 43%, followed by oil at 24%, nuclear at 17% 
and  coal  at  9%.  Russia  remains  an  important  source  of  nuclear  fuel.  Finland’s 
consumption of natural  gas has  dropped by  56%  in  the period  between  August  2022 
and March 2023, compared with the average gas consumption over the same period in 
the preceding 5 years, beyond the 15% reduction target. Finland could keep pursuing 
efforts to temporarily reduce gas demand until 31 March 202423. 

(33)  Challenges  to  achieve  long-term  climate  objectives  include  a  significant  private  and 
public investment gap in the main emitting sectors as well as delays in the deployment 
of  renewable  energy  investment,  caused  by  a  backlog  of  environmental  permit 
applications  in  need  of  processing.  Further  streamlining  permitting  procedures  is 

23 

Council Regulation (EU) 2022/1369 and Council Regulation (EU) 2023/706.    

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needed to clear the backlog of pending energy projects and facilitate additional priority 
investment. 

(34)  High energy prices and ambitious climate targets require faster and higher investment 
in decarbonisation. Despite faster than anticipated growth in electric vehicle sales, the 
necessary  investment  in  the  further  roll-out,  particularly  the  electrification  of  heavy-
duty  vehicles,  is  unlikely  to  happen  on  market  terms  due  to  the  long  distances  and 
sparsely  populated  areas  that  characterise  Finland.  Approximately  40%  of  the  rail 
network is still not electrified. 

(35)  To improve security of supply, Finland’s national transmission of electricity could be 
strengthened.  Renewable  energy  is  increasingly  produced  away  from  the  centres  of 
consumption. While Finland has acted decisively to reduce its dependence on Russian 
imports of oil, coal and gas, one of the two nuclear power plants in Finland remains 
entirely  dependent  on  Russian  fuel.  Strong  interconnections  between  Finland  and 
neighbouring  countries  are  needed  to  ensure  a  well-functioning  electricity  market  in 
the  whole  region  and  increase  the  projected  contribution  of  renewable  energy  to  the 
energy mix.   

(36)  Labour  and  skills  shortages  in  sectors  and  occupations  key  for  the  green  transition, 
including  manufacturing,  deployment  and  maintenance  of  net-zero  technologies,  are 
creating bottlenecks in the transition to a net-zero economy. In 2022, labour shortages 
were reported in Finland for 37 occupations that required specific skills or knowledge 
for  the  green  transition,  including  insulation  workers,  civil  engineers,  and  plumbers 
and pipe fitters. High-quality education and training systems that respond to changing 
labour  market  needs  and  targeted  upskilling  and  reskilling  measures  are  key  to 
reducing skills shortages and promoting labour inclusion and reallocation. To unlock 
untapped  labour  supply,  these  measures  need  to  be  accessible,  in  particular  for 
individuals and in sectors and regions most affected by the green transition.  

(37) 

(38) 

In light of the Commission’s assessment, the Council has examined the 2022 Stability 
Programme and its opinion24 is reflected in recommendation (1) below.   

In view of the close interlinkages between the economies of euro area Member States 
and  their  collective  contribution  to  the  functioning  of  the  Economic  and  Monetary 
Union, the Council recommended that euro area Member States take action, including 
through  their  recovery  and  resilience  plans,  to  (i)  preserve  debt  sustainability  and 
refrain  from  broad-based  support  to  aggregate  demand  in  2023,  better  target  fiscal 
measures taken to mitigate the impact of high energy prices and reflect on appropriate 
ways to wind down support as energy price pressures diminish; (ii) sustain high public 
investment and promote private investment to support the green and digital transition; 
(iii)  support  wage  developments  that  mitigate  the  loss  in  purchasing  power  while 
limiting  second-round  effects  on  inflation,  further  improve  active  labour  market 
policies  and  address  skills  shortages;  (iv)  improve  the  business  environment  and 
ensure that energy support to companies is cost-effective, temporary, targeted to viable 
firms  and  that  it  maintains  incentives  for  the  green  transition;  and  (v)  preserve 
macro-financial  stability  and  monitor  risks  while  continuing  to  work  on  completing 
the Banking  Union.  For  Finland, recommendations (1),  (2),  (3)  and (4) contribute to 
the implementation of the first, second, and third euro area recommendations. 

24 

Under Articles 5(2) and 9(2) of Council Regulation (EC) No 1466/97. 

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HEREBY RECOMMENDS that Finland take action in 2023 and 2024 to:  

1. 

Wind  down  the  energy  support  measures  in  force  by  the  end  of  2023,  using  the 
related  savings  to  reduce  the  government  deficit.  Should  renewed  energy  price 
increases  necessitate  support  measures,  ensure  that  these  are  targeted  at  protecting 
vulnerable  households  and  firms,  fiscally  affordable,  and  preserve  incentives  for 
energy savings. 

Ensure  prudent  fiscal  policy,  in  particular  by  limiting  the  nominal  increase  in 
nationally financed net primary expenditure in 2024 to not more than 2.2%. 

Preserve nationally financed public investment and ensure the effective absorption of 
RRF  grants  and  other  EU  funds,  in  particular  to  foster  the  green  and  digital 
transitions.  

For  the  period  beyond  2024,  continue  to  pursue  a  medium-term  fiscal  strategy  of 
gradual  and  sustainable  consolidation,  combined  with  investments  and  reforms 
conducive  to  higher  sustainable  growth,  to  achieve  a  prudent  medium-term  fiscal 
position.  

Pursue the reform of the social security system to increase the efficiency of the social 
benefits system, which would improve incentives to work and also support the long-
term sustainability of public finances.  

Proceed  with  the  steady  implementation  of  its  revised  recovery  and  resilience  plan 
and  swiftly  finalise  the  REPowerEU  chapter  with  a  view  to  rapidly  starting  its 
implementation.  Proceed  with  the  swift  implementation  of  cohesion  policy 
programmes, in close complementarity and synergy with the recovery and resilience 
plan.  

Address  labour  and  skills  shortages  by  reskilling  and  upskilling  the  workforce  and 
widening the higher education offer, in particular for the study fields most in demand 
in the labour market. 

Reduce overall reliance on fossil fuels by accelerating the deployment of renewables, 
including by further speeding up permitting procedures, and boost public and private 
investment  in  the  decarbonisation  of  industry  and  transport,  including  through 
electrification.  Develop  energy  infrastructure  to  increase  security  of  supply  by 
strengthening  the  transmission  of  electricity.  Step  up  policy  efforts  aimed  at  the 
provision and acquisition of the skills needed for the green transition. 

2. 

3. 

4. 

Done at Brussels, 

For the Council 
The President 

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