Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Finland
Date: 2024-06-19
Institutions: European Commission, Secretariat-General
Subjects: Finland, budget policy, economic policy, economic recovery, economic reform, employment policy, professional qualifications, social change, social policy, stability pact

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   EUROPEAN COMMISSION  Brussels, 19.6.2024  COM(2024) 626 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Finland {SWD(2024) 600 final} - {SWD(2024) 626 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the economic, social, employment, structural and budgetary policies 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 Regulation (EU) 2024/1263 of the European Parliament and of the Council 
of  29  April  2024  on  the  effective  coordination  of  economic  policies  and  on  multilateral 
budgetary surveillance and repealing Council Regulation (EC) No 1466/971, and in particular 
Article 3(3) 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) 

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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 helps achieve the 
economic  and  social  recovery  and  implement  sustainable  reforms  and  investment,  in 
particular, to promote the green and digital transitions 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  REPowerEU  Regulation3,  adopted  on  27  February  2023,  aims  to  phase  out  the 
EU’s  dependency  on  Russian  fossil  fuel  imports.  This  would  help  achieve  energy 
security  and  diversify  the  EU’s  energy  supply,  while  increasing  the  uptake  of 

the  Recovery  and  Resilience  Facility 

OJ L 2024/1263, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/oj. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
(OJ  L  57,  18.2.2021,  p.  17),  ELI: 
establishing 
http://data.europa.eu/eli/reg/2021/241/oj. 
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), ELI: http://data.europa.eu/eli/reg/2023/435/oj. 

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(3) 

(4) 

(5) 

renewables,  energy  storage  capacities  and  energy  efficiency.  Finland  added  a  new 
REPowerEU chapter to its national recovery and resilience plan in order to finance key 
reforms and investments that will help achieve the REPowerEU objectives. 

On  16  March  2023,  the  Commission  issued  a  Communication  on  the  ‘Long-term 
competitiveness of the EU: looking beyond 2030’4, in order to inform policy decisions 
and  create  the  framework  conditions  for  increasing  growth.  The  Communication 
frames competitiveness along nine mutually reinforcing drivers. Among these drivers, 
access to private capital, research and innovation, education and skills, and the single 
market  emerge  as  paramount  policy  priorities  for  reform  and  investment  to  address 
current productivity challenges as well as to build up the long-term competitiveness of 
the EU and its Member States.  On 14 February  2024, the Commission  followed this 
Communication  with  the  Annual  Single  Market  and  Competitiveness  Report5.  The 
report  details  the  competitive  strengths  and  challenges  of  Europe's  Single  Market, 
tracking yearly developments according to the nine competitiveness drivers identified.   

On 21 November 2023, the Commission adopted the 2024 Annual Sustainable Growth 
Survey6, marking the start of the 2024 cycle of the European Semester for economic 
policy  coordination.  The  European  Council  endorsed  the  priorities  of  the  survey 
around  the  four  dimensions  of  competitive  sustainability  on  22  March  2024.  On  21 
November 2023, on the basis of Regulation (EU) No 1176/2011, the Commission also 
adopted the 2024 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  adopted  an  opinion  on  the  2024  draft  budgetary  plan  of  Finland.  The 
Commission  also  adopted  a  recommendation  for  a  Council  recommendation  on  the 
economic policy of the euro area, which the Council adopted on 12 April 2024, as well 
as the proposal  for the 2024 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 11 March 2024.  

On  30  April  2024,  the  EU’s  new  economic  governance  framework  came  into  force. 
The  framework  includes  the  new  Regulation  of  the  European  Parliament  and  of  the 
Council  (EU)  No  2024/1263  on  the  effective  coordination  of  economic  policies  and 
multilateral  budgetary  surveillance  and  repealing  Council  Regulation  (EC)  No 
1466/97.  It  also  includes  the  amended  Regulation  (EC)  No  1467/97  on  the 
implementation  of  the  excessive  deficit  procedure  and  the  amended  Directive 
2011/85/EU  on  the  budgetary  frameworks  of  Member  States7.  The  objectives  of  the 
new  framework  are  public  debt  sustainability  and  sustainable  and  inclusive  growth 
through gradual  fiscal consolidation  as  well as  reforms  and investments.  It  promotes 
national  ownership  and  has  a  greater  medium-term  focus,  combined  with  more 
effective and coherent enforcement. Each Member State should submit to the Council 
and  to  the  Commission  a  national  medium-term  fiscal-structural  plan.  National 
medium-term  fiscal-structural  plans  contain  the  fiscal,  reform  and  investment 

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COM(2023) 168 final. 
COM(2024) 77 final. 
COM(2023) 901 final. 
Council  Regulation  (EU)  2024/1264  of  29  April  2024  amending  Regulation  (EC)  No  1467/97  on 
speeding  up  and  clarifying  the  implementation  of  the  excessive  deficit  procedure  (OJ  L,  2024/1264, 
30.4.2024,  ELI:  http://data.europa.eu/eli/reg/2024/1264/oj)  and  Council  Directive  (EU)  2024/1265  of 
29  April  2024  amending  Directive  2011/85/EU  on  requirements  for  budgetary  frameworks  of  the 
Member States (OJ L, 2024/1265, 30.4.2024, ELI: http://data.europa.eu/eli/dir/2024/1265/oj). 

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commitments  of  a  Member  State,  covering  a  planning  horizon  of  4  years  or  5  years 
depending on the regular length of the national legislature. The net expenditure8 path 
in  the  national  medium-term  fiscal-structural  plans  should  comply  with  the 
requirements of Regulation (EU) 2024/1263, including the requirements to put or keep 
general government debt on a plausibly downward path by the end of the adjustment 
period  at  the  latest,  or  for  it  to  remain  at  prudent  levels  below  60%  of  GDP,  and  to 
bring  and/or  maintain  the  government  deficit  below  the  3%  of  GDP  reference  value 
over  the  medium  term.  Where  a  Member  State  commits  to  a  relevant  set  of  reforms 
and investments in accordance with the criteria set out in Regulation (EU) 2024/1263, 
the  adjustment  period  may  be  extended  by  3  years  at  most.  For  the  purpose  of 
supporting the preparation of those plans, on [21 June] 2024, the Commission is set to 
provide Member States with guidance on the content of the plans and the subsequent 
annual progress reports that they will need to submit and, in accordance with Article 5 
of Regulation (EU) 2024/1263, will transmit to them technical guidance on the fiscal 
adjustments  (reference  trajectories  and  technical  information,  where  applicable).   
Member  States  should  submit  their  medium-term  fiscal-structural  plans  by  20 
September  2024,  unless  the  Member  State  and  the  Commission  agree  to  extend  the 
deadline by a reasonable period of time. Member States should ensure the involvement 
of their national parliaments, and the consultation of independent fiscal institutions, of 
social partners and other national stakeholders, as appropriate.  

In 2024, the European Semester for economic policy coordination continues to evolve 
in  line  with  the  implementation  of  the  Recovery  and  Resilience  Facility.  The  full 
implementation  of  the  recovery  and  resilience  plans  remains  essential  for  delivering 
the policy priorities under the European Semester, as the plans help effectively address 
all  or  a  significant  subset  of  challenges  identified  in  the  relevant  country-specific 
recommendations  issued  in  recent  years.  The  2019,  2020,  2022  and  2023  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.   

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, which was amended on 14 March 2023 
following Article 18(2) of Regulation (EU) 2021/241 to update the maximum financial 
contribution  for  non-repayable  financial  support,  as  well  as  on  8  December  2023  to 

(6) 

(7) 

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Net expenditure as defined in Article 2 of Council Regulation (EU) 2024/1263 of 29 April 2024 (OJ L 
2024/1263,  30.4.2024,  ELI:  http://data.europa.eu/eli/reg/2024/1263/oj).  Net  expenditure  means 
government  expenditure  net  of  (i)  interest  expenditure,  (ii)  discretionary  revenue  measures,  (iii) 
expenditure  on  programmes  of  the  Union  fully  matched  by  Union  funds  revenue,  (iv)  national 
expenditure  on  co-financing  of  programmes  funded  by  the  Union,  (v)  cyclical  elements  of 
unemployment benefit expenditure, and (vi) one-offs and other temporary measures. 
Council Implementing Decision of 29 October 2021 on the approval of the assessment of the recovery 
and resilience plan for Finland (12524/2021). 

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(8) 

(9) 

include  the  REPowerEU  chapter10.  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. 

On 25 April 2024, Finland submitted its 2024 National Reform Programme and, on 25 
April 2024, its 2024 Stability Programme, in line with Article 4(1) of Regulation (EC) 
No  1466/97.  In  accordance  with  Article  27  of  Regulation  (EU)  2021/241,  the  2024 
National Reform Programme also reflects Finland’s biannual reporting on the progress 
made in achieving its recovery and resilience plan.  
The Commission published the 2024 country report for Finland11 on 19 June 2024. It 
assessed  Finland’s  progress 
country-specific 
recommendations  adopted by the Council  between 2019  and  2023 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.  

addressing 

relevant 

the 

in 

(10)  Based on data validated by Eurostat12 Finland’s general government deficit increased 
from 0.4% of GDP in 2022 to 2.7% in 2023, while the general government debt rose 
from 73.5% of GDP at the end of 2022 to 75.8% at the end of 2023. As announced in 
the fiscal policy guidance for 2024 (13), the Commission is taking the first step for the 
opening  of  deficit-based  excessive  deficit  procedures,  in  line  with  existing  legal 
provisions. On 19 June 2024, the Commission adopted a report under Article 126(3) of 
the TFEU (14). That report assessed the budgetary situation of Finland, as its planned 
general  government  deficit  in  2024  exceeds  the  reference  value  of  3%  of  GDP.  The 
report concluded that in the light of this assessment, and after considering the opinion 
of the Economic and Financial Committee as established under article 126(4) TFEU, 
the Commission intends to not propose in July to open an excessive deficit procedure 
for Finland. 

(11)  On  12  July  2022,  the  Council  recommended15  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 stance16 taking into account continued temporary and targeted 

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12 
(13) 
(14)  

15 

16 

Council  Implementing  Decision  of  8  December  2023  amending  the  Implementing  Decision  of  29 
October  2021  on  the  approval  of  the  assessment  of  the  recovery  and  resilience  plan  for  Finland 
(15836/2023). 
SWD(2024)  626 final. 
Eurostat-Euro Indicators, 22.4.2024. 
 COM(2023) 141 final. 
 Report  from  the  Commission,  prepared  in  accordance  with  Article  126(3)  of  the  Treaty  on  the 
Functioning of the European Union, 19.6.2024, COM(2024)598 final. 
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. 7. 
Based  on  the  Commission  2024  spring  forecast,  the  medium-term  (10-year  average)  potential  output 
growth  of  Finland  in  2023  is  estimated  at  2.7%  in  nominal  terms,  based  on  the  10-year  average  real 
potential growth rate and the 2023 GDP deflator. 

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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 
Union funds. In 2023, according to the Commission estimates, the fiscal stance17 was 
expansionary, by 0.9% of GDP, in a context of high inflation. The growth in nationally 
financed primary current expenditure (net of discretionary revenue measures) in 2023 
provided  an  expansionary  contribution  to  the  fiscal  stance  of  0.8%  of  GDP.  This 
includes 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 in 2023 was therefore only  partly due to people fleeing Ukraine. 
The  expansionary  growth  in  nationally  financed  primary  current  expenditure  (net  of 
discretionary  revenue  measures)  was  also  driven  by  the  continued  and  rapid  rise  in 
prices  and  costs  –  especially  those  of  purchased  services  and  personnel  expenses  in 
local government, as well as the rise in preparedness-related expenses that were taken 
in  response  to  Russia’s  war  of  aggression  against  Ukraine.  In  sum,  the  growth  of 
nationally  financed  primary  current  expenditure  in  2023  was  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.  Nationally  financed 
investment  amounted  to  4.0%  of  GDP  in  2023,  representing  a  decrease  of  0.2 
percentage  points  as  compared  to  2022.  Finland  financed  additional  investment 
through  the  Recovery  and  Resilience  Facility  and  other  EU  funds.  Finland  financed 
public investment for the green and digital transitions, and for energy security, such as 
renewable energy infrastructure and low-emission hydrogen, which are partly funded 
by the Recovery and Resilience Facility and other EU funds. 

(12)  The key projections in the 2024 Stability Programme can be summarised as follows. 
The  macroeconomic  scenario  underpinning  the  budgetary  projections  foresees  real 
GDP growth at 0% in 2024 and 1.6% in 2025, while it projects HICP inflation at 1.3% 
in 2024 and 1.9% in 2025. The general government deficit is expected to increase to 
3.4%  of  GDP  in  2024  and  decline  to  2.7%  of  GDP  in  2025,  while  the  general 
government  debt-to-GDP  ratio  is  set  to  increase  to  80.8%  by  the  end  of  2024  and 
82.3% by the end of 2025. After 2025, the general government deficit is projected to 
decrease  to  1.9%  of  GDP  in  2026.  Therefore,  the  general  government  deficit  is 
planned  to  go  below  the  3%  of  GDP  deficit  reference  value  in  2025.  In  turn,  after 
2025, the general government debt ratio is projected to increase gradually to 82.4% in 
2026.  

(13)  The  Commission  Spring  2024  Forecast  projects  real  GDP  to  grow  by  0.0%  in  2024 
and 1.4% in 2025, and HICP inflation to stand at 1.4% in 2024 and 2.1% in 2025. 

(14)  The Commission Spring 2024 Forecast projects a government deficit of 3.4% of GDP 
in 2024, while the general  government debt-to-GDP ratio is set to increase to 80.5% 

17 

The fiscal stance is defined as a measure of the annual change in the underlying budgetary position of 
the  general  government.  It  aims  to  assess  the  economic  impulse  stemming  from  fiscal  policies,  both 
those  that  are  nationally  financed  and  those  that  are  financed  by  the  EU  budget.  The  fiscal  stance  is 
measured as the difference between (i) the medium-term potential growth and (ii) the change in primary 
expenditure  net  of  discretionary  revenue  measures  (and  excluding  temporary  emergency  measures 
related to the COVID-19 crisis) and including expenditure financed by non-repayable support (grants) 
from  the  Recovery  and  Resilience  Facility  and  other  Union  funds.  A  negative  (positive)  sign  of  the 
indicator indicates an expansionary (contractionary) fiscal policy. 

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by the end of 2024. The increase of the deficit in 2024 mainly reflects slow growth on 
the revenue side, both in taxes and social security contributions, but also increases in 
expenditure,  especially  on  social  benefits  and  wages.  Based  on  the  Commission’s 
estimates, the fiscal stance is projected to be expansionary by 0.7% of GDP in 2024. 

(15)  Expenditure amounting to 0.2% of GDP is expected to be financed by non-repayable 
support  (“grants”)  from  the  Recovery  and  Resilience  Facility  in  2024,  compared  to 
0.1%  of  GDP  in  2023,  according  to  the  Commission  Spring  2024  Forecast. 
Expenditure  financed  by  Recovery  and  Resilience  Facility  grants  will  enable  high-
quality investment and productivity-enhancing reforms without a direct impact on the 
general government balance and debt of Finland. 

(16)  On  14  July  2023,  the  Council  recommended18  that  Finland  ensure  a  prudent  fiscal 
policy,  in  particular  by  limiting  the  nominal  increase  in  net  nationally  financed 
primary  expenditure19  in  2024  to  not  more  than  2.2%.  When  executing  their  2023 
budgets  and  preparing  their  Draft  Budgetary  Plans  for  2024,  Member  States  were 
invited  to  take  into  account  that  the  Commission  would  propose  to  the  Council  the 
opening  of  deficit-based  excessive  deficit  procedures  based  on  the  outturn  data  for 
2023.  According  to  the  Commission  Spring  2024  Forecast,  Finland’s  net  nationally 
financed primary expenditure is projected to increase by 4.0% in 2024, which is above 
the recommended maximum growth rate. This excess spending over the recommended 
maximum growth  rate in  net  nationally financed  primary expenditure  corresponds  to 
0.9% of GDP in 2024. This risks being not in line with what was recommended by the 
Council. 

(17)  Moreover,  the  Council  recommended  that  Finland  take  action  to  wind  down  the 
emergency  energy support measures  in  force,  using the related savings to  reduce the 
government  deficit,  as  soon  as  possible  in  2023  and  2024.  The  Council  further 
specified  that,  should  renewed  energy  price  increases  necessitate  new  or  continued 
support  measures,  Finland  should  ensure  that  these  were  targeted  at  protecting 
vulnerable  households  and  firms,  fiscally  affordable,  and  preserve  incentives  for 
energy savings. According to the Commission Spring 2024 Forecast, the net budgetary 
cost20 of emergency energy support measures is estimated at 0.2% of GDP in 2023 and 
projected  at  0.0%  in  2024  and  2025.  If  the  related  savings  were  used  to  reduce  the 
government deficit, as recommended by the Council, these projections would imply a 
fiscal  adjustment  of  0.2%  of  GDP  in  2024,  whereas  net  nationally  financed  primary 
expenditure21  provides  an  expansionary  contribution  to  the  fiscal  stance  of  0.7%  of 
GDP in that year. The emergency energy support measures are projected to be wound 
down  as  soon  as  possible  in  2023  and  2024.  This  is  in  line  with  what  was 
recommended  by  the  Council.  However,  the  related  savings  are  not  projected  to  be 

18 

19 

20 

21 

Council  Recommendation  of  14  July  2023  on  the  2023  National  Reform  Programme  of  Finland  and 
delivering a Council opinion on the 2023 Stability Programme of Finland, OJ C 312, 1.9.2023, p. 243. 
Net primary expenditure is defined as nationally financed expenditure net of (i) discretionary revenue 
measures, (ii) interest expenditure, (iii) cyclical unemployment expenditure, and (iv) and one-offs and 
other temporary measures. 
The figure represents the level of the annual budgetary cost of those measures, including revenue and 
expenditure and, where applicable, net of the revenue from taxes on windfall profits of energy suppliers. 
This contribution is measured as the change in general government primary expenditure, net of (i) the 
incremental  budgetary  impact  of  discretionary  revenue  measures,  (ii)  one-offs,  (iii)  cyclical 
unemployment  expenditure  and  (iv)  expenditure  financed by  non-repayable  support  (grants)  from  the 
Recovery  and  Resilience  Facility  and  other  EU  funds,  relative  to  the  medium-term  (10-year)  average 
potential nominal GDP growth rate, expressed as a ratio to nominal GDP. 

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(18) 

fully  used  to  reduce  the  government  deficit.  This  risks  being  not  in  line  with  the 
Council recommendation. 

In addition, the Council also recommended that  Finland preserve nationally financed 
public  investment  and  ensure  the  effective  absorption  of  Recovery  and  Resilience 
Facility  grants  and  other  EU  funds,  in  particular  to  foster  the  green  and  digital 
transitions.  According  to  the  Commission  Spring  2024  Forecast,  nationally  financed 
public investment is projected to increase to 4.1% of GDP in 2024 from 4.0% of GDP 
in  2023.  This  is  in  line with  what  was  recommended  by  the  Council.  In  turn,  public 
expenditure  financed  from  revenues  from  EU  funds,  including  Recovery  and 
Resilience Facility grants, is expected to remain stable at 0.4% of GDP in 2024. 

(19)  Based on policy measures known at the cut-off date of the forecast and on a no-policy-
change  assumption,  the  Commission  Spring  2024  Forecast  projects  a  government 
deficit of 2.8% of GDP in 2025. The decrease of the deficit in 2025 mainly reflects the 
hike in the general VAT rate as well as cuts in expenditures. The general government 
debt-to-GDP  ratio  is  set  to  increase  to  82.4%  by  the  end  of  2025,  on  the  back  of  a 
slower economic growth and rising interest expenditure. 

(20)  Finland has an effective and inclusive social welfare system with a high level of social 
protection,  but  it  is  complex  and  may  create  disincentives  to  work.  In  2020,  a 
dedicated  parliamentary  committee  was  tasked  with  designing  a  reform  of  the  social 
security  system  by 2027. In March 2023, the  committee presented its interim report, 
which  contained  31  proposals  for  studies,  draft  legislation  and  development  projects 
for future governments. The reform aims to streamline the social welfare system and 
increase incentives to work, while preserving effective and inclusive social protection 
and raising the employment rate. The reform of the social security system is expected 
to help improve the long-term sustainability of public finances. 

(21) 

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. These are expected 
to  help  effectively  address  all  or  a  significant  subset  of  challenges  identified  in  the 
relevant  country-specific  recommendations.  Within  this  tight  timeframe,  proceeding 
swiftly  with  the  effective  implementation  of  the  plan,  including  the  REPowerEU 
chapter,  is  essential  to  boost  Finland’s  long-term  competitiveness  through  the  green 
and digital transition, while ensuring social fairness. To deliver on the commitments of 
the plan by August 2026, it is essential for Finland to continue the implementation of 
reforms and investments by addressing emerging delays.  In particular, it is important 
to  ensure  the  timely  submission  of  the  second  and  third  payment  requests.  The 
systematic involvement of local and regional authorities, social partners, civil society 
and  other  relevant  stakeholders  remains  essential  to  ensure  broad  ownership  for  the 
successful implementation of the recovery and resilience plan.   

(22)  As  part  of  the  mid-term  review  of  the  cohesion  policy  funds,  in  accordance  with 
Article  18  of  Regulation  (EU)  2021/1060,  Finland  is  required  to  review  each 
programme  by  March  2025,  taking  into  account,  among  other  things,  the  challenges 
identified in the 2024 country-specific recommendations, as well as its national energy 
and climate plan. This  review  forms the  basis for the definitive allocation of the EU 
funding  included  in  each  programme.  Finland  has  made  progress  in  implementing 
cohesion  policy  and  the  European  Pillar  of  Social  Rights,  but  challenges  remain.  In 
particular,  there  continue  to  be  disparities  between  the  capital  region  and  the  rest  of 
Finland  in  terms  of  GDP  per  capita  and  labour  productivity.  Accelerating  the 

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implementation of cohesion policy programmes is crucial. The priorities agreed in the 
programme are still relevant, in particular for northern sparsely populated and eastern 
regions. Particular attention should also be paid to strengthening R&D and innovation, 
digitalisation, and competitiveness of small to medium-sized enterprises, accelerating 
the green and just transition. In addition, a focus should remain on addressing labour 
and  skills  shortages,  strengthening  social  inclusion  and  active  labour  market 
participation,  particularly  for  vulnerable  groups,  and  supporting  social  innovation 
measures and improving child protection services. Finland could also make use of the 
Strategic Technologies for Europe Platform initiative to support the transformation of 
industry, for instance in the areas of artificial intelligence, cybersecurity and robotics, 
energy and resource efficiency, and medical technologies vital for health security. 

(23)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan and other EU funds, Finland faces several additional challenges related to labour 
and  skills  shortages,  and  the  implementation  of  the  reform  of  social  and  healthcare 
services.  

(24)  Employment remained above 78% in 2023, but unemployment increased from 6.8% in 
2022  to  7.2%  in  2023,  and  structural  unemployment  persists.  Skills  mismatches,  i.e. 
the  inability  to  fill  vacant  positions  with  workers  possessing  the  skills  demanded  by 
employers,  pose  challenges,  in  particular  in  education,  healthcare  and  social  care. 
Moreover,  labour  shortages  in  fields  relevant  to  the  green  transition  risk  limiting 
progress  towards  Finland’s  climate  target  of  carbon  neutrality  by  2035.  Labour  and 
skills shortages also threaten Finland’s competitiveness and long-term growth, and are 
further aggravated by population ageing. 

(25)  The  share  of  people  in  Finland  reporting  unmet  needs  for  medical  care  is  high.  The 
ongoing reform of public health and social services aims to ensure more equal access 
to  services  while  containing  the  rising  costs  of  service  delivery.  The  administrative 
reform  has  been  completed,  but  the  different  well-being  services  counties  are  in 
varying  stages  of  preparedness  in  terms  of  reorganising  and  optimising  their  service 
delivery.  

(26) 

In view of the close interlinkages between the economies of euro area Member States 
and of their collective contribution to the functioning of the Economic and Monetary 
Union,  in  2024  the  Council  recommended  that  the  euro  area  Member  States  take 
action,  including  through  their  recovery  and  resilience  plans,  to  implement  the 
recommendation  on 
the  euro  area.  For  Finland, 
recommendations  (1),  (2)  and  (3)  help  the  first,  second,  third  and  fourth  euro  area 
recommendations. 

the  economic  policy  of 

HEREBY RECOMMENDS that Finland take action in 2024 and 2025 to:  

1. 

22 

Submit  the  medium-term  fiscal-structural  plan  in  a  timely  manner.  In  line  with  the 
requirements  of  the  reformed  Stability  and  Growth  Pact,  limit  the  growth  in  net 
expenditure22 in 2025 to a rate consistent with putting the general government  debt 
on a plausibly downward trajectory over the medium term and reducing the general 
government deficit below the 3% of GDP Treaty reference value. Pursue the reform 

According  to  Article  2(2)  of  Regulation  (EU)  2024/1263,  ‘net  expenditure’  means  government 
expenditure net of interest expenditure, discretionary revenue measures, expenditure on programmes of 
the  Union  fully  matched  by  revenue  from  Union  funds,  national  expenditure  on  co-financing  of 
programmes funded by the Union, cyclical elements of unemployment benefit expenditure, and one-offs 
and other temporary measures. 

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2. 

3. 

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

Address emerging delays to allow for continued, swift and effective implementation 
of  the  recovery  and  resilience  plan,  including  the  REPowerEU  chapter,  ensuring 
completion  of  reforms  and 
the 
implementation  of  cohesion  policy  programmes.  In  the  context  of  the  mid-term 
review continue focusing on the agreed priorities, while considering the opportunities 
provided  by  the  Strategic  Technologies  for  Europe  Platform  initiative  to  improve 
competitiveness. 

investments  by  August  2026.  Accelerate 

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.  Ensure  that  the  reform  of  social  and  healthcare  services 
improves access to and delivery of services and tackles inefficiencies. 

Done at Brussels, 

For the Council 
The President 

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