Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Finland
Date: 2025-06-04
Institutions: European Commission, Reform and Investment Task Force
Subjects: Finland, budget policy, economic policy, economic recovery, economic reform, employment policy, energy policy, labour market, social policy, stability pact

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   EUROPEAN COMMISSION  Brussels, 4.6.2025  COM(2025) 226 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Finland {SWD(2025) 226 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 
Article 121(2) and Article 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: 

General considerations 

(1) 

Regulation (EU) 2024/1263, which entered into force on 30 April 2024, specifies the 
objectives  of  the  economic  governance,  which  aims  at  promoting  sound  and 
sustainable  public  finances  and  sustainable  and  inclusive  growth  and  resilience 
through reforms and investments, and preventing excessive government deficits. The 
Regulation  stipulates  that  the  Council  and  the  Commission  conduct  multilateral 
surveillance in the context of the European Semester in accordance with the objectives 
and requirements set out in the TFEU. The European Semester includes, in particular, 
the  formulation,  and  the  surveillance  of  the  implementation  of  country-specific 
recommendations.  The  Regulation  also  promotes  national  ownership  of  fiscal  policy 
and  emphasises  its  medium-term  focus,  combined  with  more  effective  and  coherent 
enforcement. Each Member State must submit to  the Council and the Commission  a 
national  medium-term  fiscal-structural  plan,  containing  its  fiscal,  reform  and 
investment  commitments,  over  4  or  5  years,  depending  on  the  length  of the  national 
legislative  term.  The  net  expenditure2  path  in  these  plans  has  to  comply  with  the 

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OJ L, 2024/1263, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/OJ. 
Net  expenditure  as  defined  in  Article  2,  point  (2),  of  Regulation  (EU)  2024/1263:  ‘net  expenditure’ 
means government expenditure net of (i) interest expenditure; (ii) discretionary revenue measures; (iii) 
expenditure  on  programmes  of  the  Union  fully  matched  by  revenue  from  Union  funds;  (iv)  national 

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Regulation’s  requirements,  including  the  requirements  to  put  or  keep  general 
government debt on a plausibly downward path by the end of the adjustment period, or 
for it to remain at prudent levels below 60% of gross domestic product (GDP), and to 
bring  and/or  maintain  the  general  government  deficit  below  the  3%-of-GDP  Treaty 
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  the 
Regulation, the adjustment period may be extended by up to three years. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council3,  which 
established  the  Recovery  and  Resilience  Facility  (the  ‘RRF’),  entered  into  force  on 
19 February 2021.  The  RRF  provides  financial  support  to  Member  States  for 
implementing  reforms  and  investments,  delivering  a  fiscal  impulse  financed  by  the 
Union.  In  line  with  the  priorities  of  the  European  Semester  for  economic  policy 
coordination, the RRF fosters economic and social recovery while driving sustainable 
reforms and investments, in particular promoting the green and digital transitions and 
making  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 Union and support the continued implementation of the 
European Pillar of Social Rights. 
Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council4  (the 
‘REPowerEU  Regulation’),  which  was  adopted  on  27 February 2023,  aims  to  phase 
out the Union’s dependence on Russian fossil-fuel imports. This helps achieve energy 
security  and  diversify  the  Union’s  energy  supply,  while  increasing  the  uptake  of 
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  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 that Regulation, the Commission assessed the relevance, effectiveness, 
efficiency  and  coherence  of  the  recovery  and  resilience  plan,  in  accordance  with  the 
assessment guidelines set out in Annex V. On 29 October 2021, the Council adopted 
its  Implementing  Decision  approving  the  assessment  of  the  recovery  and  resilience 
plan  for  Finland5,  which  was  amended  under  Article 18(2)  on  8 December  2023  to 
update  the  maximum  financial  contribution  for  non-repayable  financial  support,  as 
well as to include the REPowerEU chapter6. The release of instalments is conditional 
on  the  adoption  of  a  decision  by  the  Commission,  in  accordance  with  Article 24(5), 
stating that Finland has satisfactorily achieved the relevant milestones and targets set 

the  Recovery  and  Resilience  Facility 

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. 
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). 
Council Implementing Decision of 29 October 2021 on the approval of the assessment of the recovery 
and resilience plan for Finland (12524/2021). 
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). 

(2) 

(3) 

(4) 

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out in the Council Implementing Decision. Satisfactory achievement requires that the 
achievement  of  preceding  milestones  and  targets  for  the  same  reform  or  investment 
has not been reversed. 

On  21 January  2025,  the  Council,  upon  the  recommendation  of  the  Commission, 
adopted a recommendation endorsing the national medium-term fiscal-structural plan 
of Finland7. The plan was submitted in accordance with Article 11 and Article 36(1), 
point (a), of Regulation (EU) 2024/1263, covers the period from 2025 until 2028 and 
presents a fiscal adjustment spread over seven years. 

On  26 November 2024,  the  Commission  adopted  an  opinion  on  the  2025  draft 
budgetary  plan  of  Finland.  On  the  same  date,  on  the  basis  of  Regulation  (EU) 
No 1176/2011, the Commission adopted the 2025 Alert Mechanism Report, in which 
it did not identify Finland as one of the Member States for which an in-depth review 
would  be  needed.  The  Commission  also  adopted  a  recommendation  for  a  Council 
recommendation on the economic policy of the euro area and a proposal for the 2025 
Joint  Employment  Report,  which  analyses  the  implementation  of  the  Employment 
Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights.  The  Council 
adopted  the  Recommendation  on  the  economic  policy  of  the  euro  area8  on  13  May 
2025 and the Joint Employment Report on 10 March 2025. 

On  29 January 2025,  the  Commission  published  the  Competitiveness  Compass,  a 
strategic framework that aims to boost the EU’s global competitiveness over the next 
five  years.  It  identifies  the  three  transformative  imperatives  of  sustainable  economic 
growth: (i) innovation; (ii) decarbonisation and competitiveness; and (iii) security. To 
close  the  innovation  gap,  the  EU  aims  to  foster  industrial  innovation,  support  the 
growth of start-ups through initiatives like the EU Start-up and Scale-up Strategy, and 
promote the adoption of advanced technologies like artificial intelligence and quantum 
computing.  In  pursuit  of  a  greener  economy,  the  Commission  has  outlined  a 
comprehensive Affordable Energy Action Plan and a Clean Industrial Deal, ensuring 
that  the  shift  to  clean  energy  remains  cost-effective,  competitiveness-friendly, 
particularly  for  energy-intensive  sectors,  and  is  a  driver  for  growth.  To  reduce 
excessive dependencies and increase security, the Union is committed to strengthening 
global  trade  partnerships,  diversifying  supply  chains  and  securing  access  to  critical 
raw materials and clean energy sources. These priorities are underpinned by horizontal 
enablers, namely regulatory simplification, deepening of the single market, financing 
competitiveness and a Savings and Investments Union, promotion of skills and quality 
jobs, and better coordination of EU policies. The Competitiveness Compass is aligned 
with  the  European  Semester,  ensuring  that  Member  States’  economic  policies  are 
consistent with the Commission’s strategic objectives, creating a unified approach to 
economic governance that fosters sustainable growth, innovation and resilience across 
the Union. 

In  2025,  the  European  Semester  for  economic  policy  coordination  continues  to 
develop  alongside  the  implementation  of  the  RRF.  The  full  implementation  of  the 
recovery and resilience plans remains essential for delivering on the policy priorities 
under the European Semester, as the plans help effectively address all or a significant 

Council  Recommendation  of  21 January  2025  endorsing  the  medium-term  fiscal-structural  plan  of 
Finland, OJ C/2025/656, 10.2.2025. 
Council  Recommendation  of  13  May  2025  on  the  economic  policy  of  the  euro  area  (OJ  C, 
C/2025/2782, 22.5.2025, ELI: http:// data.europa.eu/eli/C/2025/2782/oj).) 

(5) 

(6) 

(7) 

(8) 

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subset  of  challenges  identified  in  the  relevant  country-specific  recommendations 
issued  in  recent  years.  These  country-specific  recommendations  remain  equally 
relevant  for  the  assessment  of  amended  recovery  and  resilience  plans  in  accordance 
with Article 21 of Regulation (EU) 2021/241. 

(9) 

the  key  economic  policy 
The  2025  country-specific  recommendations  cover 
challenges that are not sufficiently addressed by measures included in the recovery and 
resilience  plans,  taking  into  account  the  relevant  challenges  identified  in  the  2019-
2024 country-specific recommendations. 

in 

(10)  On  4  June  2025,  the  Commission  published  the  2025  country  report  for  Finland.  It 
assessed  Finland’s  progress 
country-specific 
recommendations  and  took  stock  of  Finland’s  implementation  of  the  recovery  and 
resilience plan. Based on this analysis, the country report identified the most pressing 
challenges  Finland  is  facing.  It  also  assessed  Finland’s progress  in  implementing the 
European  Pillar  of  Social  Rights  and  in  achieving  the  Union  headline  targets  on 
employment, skills and poverty reduction, as well as progress in achieving the United 
Nations Sustainable Development Goals. 

addressing 

relevant 

the 

Assessment of the Annual Progress Report 

(11)  On 21 January 2025, the Council recommended the following maximum growth rates 
of net expenditure for Finland: 1.6% in 2025, 1.9% in 2026, 2.6% in 2027, and 2.6% 
in  2028,  which  correspond  to  the  maximum  cumulative  growth  rates  calculated  by 
reference to 2023 of 5.3% in 2025, 7.4% in 2026, 10.1% in 2027, and 13.0% in 2028. 
On 30 April 2025 Finland submitted its Annual Progress Report9 on the adherence to 
the  recommended  maximum  growth  rates  of  net  expenditure,  the  implementation  of 
the  set  of  reforms  and  investments  underpinning  the  extension  of  the  adjustment 
period  and  the  implementation  of  reforms  and  investments  responding  to  the  main 
challenges  identified  in  the  European  Semester  country-specific  recommendations. 
The Annual Progress Report also reflects Finland’s biannual reporting on the progress 
made  in  achieving  its  recovery  and  resilience  plan  in  accordance  with  Article  27  of 
Regulation (EU) 2021/241. 

(12)  Russia’s  war  of  aggression  against  Ukraine  and  its  repercussions  constitute  an 
existential  challenge  for  the  European  Union.  The  Commission  recommended  to 
activate the national  escape clause of the Stability and Growth Pact  in  a coordinated 
manner to support the EU efforts to achieve a rapid and significant increase in defence 
spending and this proposal was welcomed by the European Council of 6 March 2025. 
Following  the  request  of  Finland  on  30  April  2025,  on  [date]  the  Council,  upon  the 
recommendation of the Commission,  adopted a recommendation allowing Finland to 
deviate  from,  and  exceed,  the  recommended  maximum  growth  rates  of  net 
expenditure10.  

(13)  Based on data validated by Eurostat11, Finland’s general government deficit increased 
from 3.0% of GDP in 2023 to 4.4% in 2024, while the general government debt rose 
from 77.5% of GDP at the end of 2023 to 82.1% at the end of 2024. According to the 
Commission’s  calculations,  these  developments  correspond  to  a  net  expenditure 

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The  2025  Annual  Progress  Reports  are  available  on:  https://economy-finance.ec.europa.eu/economic-
and-fiscal-governance/stability-and-growth-pact/preventive-arm/annual-progress-reports_en  
Council  recommendation  allowing  Finland  to  deviate  from,  and  exceed,  the  recommended  net 
expenditure path (Activation of the national escape clause), [To complete: OJ C/2025/xxx, x.x.2025]. 
Eurostat-Euro Indicators, 22.4.2025. 

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growth rate of 3.1% in 2024. In the Annual Progress Report, Finland estimates the net 
expenditure growth in 2024 at 3.2%. Based on the Commission’s estimates, the fiscal 
stance12,  which  includes  both  nationally  and  EU  financed  expenditure,  was 
expansionary, by 0.6% of GDP, in 2024. On 4 June 2025, the Commission adopted a 
report  under  Article  126(3)  of  the  TFEU13.  That  report  assessed  the  budgetary 
situation of Finland, as its general government deficit in 2024 exceeded 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 does not at this stage intend to propose in 
June to open an excessive deficit procedure.  

(14)  According to the Annual Progress Report, the macroeconomic scenario underpinning 
the budgetary projections by Finland expects real GDP growth at 1.3% in 2025, while 
HICP  inflation  is  projected  at  1.9%  in  2025.  The  Commission  Spring  2025  Forecast 
projects real GDP to grow by 1.0% in 2025 and 1.3% in 2026, and HICP inflation to 
stand at 1.7% in 2025 and 1.5% in 2026. 

(15) 

In the Annual Progress Report, the general government deficit is expected to decrease 
to  3.8%  of  GDP  in  2025,  while  the  general  government  debt-to-GDP  ratio  is  set  to 
increase  to  85.3%  by  the  end  of  2025.  These  developments  correspond  to  net 
expenditure growth of 1.6% in 2025. The Commission Spring 2025 Forecast projects a 
general  government  deficit  of  3.7%  of  GDP  in  2025.  The  decrease  of  the  deficit  in 
2025  mainly  reflects  improving  economic  conditions  and  the  impact  of  the 
consolidation measures implemented by the government in 2023 and 2024. According 
to  the  Commission’s  calculations,  these  developments  correspond  to  net  expenditure 
growth  of  1.3%  in  2025.  Based  on  the  Commission’s  estimates,  the  fiscal  stance, 
which  includes  both  nationally  and  EU  financed  expenditure,  is  projected  to  be 
contractionary, by 0.6% of GDP, in 2025. The general government debt-to-GDP ratio 
is set to increase to 85.6% by the end of 2025.  

(16)  General  government  expenditure  amounting  to  0.2%  of  GDP  is  expected  to  be 
financed  by  non-repayable  support  (“grants”)  from  the  Recovery  and  Resilience 
Facility  in  2025,  compared  to  0.1%  of  GDP  in  2024,  according  to  the  Commission 
Spring 2025 Forecast. Expenditure financed by Recovery and Resilience Facility non-
repayable support enables high-quality investment and productivity-enhancing reforms 
without a direct impact on the general government balance and debt of Finland. 

(17)  General  government  defence  expenditure  in  Finland  amounted  to  1.2%  of  GDP  in 
2021,  1.2%  of  GDP  in  2022  and  1.4%  of  GDP  in  202314.  According  to  the 
Commission  Spring  2025  Forecast,  expenditure  on  defence  is  projected  at  1.5%  of 
GDP  in  2024  and  2.1%  of  GDP  in  2025.  This  corresponds  to  an  increase  of  0.9 
percentage  points  of  GDP  compared  to  2021.  The  period  when  the  national  escape 
clause is activated (2025-2028) allows Finland to reprioritise government expenditure 

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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 including expenditure financed by non-repayable 
support (grants) from the Recovery and Resilience Facility and other Union funds. 
Report  from  the  Commission,  prepared  in  accordance  with  Article  126(3)  of  the  Treaty  on  the 
Functioning of the European Union, 4.6.2025, COM(2025) 615final. 
Eurostat, government expenditure by classification of functions of government (COFOG).  

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or increase government revenue so that lastingly higher defence expenditure would not 
endanger fiscal sustainability in the medium term.  

(18)  According  to  the  Commission  Spring  2025  Forecast,  net  expenditure  in  Finland  is 
projected to grow by 1.3% in 2025 and 4.4% cumulatively in 2024 and 2025. Based on 
the Commission Spring 2025 Forecast, the net expenditure growth of Finland in 2025 
is projected to be below the recommended maximum growth rate, both annually and 
when considering 2024 and 2025 together. 

(19)  The  Annual  Progress  Report  does  not  include  budgetary  projections  beyond  2025. 
Based on policy measures known at the cut-off date of the forecast, the Commission 
Spring 2025 Forecast projects a general government deficit of 3.4% of GDP in 2026. 
The decrease of the deficit in 2026 mainly reflects the increase in revenues thanks to 
stronger economic growth (which is however expected to be partly offset by planned 
tax  cuts),  and  declining  primary  expenditure.  These  developments  correspond  to  net 
expenditure growth of 1.5% in 2026. Based on the Commission’s estimates, the fiscal 
stance, which includes both nationally and EU financed expenditure, is projected to be 
contractionary, by 0.5% of GDP, in 2026. The general government debt-to-GDP ratio 
is projected by the Commission to increase to 87.5% by the end of 2026. 

(20)  The recommendation endorsing the medium-term plan of Finland specifies the set of 
reforms and investments underpinning the extension of the adjustment period, together 
with  a  timeline  for  their  implementation.  They  include  existing  and  stepped-up 
measures  from  the  Recovery  and  Resilience  Plan  such  as  the  introduction  of  the 
Nordic  model  of  employment  services,  energy  infrastructure  investments,  and 
introducing  digital  innovation  in  social  and  healthcare,  as  well  as  additional  reforms 
and investments such as the reform introducing the general social security model and 
the  reform  of  social  assistance,  related  to  the  green  transition,  innovation,  labour 
market,  healthcare  and  social  care.  Taking  into  account  the  information  provided  by 
Finland in its Annual Progress Report, the Commission finds that all the reforms and 
investments  underpinning  an  extension  that  were  due  by  30  April  2025  have  been 
implemented.  

Key policy challenges 

(21)  Finland  has  continuously  registered  public  deficits  in  the  last  decade  and  general 
government debt as a percentage of GDP has been trending upward. In 2023 and 2024, 
the  government  adopted  a  fiscal  consolidation  package  worth  EUR 9  billion  (around 
3% of GDP), which aims to put government finances on a sustainable path. However, 
in  2024,  partly  due  to  adverse  macroeconomic  conditions,  the  general  government 
deficit reached 4.4% of GDP, up from 3.0% in 2023, while general government debt 
reached  82%,  up  from  77.5%  in  2023.  Therefore,  further  action  may  be  needed  to 
improve  the  efficiency  of  public  spending  to  regain  fiscal  space.  This  is  particularly 
necessary to leave enough room to for the public investment needed and address the 
needs  of  an  ageing  society  without  weakening  public  finances.  The  government 
implemented the latest comprehensive spending  review in 2023 and  launched annual 
spending  reviews  to  support  the  budget  process.  Finland  has  a  comprehensive  but 
complex  social  security  system,  which  contains  some  incentive  traps  for  work,  thus 
putting  a  burden  on  public  finances.  The  system  is  being  reformed  with  several 
changes introduced since 2023 and two significant packages are due to be presented to 
Parliament in 2025. The changes in social assistance will strengthen the obligations for 
beneficiaries and its role as a last-resort assistance. The first step towards the general 
social  security  benefit  simplifies  minimum  income  protection  by  combining  existing 

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(22) 

unemployment benefits in a single application framework. Increasing the efficiency of 
the social benefits system and providing better incentives to  work would support the 
fiscal sustainability of the social security system. In addition, the reforms are expected 
to  address  the needs  of the vulnerable groups, including  those with limited access  to 
labour market.  

In accordance with Article 19(3), point (b), of Regulation (EU) 2021/241 and criterion 
2.2  of  Annex  V  to  that  Regulation,  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, finalising the effective implementation of the recovery and resilience 
plan  including  the  REPowerEU  chapter,  is  essential  to  boost  Finland’s  long-term 
competitiveness  through  the  green  and  digital  transitions,  while  ensuring  social 
fairness. The systematic involvement of local and regional authorities, social partners, 
civil society and other relevant stakeholders remains essential in order to ensure broad 
ownership for the successful implementation of the recovery and resilience plan. 

(23)  The implementation  of  cohesion  policy  programmes, which encompass support from 
the  European  Regional  Development  Fund  (ERDF),  the  Just  Transition  Fund  (JTF) 
and the European Social Fund Plus (ESF+), has accelerated in Finland. It is important 
to  continue  efforts  to  ensure  the  swift  implementation  of  these  programmes,  while 
maximising  their  impact  on  the  ground.  Finland  is  already  taking  action  under  its 
cohesion policy programmes to boost competitiveness and growth.  At the same time, 
Finland continues to face challenges, including the need to foster the competitiveness, 
economic  and  social  resilience  on  matters  including  skills  mismatches,  structural 
unemployment  and  the  delivery  of  social  and  healthcare  services,  with  a  particular 
focus on its eastern border regions. In accordance with Article 18 of Regulation (EU) 
2021/1060, Finland is required – as part of the mid-term review of the cohesion policy 
funds  –  to  review  each  programme  taking  into  account,  among  other  things,  the 
challenges identified in the 2024 country-specific recommendations. The Commission 
proposals adopted on 1 April 202515 extend the deadline for submitting an assessment 
–  for  each  programme  –  of  the  outcome  of  the  mid-term  review  beyond  31  March 
2025.  It  also  provides  flexibilities  to  help  speed  up  programme  implementation  and 
incentives  for  Member  States  to  allocate  cohesion  policy  resources  to  five  strategic 
priority areas of the Union, namely competitiveness in strategic technologies, defence, 
housing, water resilience and energy transition. 

(24)  The  Strategic  Technologies  for  Europe  Platform  (STEP)  provides  the  opportunity  to 
invest in a key EU strategic priority by strengthening the EU’s competitiveness. STEP 
is channelled through 11 existing EU funds. Member States can also contribute to the 
InvestEU programme supporting investments in priority areas. Finland could use these 
initiatives  to  support  the  development  or  manufacturing  of  critical  technologies, 
including clean and resource-efficient technologies. 

(25)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan  and  other  EU  funds,  Finland  faces  several  additional  challenges  related  to  the 

15 

Proposal  for  a  REGULATION  OF  THE  EUROPEAN  PARLIAMENT  AND  OF  THE  COUNCIL 
amending  Regulations  (EU)  2021/1058  and  (EU)  2021/1056  as  regards  specific  measures  to  address 
strategic challenges in the context of the mid-term review - COM(2025) 123 final. 

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commercialisation  of  innovation,  decarbonisation,  employment  and  skills,  and  the 
implementation of the reform of social and healthcare services. 

(26)  Finland ranks among the EU’s leading performers in innovation, with a high share of 
firms  developing  and  marketing  new  products,  and  widespread  use  among  the 
population  of  digital  tools.  Moreover,  increasing  expenditure  on  R&D,  with  the 
government  setting  a  target  of  4%  of  GDP  by  2030,  and  a  supportive  business 
environment  help  encourage  innovation.  Despite  this  strong  innovation  performance, 
productivity  stagnated  in  the  last  decade,  in  part  due  to  legacy  effects  such  as  the 
decline  of  the  electronics  sector  in  the  early  2010s.  Moreover,  the  most  productive 
firms are not large enough to lift aggregate productivity. In recent years, the number of 
companies  cooperating  with  higher-education  establishments  or  research  institutes 
diminished, likely hampering the commercialisation of innovation. Moreover, research 
outcomes  often  remain  confined  within  universities,  as  researchers  lack  the 
entrepreneurial  skills  and  guidance  to  transform  their  findings  into  marketable 
products.  Therefore,  while  moving  towards  the  2030  R&D  target,  it  would  be 
beneficial  to  redouble  efforts  to  provide  further  incentives  for  academia-business 
cooperation and support researchers in acquiring entrepreneurial skills, thus improving 
the commercialisation of innovation. 

(27)  Finland  has  an  abundant  supply  of  clean  low-cost  energy.  This  could  prove  to  be  a 
significant competitive advantage for industry, which used 44% of Finland’s total final 
energy  consumption  in  2023.  This  advantage  should  be  fully  leveraged  by  further 
increasing the rate of electrification and decarbonisation of industry to accelerate the 
industrial  greenhouse  gas  emissions.  The  ongoing  reform  of 
reduction  of 
environmental permitting procedures is expected to  help speed up major  investments 
in renewable energy and decarbonisation. 

(28)  Transport  remains  a  crucial  sector  for  Finland  in  achieving  its  climate  targets,  with 
major  potential  for  further  emissions  reductions.  Through  its  national  roadmap  for 
fossil-free  transport,  Finland  has  put  forward  legislative  changes,  incentive  schemes 
and  investments.  Rolling  out  the  planned  measures  will  be  key  to  achieving  the 
country’s  ambitious  targets.  Accelerating  investment  in  areas  like  private  vehicle 
electrification,  public  transport  connections  to  reduce  car-dependency,  and  long-haul 
transportation  can  deliver  a  competitive  advantage  for  Finland  while  supporting 
decarbonisation of the sector in a socially fair and inclusive way. 

(29)  Boosting  investment  in  green  technologies,  including  onshore  and  offshore  wind 
power and green research & development would strengthen Finland’s competitiveness. 
The adoption of an ambitious Circular Economy Act could help improve the efficiency 
of  industry  by  reducing  industrial  waste  and  increasing  reuse  and  recycling  rates  in 
industrial  processes.  This  could  also  help  make  Finland  less  dependent  on  imported 
raw materials and intermediate goods. 

(30)  The  unemployment  rate  in  Finland  sharply  increased  to  8.4%  in  2024  from  7.2%  in 
2023, following two consecutive years of decline in GDP (-1% in 2023 and -0.1% in 
2024). The employment rate fell to 77.0% in 2024, from 78.2% in 2023, jeopardising 
Finland’s  ability  to  reach  its  national  target  of  80%  by  2030.  On  1  January  2025, 
municipalities  and  municipal  employment  areas  took  over  the  responsibility  for 
organising  public  employment  services,  including  the  Nordic  model  of  employment 
services,  which  aims  to  support  jobseekers  through  active  labour  market  policies. 
Skills mismatches, i.e. the inability to fill vacant positions with workers possessing the 
skills required by employers, pose challenges especially in healthcare, where demand 

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(31) 

(32) 

for  workers  is  expected  to  increase  as  the  population  ages.  Moreover,  specific  skills 
shortages in fields relevant for the green transition risk limiting the progress Finland is 
making  towards  achieving  its  climate  target  of  carbon  neutrality  by  2035.  Skills 
shortages also threaten Finland’s competitiveness and long-term growth. In 2024, the 
tertiary  educational  attainment  rate  in  Finland  was  39.1%,  below  the  EU  average  of 
44.2%,  the  EU-level  target  of  45%,  and  far  behind  the  Finnish  ambition of  reaching 
50% by 2030. Increasing the number of tertiary graduates and  expanding the higher-
education offer closely aligned with labour market demand are crucial for addressing 
skills shortages in the long term. 

In Finland, the share of people reporting unmet needs for medical care increased from 
7.9%  in  2023  to  8.5%  in  2024  and  was  well  above  the  EU  average  of  2.5%.  The 
Finnish social and healthcare system was fundamentally restructured in 2023 with the 
creation of ‘wellbeing services counties’, which are responsible for organising social, 
healthcare  and  rescue  at  regional  level.  Two  years  after  their  creation,  the  wellbeing 
services  counties  are  at  different  stages  of  implementation  reflected  by  regional 
disparities  in  access  to  social  services,  healthcare  and  long-term  care.  In  2023  and 
2024,  there  were  sizeable  budget  overruns  in  the  wellbeing  services  counties  due  to 
inflation,  remaining  inefficiencies,  rising  demand  from  an  ageing  population,  and 
labour  shortages  requiring  recourse  to  private-sector  providers.  Tighter  financial 
steering, an extended use of digital services and  improving data for decision making 
are  expected  to  boost  productivity  and  efficiency.  Ensuring  that  the  reform  of 
healthcare and social services improves cost efficiency, while guaranteeing access and 
quality, will be fundamental to ensuring the sustainability of the social and healthcare 
services in the long run. 

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,  in  2025,  the  Council  recommended  that  the  euro-area  Member  States  take 
action,  including  through  their  recovery  and  resilience  plans,  to  implement  the  2025 
the  euro  area.  For  Finland, 
Recommendation  on 
the  economic  policy  of 
the  first  euro-area 
implement 
recommendations  (2),  (3),  (4)  and  (5)  help 
recommendation  on  competitiveness,  while  recommendations  (1),  (4)  and  (5)  help 
implement  the  second  euro-area  recommendation on resilience,  and  recommendation 
(1)  helps  implement  the  third  euro-area  recommendation  on  macroeconomic  and 
financial stability set out in the 2025 Recommendation. 

HEREBY RECOMMENDS that Finland take action in 2025 and 2026 to: 

1. 

Reinforce overall defence spending and readiness in line with the European Council 
conclusions  of  6  March  2025.  Adhere  to  the  maximum  growth  rates  of  net 
expenditure recommended by the Council on 21 January 2025, while making use of 
the  allowance  under  the  national  escape  clause  for  higher  defence  expenditure. 
Implement the set of reforms and investments underpinning the extended adjustment 
period as recommended by the Council on 21 January 2025. Improve the efficiency 
of public spending by taking into account the results of the spending reviews. Pursue 
the  reform  of  the  social  security  system  to  increase  the  efficiency  of  the  social 
benefits system, improve incentives to work and support the long-term sustainability 
of public finances, while addressing the needs of the vulnerable groups. 

2. 

In  view  of  the  applicable  deadlines  for  the  timely  completion  of  reforms  and 
investments under Regulation (EU) 2021/241, ensure the effective implementation of 
the recovery and resilience plan, including the REPowerEU chapter.  Accelerate the 

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3. 

4. 

5. 

implementation of cohesion policy programmes (ERDF, JTF, ESF+), building, where 
appropriate, on the opportunities offered by the mid-term review. Make optimal use 
of EU instruments, including the scope provided by  the InvestEU and the Strategic 
Technologies for Europe Platform, to improve competitiveness. 

Pursue  the  R&D  target  of  4%  by  2030  and  improve  the  commercialisation  of 
innovation  by  i)  stepping  up  the  cooperation  between  businesses  and  academia 
through  joint  industry-university  projects,  and  ii)  improving  the  entrepreneurship 
skills and support for researchers. 

Reduce  reliance  on  fossil  fuels  by  boosting  public  and  private  investment  in  the 
decarbonisation  of  industry  and  transport,  including  through  electrification,  as  well 
as in the development of green technologies.  

Strengthen  active  labour  market  policies  for  all  and  address  skills  shortages  by 
reskilling  and  upskilling  the  workforce  and  widening  the  higher-education  offer,  in 
particular for the skills most in demand in the labour market. Ensure that the reform 
of social and healthcare services: i) improves the delivery and cost-effectiveness of 
and  access  to  social  and  healthcare  services,  including  long-term  care,  and 
ii) addresses inefficiencies. 

Done at Brussels, 

For the Council 
The President 

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