Recommendation for a COUNCIL RECOMMENDATION with a view to bringing an end to the situation of an excessive deficit in Finland
Date: 2025-12-12
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Finland, budget deficit, budgetary control, economic policy, economic reform, gross domestic product, public debt, public finance, stability pact

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   EUROPEAN COMMISSION  Brussels, 12.12.2025  COM(2025) 779 final  Recommendation for a COUNCIL RECOMMENDATION with a view to bringing an end to the situation of an excessive deficit in Finland  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

with a view to bringing an end to the situation of an excessive deficit in Finland 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU),  and  in 
particular Article 126(7) thereof, 

Having regard to the recommendation from the Commission, 

Whereas: 

1. 

2. 

3. 

4. 

1 
2 

3 

Article  126(1)  of  TFEU  provides  that  Member  States  shall  avoid  excessive 
government deficits. 

The  Stability  and  Growth  Pact  is  based  on  the  objective  of  sound  and  sustainable 
government  finances  as  a  means  of  strengthening  the  conditions  for  price  stability 
and  for  strong,  sustainable  and  inclusive  growth  underpinned  by  financial  stability, 
thereby supporting the achievement of the Union’s objectives for sustainable growth 
and employment. 

On [DATE], the Council decided, in accordance with Article 126(6) TFEU, that an 
excessive deficit existed in Finland due to non-compliance with the deficit criterion1. 
Article  126(7)  TFEU  and  Article  3(4)  of  Council  Regulation  (EC)  No  1467/972 
require  the  Council  to  adopt  a  recommendation  addressed  to  the  Member  State 
concerned with a view to bringing the situation of excessive deficit to an end within a 
given  period.  In  line  with  Article  3(4)  of  Council  Regulation  (EC)  1467/97,  that 
recommendation is also to establish a maximum deadline of six months for effective 
action  to  be  taken  by  the  Member  State  concerned  to  correct  the  excessive  deficit, 
which  can  be  reduced  to  three  months  when  warranted  by  the  seriousness  of  the 
situation.  Furthermore,  the  Council  is  to  recommend  that  the  Member  State 
implements  a  corrective  net  expenditure3  path,  which  ensures  that  the  general 
government  deficit  is  brought  and  maintained  below  the  reference  value  of  3%  of 
gross  domestic  product  (GDP)  within  the  deadline  set  in  that  recommendation. 
Where  the  excessive  deficit  procedure  was  opened  on  the  basis  of  the  deficit 
criterion, the corrective net expenditure path is, according to Article 3(4) of Council 

Council Decision of [DATE] on the existence of an excessive deficit in Finland,  [reference].  
Council  Regulation  (EC)  No  1467/97  on  speeding  up  and  clarifying  the  implementation  of  the 
excessive deficit procedure (OJ L 209, 2.8.1997, ELI: http://data.europa.eu/eli/reg/1997/1467/2024-04-
30)  as  last  amended  by  Council  Regulation  (EU)  2024/1264  of  29  April  2024  (OJ  L,  2024/1264, 
30.4.2024). 
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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Regulation  (EC)  No  1467/97,  to  be  consistent  with  a  minimum  annual  structural 
adjustment  of  at  least  0.5  percentage  points  of  GDP  as  a  benchmark  for  the  years 
when the general government deficit is expected to exceed the reference value. The 
Commission  may,  during  a  transition  period  in  2025,  2026  and  2027,  adjust  the 
benchmark to take into account the increase in interest expenditure when setting the 
proposed corrective net expenditure path for those years, taking into account recital 
23 of Council Regulation (EU) 2024/1264. 

Real GDP in Finland grew by 0.4% in 2024. According to the Commission Autumn 
2025 Forecast, the economy of Finland is expected to grow by 0.1% in 2025. Growth 
is  driven  by  net  exports  and  investment;  however,  the  positive  impact  of  these 
components  is  largely  offset  by  a  decline  in  public  and  private  consumption.  Real 
GDP is expected to increase by 0.9% in 2026 and 1.2% in 2027, driven by increasing 
private  consumption  and  investment  while  net  exports  would  decline.  The 
unemployment rate is expected to reach  9.5% in  2025 and decline to 9.3% in 2026 
and  9.0%  in  2027.  Inflation  is  expected  to  increase  from  1.0%  in  2024  to  1.9%  in 
2025. Looking forward, the inflation rate is projected at 1.6% in 2026 and 2.0% in 
2027. 
According  to  the  data  provided  by  Eurostat  on  21  October  20254,  the  general 
government  deficit  in  Finland  stood  at  4.4%  of  GDP  in  2024.  The  Commission 
Autumn  2025  Forecast  projects  a  general  government  deficit  of  4.5%  of  GDP  in 
2025,  and  4.0%  of  GDP  in  2026,  thus  above  the  reference  value  in  both  years. 
According  to  the  Commission’s  calculations5,  these  developments  correspond  to  a 
net expenditure growth rate of 1.2% in 2025 and 1.8% in 2026. The structural deficit 
is projected at 2.9% of GDP in 2025 and is expected to decrease by 0.2 percentage 
points of GDP in 2026. 

General  government  debt  stood  at  82.5%  of  GDP  at  end-2024.  According  to  the 
Commission Autumn 2025 Forecast, on the basis of existing policies, it is projected 
to  increase  to  88.1%  of  GDP  at  end-2025  and  90.9%  of  GDP  at  end-2026,  thus 
remaining above the 60% of GDP reference value. 

The  corrective  net  expenditure  path  in  this  recommendation  is  consistent  with 
minimum annual structural adjustments, or structural primary adjustments, of at least 
0.5 percentage points of  GDP, in line with Article 3(4) of Council Regulation (EC) 
No  1467/97  and  Recital  23  of  Council  Regulation  (EU)  2024/1264.  Based  on  the 
macroeconomic  assumptions  from  the  Commission  Autumn  2025  Forecast,  the 
corrective net expenditure path in this recommendation corresponds to an adjustment 
in the structural primary balance of 0.5 percentage points of GDP in both 2026 and 
2027. For 2028, which is beyond the period during which the Commission may take 
into  account  the  increase  in  interest  expenditure,  the  adjustment  in  the  structural 
balance  is  of  0.5  percentage  points  and  the  adjustment  in  the  structural  primary 
balance is of 0.6 percentage points of GDP. 

The  corrective  net  expenditure  path  in  this  recommendation  supersedes  the 
maximum  growth  rates  for  net  expenditure  for  2026  onwards  set  out  in  point  1  of 

Eurostat Euro Indicators published on 21 October 2025. See: 
https://ec.europa.eu/eurostat/en/web/products-euro-indicators/w/2-21102025-AP 
Commission  Staff  Working  Document  SWD(2025)  951  final,  'Fiscal  statistical  tables  providing 
background  data  relevant  for  the  assessment  of  the  budgetary  policies  of  the  Member  States',  
25.11.2025. 

5. 

6. 

7. 

8. 

9. 

4 

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Council  Recommendation  of  21  January  2025  endorsing  the  medium-term  fiscal-
structural plan of Finland6.  

Based  on  the  corrective  net  expenditure  path  in  this  recommendation,  the 
Commission  medium-term  government  debt  projection  framework  and 
the 
Commission  Autumn  2025  Forecast,  the  general  government  deficit  is  projected  to 
decrease from 4.5% of GDP in 2025 to 2.7% by 2028. The general government debt 
is projected to continue increasing from 82.5% of GDP at end-2024 to 93.5% at end-
2028. 

Budgetary consolidation measures to abide by the corrective net expenditure path in 
this recommendation should secure a lasting correction of the excessive deficit, while 
being geared towards enhancing the quality and composition of the public finances, 
preserving investment and reinforcing the growth potential of the economy. Reforms 
of  a  fiscal  and  broader  economic  nature  should  improve  the  growth  and  resilience 
potential of the economy in a sustainable manner, and support fiscal sustainability. 

the  adjustment  period 

In this respect, point 2 and Annex II (“Set of reforms and investments that underpins 
an  extension  of 
the  Council 
Recommendation  of  21 January  2025  endorsing  the  medium-term  plan  of  Finland, 
continue  to  apply.  The  implementation  of  these  reforms  and  investments  will 
continue  being  monitored  by  the  Commission  in  accordance  with  Article  22(1)  of 
Regulation 2024/12637. 

to  seven  years”)  of 

On 30 April 2025, Finland requested the activation of the national escape clause to 
accommodate  higher  defence  spending,  in  accordance  with  Article  26(1)  of 
Regulation  (EU)  2024/1263  and  following  the  Commission  Communication  of  19 
March  20258.  On  8  July  2025,  the  Council,  upon  this  request,  adopted  a 
recommendation9  allowing  Finland  to  deviate  from,  and  exceed,  the  maximum 
growth rates of net expenditure in the Council Recommendation of 21 January 2025 
endorsing the medium-term plan of Finland, for the period 2025-2028. 

The  flexibility  provided by  the  national  escape  clause  should  also  be  considered  in 
the implementation of the excessive deficit procedure, and when assessing if Finland 
has taken effective action. Therefore, until 2028, the corrective net expenditure path 
set out in this recommendation is complemented by the flexibility that is allowed by 
the increase in defence expenditure10 under the national escape clause. To ensure that 
fiscal  sustainability  is  not  endangered,  this  Recommendation  should  set  out  the 
maximum flexibility, in line with the Commission Communication of 19 March 2025 
and  the  Council  Recommendation  of  8  July  2025.  For  that  purpose,  the  overall 
maximum  flexibility  under  the  excessive  deficit  procedure  should  be  limited  to  the 

(EC) 

Regulation 

Council Recommendation of 21 January 2025 endorsing the national medium-term fiscal-structural plan 
of Finland (OJ C, C/2025/656, 10.2.2025, ELI: http://data.europa.eu/eli/C/2025/656/oj). 
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 
30.4.2024, 
1466/97 
ELI: http://data.europa.eu/eli/reg/2024/1263/oj). 
Communication  from  the  Commission  'Accommodating  increased  defence  expenditure  within  the 
Stability and Growth Pact' 19.3.2025, C(2025) 2000 final. 
Council  recommendation  allowing  Finland  to  deviate  from,  and  exceed,  the  recommended  net 
expenditure  path  (Activation  of  the  national  escape  clause),  (OJ  C,  C/2025/3966,  20.8.2025, 
ELI:  http://data.europa.eu/eli/C/2025/3966/oj). 
Nationally financed defence expenditure as defined in the Classification of the functions of government 
(COFOG02). 

2024/1263, 

(OJ 

No 

L, 

10. 

11. 

12. 

13. 

14. 

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7 

8 

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15. 

16. 

flexibility that has not been used during the period preceding the net expenditure path 
in this recommendation. 
Based on the Commission’s projections,11 Finland is expected not to have exceeded 
the maximum net expenditure growth rate for 2025 recommended by the Council on 
21  January  2025,  and  therefore  to  not  have  used  any  flexibility  allowed  by  the 
Council  Recommendation  of  8  July  2025.  As  a  result,  the  maximum  flexibility 
continues  to  be  defined  as  the  increase  in  defence  expenditure  in  percent  of  GDP 
since 2021, and in any case not more than 1.5% of GDP.  

In  line  with  Article  8(3)  of  Regulation  (EC)  No  1467/97,  a  Council  decision  to 
abrogate  the  excessive  deficit  procedure  shall  only  be  taken  pursuant  to  Article 
126(12) TFEU where the deficit has been brought below the reference value and is 
projected by the Commission to remain so in the current and following year. 

HEREBY RECOMMENDS: 

1. 

2. 

3. 

4. 

5. 

11 

12 

Finland should ensure that the nominal growth rates of net expenditure do not exceed 
the maxima established in Annex I. 

Finland should thus put an end to the excessive deficit situation by 2028. 

The Council establishes the deadline of 30 April 2026 for  Finland  to  take effective 
action  and  present  the  necessary  measures  together  with  its  2026  annual  progress 
report,  to  be  submitted  to  the  Commission  in  accordance  with  Article  21  of 
Regulation  (EU) 2024/1263.  Thereafter,  Finland  should report on progress  made in 
the  implementation  of  this  recommendation  at  least  every  six  months  until  the 
excessive  deficit  has  been  corrected,  in  spring  in  the  context  of  its  annual  progress 
reports, and in autumn in the context of its draft budgetary plans, until the excessive 
deficit has been corrected. 

Until  2028,  Finland  is  allowed  to  exceed  the  maximum  growth  rates  of  net 
expenditure  as  set  by  point  1  of  this  Recommendation,  to  the  extent  that  the  net 
expenditure in excess of those maximum growth rates is not more than: 

(a) 

the increase in defence expenditure in percent of GDP since 2021; 

(b)  provided that the deviation in excess of the maximum growth rates of net 

expenditure does not exceed 1.5 percent of GDP. 

In order to  ensure  the  correct  recording of the additional expenditure,  Finland is  to 
include actual and planned data on total defence expenditure (COFOG division 02), 
including defence investment (COFOG division 02 P.51) and any expenditure to be 
financed by SAFE loans that are not covered in COFOG-02: 

(a) 

(for years T-4, T-3, T-2 and T-1 (with year T being the current year), in 
the  reporting  to  the  Commission  (Eurostat)  in  accordance  with  Council 
Regulation (EC) No 479/200912; 

Commission  Staff  Working  Document  SWD(2025)  951  final,  'Fiscal  statistical  tables  providing 
background  data  relevant  for  the  assessment  of  the  budgetary  policies  of  the  Member  States',  
25.11.2025. 
Council  Regulation  (EC)  No  479/2009  of  25  May  2009  on  the  application  of  the  Protocol  on  the 
excessive  deficit  procedure  annexed  to  the  Treaty  establishing  the  European  Community  (OJ  L  145, 
10.6.2009, p. 1-9, ELI: http://data.europa.eu/eli/reg/2009/479/2014-09-01). 

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(b) 

for  years  2021  through  year  T  (current  year),  in  national  medium-term 
fiscal-structural plans and in annual progress reports in accordance with 
Article  11(1),  Article  15  and  Article  21(1)  of  Regulation  (EU) 
2024/1263; 

(c) 

(for  years  T  (current  year)  and  T+1,  in  draft  budgetary  plans  in 
accordance with Regulation (EU) No 473/201313.. 

This Recommendation is addressed to the Republic of Finland. 

ANNEX I 
Maximum growth rates of net expenditure 
(annual and cumulative growth rates, in nominal terms) 
Finland 

Years 

2026 

2027 

2028 

Growth 
rates 

Yearly 

Cumulative (*) 

1.3 

2.5 

1.5 

4.1 

1.8 

5.9 

(*) The cumulative growth rates are calculated by reference to 
the base year of 2024. 

Done at Brussels, 

For the Council 
The President 

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Regulation  (EU)  No  473/2013  of  the  European  Parliament  and  of  the  Council  of  21  May  2013  on 
common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of 
the  euro  area  (OJ  L  140,  27.5.2013,  ELI: 
excessive  deficit  of 
http://data.europa.eu/eli/reg/2013/473/oj). 

the  Member  States 

in 

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