REPORT FROM THE COMMISSION Germany and Finland Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of the European Union
Date: 2025-12-12
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Finland, Germany, budget deficit, budget policy, budgetary control, budgetary expenditure, gross domestic product, macroeconomics, public debt, stability pact, structural adjustment

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 12.12.2025  COM(2025) 950 final/2  CORRIGENDUM This document corrects document COM(2025)950 final of 25.11.2025. Only the English version is concerned. Amending footnote 35 containing a description of the main elements of the parliamentary pact on the terms of the new fiscal framework. The text shall read as follows:  REPORT FROM THE COMMISSION Germany and Finland        Report prepared in accordance with Article 126(3) of the Treaty on the Functioning of the European Union      
 
 
1.  INTRODUCTION 

Article 126 of the Treaty on the Functioning of the European Union (TFEU) lays down the 
excessive deficit procedure. That procedure is further set out in Council Regulation (EC) No 
1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure1, 
which is part of the Stability and Growth Pact. In accordance with Article 126(3) TFEU, this 
report assesses the situation of Member States vis-à-vis the deficit criterion.2  

The previous report under Article 126(3) TFEU was adopted by the Commission on 4 June 
2025, in the context of the 2025 Spring Package of the European Semester. In that report3, the 
Commission concluded with its consideration to propose the opening of an excessive deficit 
procedure for Austria due to the non-compliance with the deficit criterion. Subsequently, upon 
a Commission proposal, the Council decided on the existence of an excessive deficit in Austria4 
and  adopted  a  Recommendation  with  a  view  to  bringing  an  end  to  that  situation.5  The 
Commission’s  report of 4 June 2025 also  discussed the cases of Spain,  Latvia and Finland. 
With  regard  to  Spain  and  Latvia,  the  Commission  considered  that  the  deficit  criterion  was 
fulfilled, whereas, for Finland, the Commission considered, that there was no case to open an 
excessive deficit procedure at that time.  

The  present  report  examines  the  situation  of  the  Member  States  for  which  the  government 
deficit  and  debt  levels  reported  under  Council  Regulation  (EU)  No  479/2009,  and  the 
Commission  Autumn  2025  Forecast6,  indicate  relevant  changes  compared  to  the  figures 
available in spring. This is namely the case for Finland and Germany.7 

The deficit and debt criteria 

The deficit criterion is fulfilled if the actual general government deficit for the previous year 
(2024) and planned deficit for the current year (2025) do not exceed 3% of GDP. If either does, 
the Commission examines whether the deficit ratio has declined substantially and continuously, 
and comes close to the reference value. The Commission also examines whether the deficit in 
excess over the reference value is exceptional and temporary, and remains close to the reference 
value (section 2). Relevant factors are to be considered by the Commission and the Council in 
the  steps  leading  to  the  decision  on  the  existence  of  an  excessive  deficit,  if  either  i) the 
government debt does not exceed 60% of GDP, or  ii) if the debt exceeds 60% of GDP, the 
deficit is close to 3% of GDP and the excess over it is temporary (section 4).  

1   Council Regulation (EC) 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). 
Following the 2024 reform of the economic governance framework, the rules governing the excessive deficit 
procedures  on  the  basis  of  the  deficit  criterion,  as  laid  out  in  Regulation 1467/97,  remain  fundamentally 
unchanged. 

2  

6  

3   COM(2025) 615 final, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52025DC0615  
4   Council Decision on the existence of an excessive deficit in Austria, adopted on 8 July 2025. 
5   All  documents  related  to  the  excessive  deficit  procedure  of  Austria  can  be  found  at:  https://economy-
finance.ec.europa.eu/economic-and-fiscal-governance/stability-and-growth-pact/corrective-arm-excessive-
deficit-procedure/excessive-deficit-procedures-overview/austria_en. 
European  Commission  Autumn  2025  Forecast  (European  Economy  Institutional  Paper  327,  November 
2025). 
This  report  is  adopted  at  the  same  time  as  the  Commission’s  opinions  on  the  draft  budgetary  plans  of 
Germany, Finland, and other euro area Member States. This report analyses the government deficits against 
the requirements of the Treaty in order to conclude on whether  there is a risk of an excessive deficit in a 
Member State. The Commission opinions on the Draft Budgetary Plans on the other hand analyse the net 
expenditure projected for 2026 against the relevant Council recommendations. 

7  

1 

 
 
According to the Treaty, the debt criterion is fulfilled if the general government gross debt 
does not exceed 60% of GDP, or if the ratio is sufficiently diminishing and approaching the 
reference value at a satisfactory pace. According to Article 2(2) of Regulation (EC) No 1467/97 
(as amended), the debt-to-GDP ratio shall be considered as  ‘sufficiently diminishing and as 
approaching the reference value at a satisfactory pace’ if the Member State concerned respects 
the maximum net expenditure8 growth rates recommended by the Council under Articles 17 or 
19  of  Regulation  (EU)  2024/12639.  If  the  Member  State  concerned  does  not  respect  those 
maximum net expenditure growth rates, the Commission prepares a report in line with Article 
126(3) TFEU if the debits10 recorded in the Member State’s control account exceed one of two 
thresholds − 0.3% of GDP annually and 0.6% of GDP cumulatively − unless the budgetary 
position is close to balance or in surplus.  

The  debt  criterion  cannot  yet  be  fully  assessed  at  this  stage.  According  to  Article  22(6)  of 
Regulation  (EU)  2024/1263,  debits  (or  credits)  in  the  control  account  are  calculated  on  the 
basis of outturn data. For all Member States, the initial year for their maximum annual and 
cumulative net expenditure growth rates is currently 2025. The assessment of compliance with 
the debt criterion can thus only be undertaken by the Commission once the outturn data for 
2025 are available, in spring 2026. Figures on the general government debt-to-GDP ratio are, 
however, presented in section 3. 

Main data underlying and motivating this report 

The present report concerns Member States for which the actual 2024 deficit ratio provided by 
Eurostat,11  or  the  planned  deficit  ratio  for  202512,  exceeds  3%  of  GDP.13  These  actual  and 
planned  deficits  above  the  reference  value  are  what  motivates  this  report.  Moreover,  the 
assessment of compliance with  the deficit criterion also  considers the Commission  Autumn 
2025 Forecast14. This report also compares the government deficit with government investment 
expenditure and takes into account all other relevant factors, in accordance with Article 2 of 
Regulation (EC) No 1467/97. 

Based on the data provided by Eurostat on 21 October 2025 (see Table 1), this report assesses 
compliance  with  the  deficit  criterion  in  two  Member  States:  Germany  and  Finland. 
Specifically: 

8    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. 
9   Regulation  (EU)  2024/1263  of  the  Parliament  and  of  the  Council  of  29  April  2024  on  the  effective 
coordination of economic policies and on multilateral budgetary surveillance and repealing Regulation (EC) 
No 1466/97 (OJ L, 2024/1263, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/oj). 

10   The  control  account  set  up  by  the  Commission  in  accordance  with  Article  22(2)  of  Regulation  (EU) 
2024/1263 records deviations of the observed net expenditure in a Member State from the recommended 
maximum net expenditure growth rates set by the Council. Upward deviations from the recommended net 
expenditure path are registered as debits, after taking into account national escape clauses that may have 
been activated. 

11   See  Eurostat  Euro  indicators  of  21  October  2025  https://ec.europa.eu/eurostat/en/web/products-euro-
indicators/w/2-21102025-AP, in accordance with Article 14 of Council Regulation (EC) No 479/2009. 
12   The  complete  set  of  tables  reported  to  Eurostat  by  Member  States  is  available  at:  http://ec.europa.eu 
/eurostat/web/government-finance-statistics/excessive-deficit-procedure/edp-notification-tables.  In 
these 
tables, Member States are required to report actual data for the previous years, as well as planned data for 
the current year. 

13   Member States currently under excessive deficit procedure are not concerned by the present report. 
14   Unless stated otherwise, the source for the figures for 2025, 2026 and 2027 provided in this report is the 

European Commission Autumn 2025 Forecast (European Economy Institutional Papers 327). 

2 

 
 
- 

In Finland, the 2024 general government deficit exceeded 3% of GDP.  

-  According to the autumn 2025 fiscal notification, Germany and Finland plan government 

deficits that exceed 3% of GDP in 2025.  

This report does not elaborate on the case of Spain, which reports a deficit of 3.2% of GDP in 
2024 (see Table 1). Spain was analysed in the Commission report under Article 126(3) of 4 
June  2025,  which  concluded  that  the  deficit  criterion  was  fulfilled.  There  have  not  been 
significant  changes  compared  to  the  figures  available  in  spring  that  would  justify  a 
reassessment of that conclusion15. The June 2025 report also examined the case of Latvia and 
concluded that the deficit criterion was fulfilled16. According to the autumn 2025 notification, 
Latvia no longer reports a breach of the reference value, as the actual deficit for 2024 and the 
planned  deficit  for  2025  are  below  3%  of  GDP,  so  that  the  deficit  criterion  is  regarded  as 
fulfilled17. The Commission Communication of 25 November 202518 provides a more detailed 
update on the fiscal situation of these and all other Member States.  

15  

16  

In spring 2025, Spain notified a deficit of 3.2% of GDP for 2024 and a planned deficit of 2.5% for 2025. 
The  2024 deficit  was  assessed as above but close  to the reference value,  and the  excess  was assessed as 
temporary (based on the Commission Spring 2025 forecast) but not exceptional. Relevant factors could be 
taken into account and were regarded as on balance providing a mixed picture. Overall, the deficit criterion 
was assessed as fulfilled. Based on the autumn 2025 notification, the deficit in 2024 and the planned deficit 
for 2025 remain unchanged at 3.2% and 2.5% of GDP, while also the Commission Autumn 2025 forecast 
projects similar deficits in 2025-26 as in spring. As a result, there are no material changes compared to the 
situation in spring that would justify a detailed discussion of Spain in the present report.  
In spring 2025, Latvia notified a deficit of 1.8% of GDP for 2024 and a planned deficit of 3.1% for 2025. 
The 2025 planned deficit was assessed as above but close to the reference value and the excess was assessed 
as exceptional but not temporary (based on the Commission Spring 2025 forecast). Relevant factors could 
be taken into account and were regarded as on balance mitigating. Overall, the deficit criterion was assessed 
as fulfilled. 

17   Based on the autumn 2025 notification, the deficit in 2024 remains at 1.8% of GDP, while the planned deficit 
for 2025 fell to 2.9% of GDP. This means that the motivation for the report in spring no longer applies, and 
therefore a detailed discussion of Latvia in the present report does not seem justified. Note, Hhowever, that 
the European Commission Autumn 2025 Forecast projects the deficit in 2025 to be marginally above 3% of 
GDP and increasing in 2026. Fiscal developments in Latvia will be reassessed in spring 2026. 

18   Communication from the Commission to the European Parliament, the Council and the European Central 
Bank 'Reflecting the economic governance framework in national fiscal policy', Brussels, 25.11.2025, COM 
(2025)951 final. 

3 

 
 
Table 1 - Member States’ position vis-à-vis the deficit and debt reference values 

Actual deficit 
not exceeding (✓) 
/ exceeding (✗) 
3% of GDP in 
2024 

Planned deficit 
not exceeding (✓) /  
exceeding (✗) 
3% of GDP in 2025 

Debt ratio  
not exceeding (✓) / 
exceeding (✗) 60% 
of GDP at end-
2024 

Member States assessed in this report 
Germany 

Finland 

Member States not considered in this report 
Belgium** 

✓ 
✗ 

✗ 
✓ 
✓ 
✓ 
✓ 
✓ 
✓ 
✗ 
✗ 
✓ 
✗ 
✓ 
✓ 
✓ 
✓ 
✗ 
✗ 
✓ 
✗ 
✗ 
✓ 
✗ 
✓ 
✗ 
✓ 

Bulgaria 

Czechia 

Denmark 

Estonia 

Ireland 

Greece 

Spain† 

France** 

Croatia 

Italy** 

Cyprus 

Latvia 

Lithuania 

Luxembourg 

Hungary** 

Malta** 

Netherlands 

Austria* 

Poland** 

Portugal 

Romania*** 

Slovenia 

Slovakia** 

Sweden 

✗ 
✗ 

✗ 
✓ 
✓ 
✓ 
✓ 
✓ 
✓ 
✓ 
✗ 
✓ 
✓ 
✓ 
✓ 
✓ 
✓ 
✗ 
✗ 
✓ 
✗ 
✗ 
✓ 
✗ 
✓ 
✗ 
✓ 

✗ 
✗ 

✗ 
✓ 
✓ 
✓ 
✓ 
✓ 
✗ 
✗ 
✗ 
✓ 
✗ 
✗ 
✓ 
✓ 
✓ 
✗ 
✓ 
✓ 
✗ 
✓ 
✗ 
✓ 
✗ 
✓ 
✓ 

Source: Eurostat (press release of 21 October 2025 and autumn 2025 fiscal notification). 
Notes: (*) In excessive deficit procedure since June 2025. (**) In excessive deficit procedure since July 2024. (***) In excessive 
deficit procedure since April 2020. (†) Not in excessive deficit and not discussed in this report (see Section 1).  

4 

 
 
 
 
 
 
 
 
 
2.  GENERAL GOVERNMENT BALANCE 

Finland exceeded the government deficit reference value in 2024, while both Germany and 
Finland plan a deficit for 2025 exceeding the 3% of GDP reference value (see Table 2). 

For Finland, the government deficit in 2024 amounts to 4.4% of GDP and the planned deficit 
for 2025 to 4.3% of GDP, whereas the Commission Autumn 2025 Forecast projects a deficit of 
4.5% in 2025. The deficits in both 2024 and 2025 are therefore assessed as above and not close 
to the reference value. For Germany, the planned deficit for 2025 amounts to 3.3% of GDP, 
whereas the Commission Autumn 2025 Forecast projects the deficit at 3.1% which is assessed 
as above but close to the reference value.  

According to the Commission Autumn 2025 Forecast, the government deficits in Finland and 
in Germany are projected to continue exceeding 3% of GDP over the forecast horizon to 2027. 
Therefore, the deficits in excess of the reference value are assessed to be not temporary. 

For Finland, the deficit in excess of the reference value in 2024 was impacted by unfavourable 
macroeconomic conditions. Real GDP decreased by 0.9% in 2023 and grew by 0.4% in 2024, 
and is projected in the Commission Autumn 2025 Forecast to increase by  0.1% in 2025. In 
addition, the worsening security environment due to Russia's war of aggression against Ukraine 
has sizeable repercussions on public finances in Finland. On 8 July 2025, the Council adopted 
a Recommendation19 under Article 26 of Regulation 2024/126320 allowing Finland to deviate 
from  the maximum growth  rates of net  expenditure  as  set  by the Council  (activation of the 
national escape clause) during the period 2025-2028 to accommodate the increase in defence 
spending21.  The  Recommendation  documented  the  exceptional  circumstances  outside  the 
control of the government with a major impact on public finances underpinning the increase in 
defence spending. However, the deficit in excess of the reference value in 2025 is not fully 
explained by an increase in defence spending22. 

In Germany, the deficit in excess of the reference value in 2025 is impacted by unfavourable 
macroeconomic conditions. Real GDP decreased by 0.9% in 2023 and by 0.5% in 2024, and is 
projected  in  the  Commission Autumn  2025  Forecast  to  increase  by  0.2%  in  2025.  On  10 
October  2025,  the  Council  adopted  a  Recommendation23  under  Article  26  of  Regulation 
2024/1263 allowing Germany to deviate from the maximum growth rates of net expenditure as 
set by the Council (activation of the national escape clause) during the period 2025-2028 to 
accommodate  the  increase  in  defence  spending.  The  Recommendation  documented  the 
exceptional circumstances outside the control of the government with a major impact on public 

19   Council Recommendation of 8 July 2025 allowing Finland to deviate from the maximum growth rates of net 
expenditure  as  set  by  the  Council  under  Regulation  (EU)  2024/1263  (Activation  of  the  national  escape 
clause), (OJ C, C/2025/3966, 20.8.2025, ELI: http://data.europa.eu/eli/C/2025/3966/oj). 

20   According to Article 2(1) of Regulation 1467/97, the excess of the government deficit over the reference 
value shall be considered exceptional, in accordance with the second indent of point (a) of Article 126(2). 
TFEU if it results from the existence of a severe economic downturn in the euro area or the Union as a whole 
established by the Council in accordance with Article 25 of Regulation (EU) 2024/1263 or from exceptional 
circumstances  outside  the  control  of  the  government  with  a  major  impact  on  the  public  finances  of  the 
Member State concerned, in accordance with Article 26 of that Regulation. 

21   The  defence  spending  relevant  to  the  assessment  of  compliance  is  the  nationally  financed  defence 

expenditure as defined in the Classification of the functions of government (COFOG 02). 

22  According to the Commission Autumn 2025 Forecast, defence spending in Finland is projected to 2.2% in 

2025, this is an increase by 1.0 pps. of GDP, compared to 2021.  

23   Council Recommendation of 10 October 2025 endorsing the national medium-term fiscal-structural plan of 
Germany and allowing Germany to deviate from the maximum growth rates of net expenditure as set by the 
Council  under  Regulation  (EU)  2024/1263  (Activation  of  the  national  escape  clause),  OJ  C/2025/5635, 
22.10.2025. ELI: http://data.europa.eu/eli/C/2025/5635/oj. 

5 

 
 
finances underpinning the increase in defence spending. Moreover, the deficit in excess of the 
reference value in 2025 is fully explained by an increase in defence spending24. 

Based  on  the  above,  the  deficits  in  excess  of  the  reference  value  can  be  considered  as 
exceptional for Finland and Germany. 

In  sum,  this  analysis  of  deficits  in  excess  over  the  reference  value  −  regarding  whether  the 
deficit is exceptional, temporary as well as remains close to the reference value − suggests that 
the deficit criterion is not fulfilled in Finland or Germany, before the consideration of relevant 
factors. 

24   According to the Commission Autumn 2025 Forecast, defence spending in Germany is projected to 1.6% in 

2025, this is an increase by 0.5 pps. of GDP compared to 2021.  

6 

 
 
 
 
Table 2 - General government balance 

Percentage of GDP 

Autumn fiscal 
notification 

European Commission 
Autumn 2025 Forecast 

2021 

2022 

2023 

2024 

2025 

2025 

2026 

2027 

Member States assessed in this report 

Germany 

Finland 

-3.2 

-2.7 

-1.9 

-0.2 

-2.5 

-2.9 

Member States not considered in this report 

Belgium** 

Bulgaria 

Czechia 

Denmark 

Estonia 

Ireland 

Greece 

Spain† 

France** 

Croatia 

Italy** 

Cyprus 

Latvia 

Lithuania 

Luxembourg 

Hungary** 

Malta** 

Netherlands 

Austria* 

Poland** 

Portugal 

Romania*** 

Slovenia 

Slovakia** 

Sweden 

-5.4 

-4.0 

-5.0 

4.1 

-2.5 

-1.3 

-7.2 

-6.7 

-6.6 

-2.6 

-8.9 

-1.6 

-7.2 

-1.1 

1.1 

-7.1 

-7.0 

-2.3 

-5.7 

-1.7 

-2.8 

-7.2 

-4.6 

-5.1 

-0.2 

-3.6 

-2.9 

-3.1 

3.4 

-1.0 

1.6 

-2.6 

-4.6 

-4.7 

0.1 

-8.1 

2.7 

-4.9 

-0.7 

0.2 

-6.2 

-5.3 

0.0 

-3.4 

-3.4 

-0.3 

-6.5 

-3.0 

-1.6 

1.0 

-4.0 

-2.0 

-3.7 

3.4 

-2.7 

1.4 

-1.4 

-3.3 

-5.4 

-0.8 

-7.2 

1.7 

-2.4 

-0.7 

-0.7 

-6.8 

-4.4 

-0.4 

-2.6 

-5.2 

1.3 

-6.7 

-2.6 

-5.3 

-0.9 

-2.7 

-4.4 

-4.4 

-3.0 

-2.0 

4.5 

-1.7 

4.0 

1.2 

-3.2 

-5.8 

-1.9 

-3.4 

4.1 

-1.8 

-1.3 

0.9 

-5.0 

-3.5 

-0.9 

-4.7 

-6.5 

0.5 

-9.3 

-0.9 

-5.5 

-1.6 

-3.3 

-4.3 

-5.9 

-3.0 

-1.9 

1.8 

-1.3 

1.3 

0.1 

-2.5 

-5.4 

-2.9 

-3.0 

3.3 

-2.9 

-2.9 

-0.8 

-4.3 

-3.3 

-2.1 

-4.5 

-6.9 

0.3 

-8.4 

-2.4 

-5.1 

-1.4 

-3.1 

-4.5 

-5.3 

-3.0 

-1.8 

2.3 

-1.3 

1.5 

1.1 

-2.5 

-5.5 

-2.8 

-3.0 

3.3 

-3.1 

-2.2 

-0.8 

-4.6 

-3.2 

-1.9 

-4.4 

-6.8 

0.0 

-8.4 

-2.2 

-5.0 

-1.7 

-4.0 

-4.0 

-5.5 

-2.7 

-2.0 

1.1 

-4.4 

1.0 

0.3 

-2.1 

-4.9 

-2.9 

-2.8 

3.0 

-3.5 

-2.5 

-0.5 

-5.1 

-2.8 

-2.7 

-4.1 

-6.3 

-0.3 

-6.2 

-2.3 

-4.6 

-2.4 

-3.8 

-3.9 

-5.9 

-4.3 

-2.2 

0.8 

-4.4 

0.8 

0.0 

-2.1 

-5.3 

-2.8 

-2.6 

3.2 

-4.3 

-2.7 

-0.8 

-5.1 

-2.6 

-2.1 

-4.3 

-6.1 

-0.5 

-5.9 

-2.5 

-5.3 

-2.0 

Source: Eurostat (data from 2021 to 2024, and 2025 fiscal notification) and European Commission Autumn 2025 Forecast (data 
for 2025, 2026 and 2027).  
Notes: (*) In excessive deficit procedure since June 2025. (**) In excessive deficit procedure since July 2024. (***) In excessive 
deficit procedure since April 2020. (†) Not in excessive deficit and not discussed in this report (see Section 1). 

7 

 
 
 
 
 
 
 
 
 
 
 
3.  GENERAL GOVERNMENT DEBT 

In both Finland and Germany, the general government gross debt at the end of 2024 exceeded 
60% of GDP (see Table 3). For Germany, the government debt-to-GDP ratio slightly decreased 
in  2024  compared  to  the  previous  year,  whereas  it  increased  in  Finland.  Based  on  the 
Commission  Autumn  2025  Forecast,  the  debt-to-GDP  ratios  in  both  Member  States  are 
projected to rise in 2025 and 2026. 

Table 3 – General government debt 

Percentage of GDP 

Autumn fiscal 
notification 

European Commission 
Autumn 2025 Forecast 

2021 

2022 

2023 

2024 

2025 

2025 

2026 

2027 

Member States assessed in this report 

Germany 

Finland 

67.9 

73.1 

64.4 

74.0 

62.3 

77.1 

62.2 

82.5 

65.0 

86.9 

63.5 

88.1 

65.2 

90.9 

67.0 

92.3 

Member States not considered in this report 

Belgium** 

108.7 

103.4 

102.4 

103.9 

107.5 

107.1 

109.9 

112.2 

Bulgaria 

Czechia 

Denmark 

Estonia 

Ireland 

Greece 

Spain† 

23.8 

40.7 

39.6 

18.4 

52.4 

22.5 

42.5 

33.3 

19.2 

42.9 

22.9 

42.2 

33.0 

20.2 

41.8 

23.8 

43.3 

30.5 

23.5 

38.3 

197.3 

177.8 

164.3 

154.2 

115.7 

109.3 

105.2 

101.6 

France** 

112.8 

111.4 

109.8 

113.2 

Croatia 

Italy** 

Cyprus 

Latvia 

Lithuania 

Luxembourg 

Hungary** 

Malta** 

Netherlands 

Austria* 

Poland** 

Portugal 

Romania*** 

Slovenia 

Slovakia** 

Sweden 

78.2 

68.5 

60.9 

57.4 

145.8 

138.4 

133.9 

134.9 

96.5 

45.9 

43.3 

24.2 

76.2 

49.8 

50.5 

82.4 

53.0 

80.3 

44.4 

38.3 

24.9 

74.1 

50.3 

48.4 

78.1 

48.8 

123.9 

111.2 

48.6 

74.8 

60.2 

37.2 

48.1 

72.8 

57.8 

34.1 

71.1 

44.4 

37.1 

24.7 

73.2 

47.0 

45.8 

77.8 

49.5 

96.9 

49.3 

68.3 

55.8 

32.0 

62.8 

46.6 

38.0 

26.3 

73.5 

46.2 

43.7 

79.9 

55.1 

93.6 

54.8 

66.6 

59.7 

34.0 

28.9 

44.2 

29.1 

23.3 

33.4 

145.4 

101.3 

116.2 

56.9 
136.2 

55.4 

48.9 

44.1 

26.8 

73.1 

49.9 

44.9 

81.6 

59.8 

90.2 

59.5 

66.0 

61.6 

35.1 

28.5 

43.4 

28.9 

23.4 

33.1 

147.6 

100.0 

116.3 

56.2 

30.6 

44.1 

27.7 

25.9 

32.5 

32.6 

45.1 

26.8 

29.2 

31.3 

142.1 

138.0 

98.2 

97.1 

118.1 

120.0 

56.1 

55.9 

136.4 

137.9 

137.2 

56.4 

48.3 

39.8 

26.8 

73.7 

47.0 

45.2 

81.4 

59.5 

91.3 

59.1 

65.2 

61.9 

34.5 

51.0 

49.9 

44.7 

27.1 

73.9 

47.2 

47.9 

82.8 

64.9 

89.2 

61.1 

63.7 

64.0 

35.3 

45.7 

54.5 

48.2 

27.2 

74.9 

47.3 

48.1 

83.9 

69.2 

88.2 

62.7 

63.1 

66.9 

35.8 

Source: Eurostat (data from 2021 to 2024, and 2025 fiscal notification) and European Commission Autumn 2025 Forecast (data 
for 2025, 2026 and 2027).  
Notes: (*) In excessive deficit procedure since June 2025. (**) In excessive deficit procedure since July 2024. (***) In excessive 
deficit procedure since April 2020. (†)Not in excessive deficit and not discussed in this report (see Section 1). 

8 

 
 
 
 
 
 
 
4.  RELEVANT FACTORS WHEN ASSESSING COMPLIANCE WITH THE DEFICIT CRITERION  

Article 126(3) of the Treaty provides that, for each Member State, this report shall “take into 
account whether the government deficit exceeds government investment expenditure and take 
into account all other relevant factors, including the medium-term economic and budgetary 
position of the Member State”. Those factors are further clarified in Article 2(3) of Regulation 
(EC) No 1467/97, as amended, and refer to:  

a)  the medium-term debt position, i.e., the degree of public debt challenges, the evolution 
of  the  government  debt  position  and  its  financing,  and  the  related  risk  factors,  in 
particular the maturity structure, the currency denomination of the debt and contingent 
liabilities, including any implicit liabilities related to ageing and private debt; 

b)  the  medium-term  budgetary  position,  including,  in  particular,  the  size  of  the  actual 
deviation  from  the  maximum  net  expenditure  growth  rates  as  set  by  the  Council,  in 
annual and cumulative terms as measured by the control account; 

c)  the  medium-term  economic  position, 

inflation 
developments and cyclical developments compared to the assumptions underlying the 
maximum net expenditure growth rates as set by the Council; 

including  potential  growth, 

d)  the  implementation  of  reforms  and  investments25,  including  in  particular  policies  to 
prevent and correct macroeconomic imbalances and policies to implement the common 
growth  and  employment  strategy  of  the  Union,  including  those  supported  by  the 
Recovery and Resilience Facility (RRF), and the overall quality of public finances, in 
particular the effectiveness of national budgetary frameworks;  

e)  the increase of government investment in defence, where applicable, considering also 
the time of recording of military equipment expenditure. The increase in government 
investment in defence has been included among the relevant factors as a result of the 
reform of the economic governance framework.  

Article 2(3) of Regulation (EC) No 1467/97 provides also that “any other factors which, in the 
opinion  of  the  Member  State  concerned,  are  relevant  in  order  to  comprehensively  assess 
compliance with the deficit and debt criteria and which the Member State has put forward to 
the  Council  and  the  Commission”  need  to  be  given  due  consideration  in  this  report. 
Furthermore, in accordance with Article 2(4) of Regulation (EC) No 1467/97, the presence of 
substantial public debt challenges is a key aggravating factor.  

As  regards  the  assessment  of  compliance  with  the  deficit  criterion,  Article  2(4)  of  Council 
Regulation (EC) No 1467/97 further provides that the relevant factors can be taken into account 
by the Council and the Commission in the steps leading to the decision on the existence of an 
excessive deficit only when: 

a)  the government debt-to-GDP ratio does not exceed the 60% reference value, or 
b)  if  the  government  debt-to-GDP  ratio  exceeds  the  60%  reference  value,  a  double 
condition is met – i.e. that the deficit remains close to the reference value and that the 
excess over the reference value is temporary. 

For both Germany and Finland, the debt-to-GDP ratio exceeds the 60% reference value, and 
the  double  condition  necessary  for  relevant  factors  to  be  taken  into  account  (closeness  and 

25   The  implementation of the set of reforms and investments that underpins an extension of the adjustment 
period for some Member States, as specified in the Council Recommendations endorsing the medium-term 
fiscal-structural plans, will be assessed in the context of the European Semester Spring Package, which is 
expected to be published by the Commission at the beginning of June 2026. For the countries covered in this 
report, there is an extension of the adjustment period for both Germany and Finland. 

9 

 
 
temporariness) is not met. Therefore, for both Member States relevant factors cannot be taken 
into account by the Council and the Commission in the steps leading to the decision on the 
existence of an excessive deficit. According to the established practice and in line with Article 
2(4) of Regulation (EC) No 1467/97, the relevant factors are discussed in this report, even if 
they cannot be taken into account by the Council and the Commission in the steps leading to 
the decision on the existence of an excessive deficit on the basis of the deficit criterion.  

4.1. CROSS-COUNTRY RELEVANT FACTORS  

The EU economy  has been faced with  a series of  adverse shocks in  recent  years, including 
Russia’s  war  of  aggression  against  Ukraine  and  high  energy  prices,  a  rise  in  geopolitical 
uncertainty, higher US tariffs and a reconfiguration of global trade flows. These factors played 
a role in budgetary developments of Member States, via e.g. the delayed adjustment of certain 
tax bases to inflation, automatic indexation mechanisms and increased expenditure for defence 
and border safety.  

Economic activity in the EU as a whole picked up in 2024, with real GDP growth rising to 
1.1%  in  2024  from  0.4%  in  2023.  Modest  growth,  driven  by  domestic  demand,  remains  in 
place, amidst a challenging external environment and lingering high uncertainty. According to 
the Commission Autumn 2025 Forecast, EU real GDP growth is projected at 1.4% in 2025. 
Meanwhile, inflation has continued declining, decreasing from a peak of 9.2% in 2022 to 2.6% 
in  2024.  According  to  the  Commission  Autumn  2025  Forecast,  EU  real  GDP  growth  is 
projected at 1.4% in 2025. The disinflation process is set to continue, with headline inflation 
falling to 2.5% in 2025. 

Concerning the aggregate EU government deficit, after a sizeable reduction in 2021 and 2022 
from very high levels in 2020, the deficit increased to 3.4% of GDP in 2023 and then fell to 
3.1% of GDP in 2024. In 2025, the aggregate deficit is projected to increase to 3.3% of GDP. 

At the end of 2024, the EU government debt-to-GDP ratio stood at 82.0%, broadly unchanged 
compared to 2023 (81.8%) and around 9 pps. lower than the 91.3% peak at the end of 2020, 
when public debt ratios increased substantially as a result of the COVID-19 crisis. However, it 
remains around 3 pps. above the pre-COVID-19 level. According to the Commission Autumn 
2025 Forecast, the debt ratio is projected to rise to 82.8% of GDP in 2025.  

After a sizeable expansion overall in 2020-23, the fiscal stance in 2024 was contractionary at 
0.3% of GDP, driven by the phase-out of support to private investment and somewhat lower 
expenditure  financed  by  the  EU  budget  (including  due  to  the  end  of  spending  under  the 
Multiannual  Financial  Framework  2014-2020).  This  was  only  slightly  offset  by  an 
expansionary  contribution  from  public  investment  financed  by  national  budgets.  The  fiscal 
stance in 2025 is projected to be broadly neutral (below 1/4% of GDP), with the contractionary 
contribution  from  national  budgets  largely  offset  by  the  expansionary  contribution  from 
expenditure financed by the EU budget.  

4.2. COUNTRY-SPECIFIC RELEVANT FACTORS  

This  section  provides  an  assessment  of  country-specific  relevant  factors,  including  public 
investment  (see  Table  4),    for  each  of  the  two  Member  States  concerned  by  this  report,  as 
specified in section 4.  

Concerning the increase in government expenditure and investment in defence, this report uses 
the  breakdown  of  government  expenditure  that  is  based  on  national  accounts  (ESA  2010) 
definitions  with  respect  to  the  International  Classification  of  the  Functions  of  Government 
(COFOG) for defence purposes.  

10 

 
While  the  country-specific  sections  refer  to  key  information  on  the  medium-term 
macroeconomic position, including on the contributions to growth, and on the medium-term 
budgetary  and  debt  positions,  more  detail  on  the  macroeconomic  and  fiscal  outlook  can  be 
found in the Commission Autumn 2025 Forecast. 

Table 4 - Public investment 

Percentage of GDP 

European Commission 
Autumn 2025 Forecast 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

Member States assessed in this report 

Germany 

Finland 

2.9 

4.2 

2.9 

4.1 

2.9 

4.1 

Member States not considered in this report 

Belgium** 

Bulgaria 

Czechia 

Denmark 

Estonia 

Ireland 

Greece 

Spain† 

France** 

Croatia 

Italy** 

Cyprus 

Latvia 

Lithuania 

Luxembourg 

Hungary** 

Malta** 

Netherlands 

Austria* 

Poland** 

Portugal 

Romania*** 

Slovenia 

Slovakia** 

2.8 

2.7 

4.6 

3.2 

5.8 

2.0 

3.6 

2.7 

4.1 

4.8 

2.8 

2.7 

5.6 

3.2 

4.1 

6.2 

3.7 

3.4 

3.6 

4.1 

2.6 

4.1 

4.7 

3.0 

2.7 

2.4 

4.5 

3.1 

5.4 

2.1 

3.7 

2.7 

4.2 

4.1 

2.6 

2.4 

4.8 

3.2 

4.3 

5.3 

3.3 

3.2 

3.4 

3.8 

2.4 

4.4 

5.5 

3.1 

2.9 

3.8 

4.8 

3.2 

6.5 

2.3 

3.9 

3.0 

4.2 

5.7 

3.1 

3.1 

5.6 

4.2 

4.6 

5.1 

3.5 

3.3 

3.7 

5.1 

2.6 

5.4 

5.5 

3.6 

3.1 

4.4 

3.1 

3.2 

4.7 

3.2 

6.2 

2.6 

3.6 

2.7 

4.3 

5.2 

3.6 

2.8 

6.3 

4.2 

4.6 

4.3 

3.2 

3.3 

3.9 

4.8 

2.7 

5.9 

5.1 

3.6 

3.2 

5.0 

3.2 

4.2 

4.8 

3.8 

6.9 

2.5 

4.4 

2.9 

4.3 

5.7 

3.7 

3.2 

7.3 

4.8 

4.8 

4.1 

3.7 

3.4 

4.0 

5.0 

3.5 

6.4 

5.3 

5.2 

3.4 

5.1 

3.2 

3.8 

4.8 

4.2 

8.0 

2.9 

4.2 

3.1 

4.2 

5.6 

3.9 

3.5 

7.7 

5.6 

4.9 

4.2 

3.6 

3.5 

4.0 

5.4 

3.8 

6.5 

5.3 

5.4 

3.4 

5.1 

3.3 

4.2 

4.7 

4.3 

7.8 

2.9 

5.0 

2.9 

4.3 

5.4 

3.9 

3.0 

7.8 

5.0 

4.9 

4.2 

3.5 

3.6 

4.1 

5.6 

2.4 

6.5 

5.3 

5.0 

5.1 

5.1 

6.0 
Sweden 
Source: Eurostat (data from 2021 to 2024) and European Commission Autumn 2025 Forecast (data for 
2025, 2026 and 2027).  
Notes:  (*)  In  excessive  deficit procedure  since  June 2025.  (**)  In excessive deficit procedure  since  July 
2024. (***) In excessive deficit procedure since April 2020. (†) Not in excessive deficit and not discussed 
in this report since (see Section 1). 

5.4 

5.7 

6.0 

5.5 

11 

 
 
 
 
 
 
 
 
4.2.1.  GERMANY 

Medium-term macroeconomic position. Real GDP decreased by 0.9% in 2023 and by 0.5% 
in 2024, mainly driven by weakness in manufacturing and weak external demand. In addition, 
policy  uncertainty  and  still  relatively  tight  financing  conditions  continued  to  dampen 
investment in 2024. Private consumption provided only limited support to growth. Output is 
projected to  broadly  stagnate  in  2025  (0.2%) and increase  by 1.2% in  both  2026 and 2027. 
Growth  in  2025  is  mainly  driven  by  a  pick-up  in  private  and  public  consumption, 
counterbalanced by contracting investment and a negative trade contribution. 

Medium-term  budgetary  position,  including  investment.  Germany’s  general  government 
deficit increased from 2.5% of GDP in 2023 to 2.7% in 2024. Government investment stood at 
2.9% of GDP in 2023 and increased slightly to 3.1% in 2024.  

Based on the Commission’s estimates26, the fiscal stance27, which includes both nationally and 
EU-financed expenditure, was broadly neutral in 2024. Growth in nationally financed primary 
current expenditure (net of discretionary revenue measures) in 2024 provided a contractionary 
contribution to the fiscal stance amounting to 0.3% of GDP. 

The Commission Autumn 2025 Forecast projects a general government deficit of 3.1% of GDP 
in  2025,  4.0%  in  2026,  and  3.8%  in  2027.  Government  investment  is  projected  to  slightly 
increase  to  3.2%  of  GDP  in  2025  and  to  3.4%  in  both  2026  and  2027.  Based  on  the 
Commission’s estimates, the fiscal stance is projected to be broadly neutral in 2025. Growth in 
nationally financed net primary current expenditure in 2025 is projected to provide a broadly 
neutral contribution to the fiscal stance. 

According to the Commission Autumn 2025 Forecast, Germany’s net expenditure is projected 
to increase by 3.7% in 2025, which is within the maximum growth rate of 4.4% recommended 
by the Council  on 10 October 202528. For 2026, net  expenditure is  projected to  increase by 
5.2%, which is above the maximum growth rate of 4.5% recommended by the Council. This 
corresponds to a deviation of 0.3% of GDP in 2026. In cumulative terms, i.e. compared to the 
base year of 2024, Germany’s net expenditure is projected by the Commission to increase by 
9.1% in 2026, which is above the maximum cumulative growth rate of 9.0% recommended by 
the Council. This corresponds to a cumulative deviation of less than 0.1% of GDP in 2026. 
However, the projected cumulative deviation in 2026 is within the flexibility provided by the 
national escape clause based on current projections for defence spending.29  

Debt challenges and medium-term debt position. Government debt slightly decreased from 
62.3% of GDP at the end of 2023 to 62.2%  of GDP at the end of 2024. The debt-to-GDP ratio 
is projected to increase to 63.5% of GDP at the end of 2025, 65.2% at the end of 2026, and 
67.0% at the end of 2027. 

26   Commission Staff Working Document SWD(2025)951, 'Fiscal statistical tables providing background data 

27 

relevant for the assessment of the budgetary policies of the Member States', 25.11.2025. 
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. 

28   Council Recommendation of 10 October 2025 endorsing the medium-term fiscal-structural plan of Germany 
and allowing Germany to deviate from the maximum growth rates of net expenditure as set by the Council 
under Regulation (EU) 2024/1263 (Activation of the national escape clause), OJ C/2025/5635, 22.10.2025. 
ELI: http://data.europa.eu/eli/C/2025/5635/oj.  

29   According  to  Art.  4  of  the  Council  Recommendation  of  10  October  2025  activating  the  national  escape 
clause, actual deviations from the maximum growth rates of net expenditure as set by the Council that are 
allowed under the national escape clause will not be recorded as debits in the control account of Germany. 

12 

 
 
Overall, the debt sustainability analysis indicates medium risk over the medium term.30 The 
debt ratio in the baseline under unchanged policies is projected to increase significantly, and 
the debt trajectory is sensitive to more adverse macroeconomic assumptions. According to the 
stochastic  projections,  which  simulate  a  large  range  of  possible  temporary  shocks  to 
macroeconomic variables, there is a medium likelihood that the debt ratio in 2029 will be higher 
than in 2024. 

Other factors need to be taken into account for an overall assessment of debt sustainability. On 
the  one  hand,  risk-increasing  factors  are  related  to  the  recent  high  share  of  short-term 
government debt. On the other hand, risk-mitigating factors include the lengthening of debt 
maturity  in  recent  years,  relatively  stable  financing  sources  (with  a  diversified  and  large 
investor base), a low share of public debt held in foreign currency and Germany’s positive net 
international investment position. 

In addition, structural reforms and investments under the RRF will have a positive impact on 
GDP growth in the coming years. The implementation of reforms and investments included in 
the RRP is underway. However, timely completion requires sustained efforts. 

National budgetary framework. The central element of the German fiscal framework is the 
debt brake, according to which the government finances shall in principle be balanced. This 
rule allows for structural net borrowing of up to 0.35% of GDP, which can be exceeded in the 
case of natural disasters and exceptional emergencies beyond state control and except defence 
and  security-related  expenditure  above  1%  of  GDP.  The  latter  exception  was  introduced  in 
March 2025, along with a new EUR 500 billion special purpose vehicle for infrastructure and 
climate-related investments. If non-compliance with the rule is reported after a budget year, 
any  deviations  from  the  permissible  borrowing  amount  are  recorded  to  a  standing  control 
account, which must be balanced over time. A similar rule applies in every one of the regions 
(Länder), with net borrowing now also limited to 0.35% of GDP in structural terms since March 
2025. The German constitution enshrines a general government balance rule to limit the general 
government structural deficit to 0.5% of GDP.  

Increase  in  government  investment  in  defence.  Germany’s  government  expenditure31  on 
defence amounted to 1.4% of GDP in 2024, compared to 1.1% in 2021. Government investment 
in defence represented 0.2% of GDP, remaining unchanged compared to 2023.  

The  Commission  Autumn  2025  Forecast  projects  government  expenditure  on  defence  to 
amount to 1.6% of GDP in 2025, 1.9% in 2026 and 2.1% in 2027. Government investment in 
defence is projected to remain broadly unchanged at 0.2% of GDP in 2025 and 2026 to then 
increase to 0.3% in 2027.  

Other factors put forward by the Member State. On 28 October 2025, Germany provided 
additional relevant factors not mentioned above. Germany drew attention to new estimates for 
tax  revenue  by  the  German  Working  Group  on  Tax  Revenue  Estimates  published  on 
23 October, which shows an increase in projected tax revenue relative to the figures notified 
by  Germany  in  the  EDP  notification.  All  else  being  equal,  this  increase  would  reduce  the 
projected  deficit  in  2025  to  3.0%  of  GDP32.  Germany  also  noted  that  the  government  had 
introduced reforms to enhance potential output and fiscal sustainability.  

30   Debt Sustainability Monitor 2024 (European Economy Institutional Paper 306, March 2025) based on the 

Commission Autumn 2024 Forecast. 

31   Nationally-financed  defence  expenditure  as  defined  in  the  Classification  of  the  functions  of  government 

(COFOG) in the framework of the European System of National Accounts (ESA2010). 

32   The Commission Autumn 2025 Forecast reflects the improved macroeconomic outlook underlying the tax 

revenue estimate and thus also higher tax revenues. 

13 

 
 
4.2.2. FINLAND 

Medium-term macroeconomic position. Real GDP decreased by 0.9% in 2023 and increased 
by 0.4% in 2024, mainly driven by an increase in net exports as exports of goods and services 
increased  while  imports  fell.  Public  consumption  also  increased,  but  altogether,  domestic 
demand  (including  changes  in  inventories)  declined  in  particular  due  to  a  significant 
contraction in investment. Finland’s economy is projected to stagnate with a marginal increase 
in real GDP of 0.1% in 2025. This unfavourable economic sitiuation is mainly linked to the 
worsening  security  environment  due  to  Russia's  war  of  aggression  against  Ukraine.  The 
economy is projected to resume growth in 2026 and in 2027, when real GDP is anticipated to 
grow by 0.9% and by 1.2%, respectively. Growth in 2025 is supported by slightly increasing 
net exports and investment while public and private consumption are projected to decline. In 
2026, private consumption and investment are projected to become the growth drivers while 
net exports would decline. 

Medium-term  budgetary  position,  including  investment.  Finland’s  general  government 
deficit increased from 2.9% of GDP in 2023 to 4.4% in 2024. Government investment stood at 
4.1% of GDP in 2023 and increased to 4.4% in 2024.  

Based on the Commission’s estimates, the fiscal stance, which includes both nationally and EU 
financed expenditure, was expansionary, by 1.1% of GDP, in 2024. The growth in nationally 
financed primary current expenditure (net of discretionary revenue measures) in 2024 provided 
an expansionary contribution to the fiscal stance, amounting to 0.8% of GDP. 

The Commission Autumn 2025 Forecast projects a general government deficit of 4.5% of GDP 
in 2025, 4.0% in 2026 and 3.9% in 2027. Government investment is projected to increase to 
5.0% of GDP in 2025 and then slightly increase to 5.1% in both 2026 and 2027. Based on the 
Commission’s estimates, the fiscal stance is projected to be broadly neutral in 2025. Growth in 
nationally  financed  net  primary  current  expenditure  in  2025  is  projected  to  provide  a 
contractionary  contribution  to  the  fiscal  stance,  amounting  to  0.8%  of  GDP,  reflecting  the 
implementation of substantial fiscal consolidation measures. 

According to the Commission Autumn 2025 Forecast, Finland’s net expenditure is projected to 
increase by 1.2% in 2025, which is within the maximum growth rate of 1.6 % recommended 
by the Council  on 21 January  202533. For 2026, net  expenditure is  projected to  increase by 
1.8%, which is within the maximum growth rate of 1.9% recommended by the Council.  

In  cumulative  terms,  i.e.  compared  to  the  base  year  of  2023,  Finland’s  net  expenditure  is 
projected  by  the  Commission  to  increase  by  4.5%  in  2025,  which  is  within  the  maximum 
cumulative growth rate of 5.3% recommended by the Council. For 2026, net expenditure is 
projected  to  increase  by  6.4%  in  cumulative  terms  in  2026,  which  is  within  the  maximum 
cumulative growth rate of 7.4% recommended by the Council. 

Debt challenges and medium-term debt position. Government debt increased from 77.1% 
of GDP at  the  end of  2023 to  82.5% of GDP at  the end of  2024. The  debt-to-GDP ratio is 
projected to increase further to 88.1% of GDP at the end of 2025, 90.9% at the end of 2026, 
and 92.3% at the end of 2027. 

Overall, the debt sustainability analysis indicates high risk over the medium term.34 The debt 
ratio in  the baseline under unchanged policies is  projected to  increase significantly, and the 
debt  trajectory  is  sensitive  to  more  adverse  macroeconomic  assumptions. According  to  the 

33   Council Recommendation of 21 January 2025 endorsing the 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).  

34   Debt Sustainability Monitor 2024 (European Economy Institutional Paper 306, March 2025) based on the 

Commission Autumn 2024 Forecast. 

14 

 
 
stochastic  projections,  which  simulate  a  large  range  of  possible  temporary  shocks  to 
macroeconomic variables, there is a high likelihood that the debt ratio in 2029 will be higher 
than in 2024.  

Other factors need to be taken into account for an overall assessment of debt sustainability. On 
the one hand, government guarantees, and the related implicit liabilities for the public sector, 
are the largest in the EU. On the other hand, risk-mitigating factors include relatively stable 
financing sources (with a diversified and large investor base) and the currency denomination 
of debt. 

In addition, structural reforms and investments under the RRF will have a positive impact on 
GDP growth in the coming years. The implementation of reforms and investments included in 
the RRP is underway. However, timely completion requires sustained efforts. 

National budgetary framework.  The cornerstone of the Finnish fiscal framework is a set of 
binding  expenditure  ceilings  covering  the  central  government.  At  the  beginning  of  the 
parliamentary term, the government decides on the spending limits and the rules governing the 
procedure  for  the  entire  4-year  term,  complemented  by  a  nominal  deficit  rule.  In  addition, 
Finland has a balanced-budget rule in structural terms as well as a debt rule covering the general 
government, which also apply over the length of  the government term (four years). Finally, 
there are budget balance rules for local governments and the social security sector in place set 
by ordinary law. Finland builds its medium-term budgetary strategy outlining the government’s 
fiscal  objectives  and  medium-term  priorities  according  to  these  rules,  following  a  rolling 
planning window. Finland is currently reforming its fiscal framework, and the new framework 
is expected to be legislated by end-202535.  

Increase  in  government  investment  in  defence.  Finland’s  government  expenditure  on 
defence  amounted  to  1.6%  of  GDP  in  2024,  compared  to  1.2%  in  2021.  Government 
investment in defence represented 0.1% of GDP, remaining unchanged compared to 2023.  

The  Commission  Autumn  2025  Forecast  projects  government  expenditure  on  defence  to 
amount to 2.2% of GDP in 2025, 2.1% in 2026 and 2.3% in 2027. Government investment in 
defence is projected to increase by 0.8 percentage point to 1.0% in 2025, stabilise in 2026, and 
then increase to 1.2% in 2027. 

Other factors put forward by the Member State. On 28 October 2025, Finland provided 
additional relevant factors not mentioned above. Finland highlights that the planned deficit of 
4.3% of GDP in 2025 is due to lower-than-expected tax revenues and a downward revision to 
the  projected  growth  of  the  property  income  of  pension  funds.  Finland  also  highlighted 
consolidation  measures  of  around  EUR  1  billion  (around  0.3%  of  GDP),  announced  in 
September 2025, to contain the growth of government debt; some of these measures will have 
effects already in 2026.  This comes in addition to the consolidation measures amounting to 
EUR  9  billion  (around  3.0%%  of  GDP)  taken  since  2023.  In  addition,  the  unemployment 

35  

In October 2025, a parliamentary pact  was signed by several political groups on the terms of the new fiscal 
framework. This includes a numerical fiscal rule that will come on top of the EU fiscal rules and the adoption 
of a 40% of GDP long-term debt target, with two medium-term budget balance targets (a target for a four-
year government term, which is the fiscal rule, and an eight-year inter-parliamentary target set in the middle 
of the government term) covering the central and local government. The targets must be consistent with the 
EU fiscal rules and with an 0.75 pps. of GDP debt reduction on average per year during an eight-year period 
towards the long-term debt target. There is a transitory period, where targets will only be set consistently 
with the EU rules, while the debt-reduction precondition would enter into force as from 2033. A correction 
mechanism,  triggered  in  case  of  deviations  from  the  target  for  the  government  term  and  the  steps of  the 
excessive deficit procedure , is also expected to be part of the framework. The independent fiscal institution’s 
tasks will be given to the Finnish Economic Policy Council. 

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insurance contribution will be increased at the beginning of 2026, strengthening the general 
government financial position by EUR 0.5 billion36. 

5.  CONCLUSIONS 

The government deficit in Finland exceeded the reference value of 3% of GDP in 2024 and is 
planned to exceed the reference value also in 2025; both deficits are assessed as above and not 
close to the reference value. Finland’s deficits in excess of the reference value are assessed to 
be not temporary, according to the Commission’s forecast, while the excess over the reference 
value is assessed as exceptional. 

Germany had a government deficit not exceeding the reference value in 2024 but has reported 
a planned deficit that is assessed as above but close to 3% of GDP in 2025. Germany’s deficit 
in excess of the reference value is assessed to be not temporary, according to the Commission’s 
forecast, while the excess over the reference value is assessed as exceptional. 

In both  Germany and  Finland, government  debt  exceeds  the 60% of GDP reference value 
while the double condition necessary for relevant factors to be taken into account (i.e. that the 
deficit  remains  close  to  the  reference  value  and  that  the  excess  over  the  reference  value  is 
temporary)  is  not  met. Thus,  for  both  Member  States  relevant  factors  cannot  be  taken  into 
account by the Council and the Commission in the steps leading to the decision on the existence 
of an excessive deficit. 

Therefore, the deficit criterion is fulfilled in neither Finland nor Germany 

The  Council  has  activated  national  escape  clauses  to  facilitate  an  increase  in  defence 
expenditure  in  both  Germany  and  Finland,  during  the  period  2025-2028.  Article  2(5)  of 
Regulation  (EU)  No  1467/97  establishes  that,  if  a  national  escape  clause  is  activated,  the 
Commission and the Council may decide not to reach a conclusion regarding the existence of 
an excessive deficit. 

In line with Commission Communication of 19 March 202537, if the national escape clause is 
activated, the Commission and Council may decide not to reach a conclusion regarding the 
existence of an excessive deficit in case of an excess of the deficit over 3% of GDP, when this 
is due to an increase in defence expenditure. 

In the case of Germany, defence expenditure increased from 1.1% of GDP in 2021 to 1.4% in 
2024, and is projected to be 1.6% of GDP in 2025, based on the Commission Autumn 2025 
Forecast. Without this increase in defence expenditure since 2021, the 2025 deficit projected 
by the Commission would be 2.6% of GDP, thus  below the reference value. Not to reach a 
conclusion  on  the  existence  of  an  excessive  deficit  in  Germany  at  this  stage  is  therefore  in 
accordance with Article 2(5) of Regulation (EU) No 1467/97.  

In light of this assessment, the Commission is of the view that there is no case to open an 
excessive  deficit  procedure  for  Germany.  Fiscal  developments  in  Germany  will  be 
reassessed in spring 2026. 

36   The  measures  announced  in  autumn  that  were  specified  in  sufficient  detail  have  been  reflected  in  the 
Commission  Autumn  2025  Forecast.  This  also  includes  the  increase  in  the  unemployment  insurance 
contribution. 

37   Communication from the Commission 'Accommodating increased defence expenditure within the Stability 

and Growth Pact', Brussels, 19.3.2025, C(2025) 2000 final. 

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In Finland, defence expenditure increased from 1.2% of GDP in 2021 to 1.6% in 2024, and is 
projected  to  be  2.2%  of  GDP  in  2025,  based  on  the  Commission Autumn  2025  Forecast. 
Without  the  increase  in  defence  expenditure  since  2021,  the  2025  deficit  projected  by  the 
Commission  would  be  3.4%  of  GDP,  thus  still  above  the  reference  value.  Therefore  the 
conclusion reached in the report of June 2025 needs to be revisited.  

After considering the opinion of the Economic and Financial Committee as established 
under Article 126(4) TFEU, the Commission will consider proposing to open an excessive 
deficit procedure for Finland by recommending to the Council to adopt a Decision under 
Article  126(6)  establishing  the  existence  of  an  excessive  deficit  as  well  as  a 
Recommendation under Article 126(7) with a view to correcting the excessive deficit.  

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