Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Finland
Date: 2026-06-03
Institutions: European Commission, Reform and Investment Task Force
Subjects: Finland, budget policy, economic policy, economic recovery, economic reform, employment policy, investment, labour market, social policy, stability pact

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   EUROPEAN COMMISSION  Brussels, 3.6.2026  COM(2026) 226 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Finland {SWD(2026) 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  1466/97  (1),  and  in 
particular Article 3(3) thereof, 

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

Regulation  (EU)  2024/1263  specifies  the  objectives  of  the  economic  governance 
framework,  which  aims  at  promoting  sound  and  sustainable  public  finances, 
sustainable  and  inclusive  growth  and  resilience  through  reforms  and  investments,  as 
well  as  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 
Treaty  on  the  Functioning  of  the  European  Union  (TFEU).  The  European  Semester 
includes, in  particular, the formulation and the surveillance of the implementation  of 
country-specific recommendations. 

(2) 

On  16 July 2025,  the  Commission  adopted  its  proposal  for  a  regulation  establishing 
the European Fund for economic, social and territorial cohesion, agriculture and rural, 
fisheries and maritime, prosperity and security for the period 2028-2034 and amending 
Regulation (EU) 2023/955 and Regulation (EU, Euratom) 2024/2509 (2). The proposal 

1 

2 

EN 

Regulation 

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 
ELI: 
http://data.europa.eu/eli/reg/2024/1263/oj). 
Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  establishing  the  European 
Fund  for  economic,  social  and  territorial  cohesion,  agriculture  and  rural,  fisheries  and  maritime, 
prosperity  and  security  for  the  period  2028-2034  and  amending  Regulation  (EU)  2023/955  and 

(EC)  No 

2024/1263, 

30.4.2024, 

1466/97 

(OJ 

L, 

1 

  EN 

 
 
aims to increase the effectiveness of Union funding by reducing the fragmentation of 
the  financial  architecture  and  to  support  Member  States  in  the  coordination  of  their 
economic policy in line with Article 175 TFEU (3). 

On  25 November 2025,  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  2026  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,  a  recommendation  for  a 
Council recommendation on human capital in the European Union, and a proposal for 
the  2026  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 area (4) 
on  21 April 2026  and  the  Joint  Employment  Report  and  the  Recommendation  on 
human capital on 9 March 2026. 

On  29 January 2025,  the  Commission  published  the  Competitiveness  Compass,  a 
strategic  framework  that  aims  to  boost  the  Union’s  global  competitiveness  over  the 
next  five  years.  It  identifies  the  three  transformational  imperatives  of  innovation, 
decarbonisation  and  competitiveness,  and  security  as  critical  pillars  for  sustainable 
economic  growth  The  European  Semester  is  aligned  with  the  Competitiveness 
Compass,  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  2026,  the  European  Semester  for  economic  policy  coordination  continues  to 
develop  alongside  the  final  stage  of  the  Recovery  and  Resilience  Facility  (RRF) 
implementation (5). Recovery and resilience plans (RRPs), along with cohesion policy 
funding, have been essential for delivering on the policy priorities under the European 
Semester, as the plans were required to effectively address all or a significant subset of 
challenges identified in the relevant country-specific recommendations issued in recent 
cycles, and programmes funded by the European cohesion policy were required to take 
country-specific recommendations into account. As the RRF approaches the end of its 
lifetime,  it  remains  essential  to  sustain  the  reforms  and  investments  supported  and 
implemented  under  the  RRF,  in  particular  those  that  contribute  to  addressing 
challenges identified in the country-specific recommendations. 

On  3 June 2026,  the  Commission  published  the  2026  country  report  for  Finland.  It 
assessed  Finland’s  progress 
country-specific 
recommendations  and  took  stock  of  Finland’s  implementation  of  the  RRP.  On  the 
basis  of  that  analysis,  the  country  report  identified  the  most  pressing  challenges 

addressing 

relevant 

the 

in 

Regulation (EU, Euratom) 2024/2509 - COM(2025) 565 final. The proposed Regulation is currently the 
subject of negotiations with the co-legislators. 
Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  establishing  the  European 
Fund  for  economic,  social  and  territorial  cohesion,  agriculture  and  rural,  fisheries  and  maritime, 
prosperity  and  security  for  the  period  2028-2034  and  amending  Regulation  (EU)  2023/955  and 
Regulation (EU, Euratom) 2024/2509 - COM(2025) 565 final. The proposed Regulation is currently the 
subject of negotiations with the co-legislators. 
OJ C, C/2026/2434, 28.4.2026, ELI: http://data.europa.eu/eli/C/2026/2434/oj). 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12 February 2021 
(OJ  L  57,  18.2.2021,  p.  17,  ELI: 
establishing 
http://data.europa.eu/eli/reg/2021/241/oj). 

the  Recovery  and  Resilience  Facility 

(3) 

(4) 

(5) 

(6) 

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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. 

On  20 January 2026,  the  Council  adopted  a  Recommendation  under  Article  126(7) 
TFEU with a view to bringing an end to the situation of an excessive deficit in Finland 
(6).  The  Council  recommended  the  following  maximum  growth  rates  of  net 
expenditure: 1.3% in 2026, 1.5% in 2027 and 1.8% in 2028, which correspond to the 
maximum cumulative growth rates calculated by reference to the base year of 2024 of 
2.5% in 2026, 4.1% in 2027 and 5.9% in 2028. The corrective net expenditure path set 
out in that Recommendation supersedes the maximum growth rates of net expenditure 
for 2026 onwards established by the Recommendation of 21 January 2025 endorsing 
the  medium-term  fiscal-structural  plan  of  Finland  (7)(8).  However,  the  maximum 
growth  rates of net  expenditure set  therein  for the year 2025, which corresponded to 
1.6%  annually  and  5.3%  cumulatively  by  reference  to  the  base  year  2023,  remain 
relevant  to  assess  compliance  until  and  including  2025.  Based  on  the  Commission’s 
assessment on effective action of 3 June 2026 (9), the excessive deficit procedure for 
Finland is held in abeyance. 

Russia’s  war  of  aggression  against  Ukraine  and  its  repercussions  constitute  an 
existential  challenge  for  the  European  Union.  The  Commission  has  invited  Member 
States  to  request  the  activation  of  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  (10)  and  this  proposal  was  welcomed  by  the 
European Council of 6 March 2025. Following the request of Finland, on 8 July 2025 
the  Council,  upon  a 
the  Commission,  adopted  a 
Recommendation  allowing  Finland  to  deviate  from  the  recommended  maximum 
growth  rates  of  net  expenditure  (11).  The  period  when  the  national  escape  clause  is 
activated  (2025-2028)  allows  Finland  to  reprioritise  government  expenditure  or 
increase  government  revenue  so  that  lastingly  higher  defence  expenditure  would  not 
endanger fiscal sustainability in the medium term. 
On  30 April 2026,  Finland  submitted  its  2026  Annual  Progress  Report  (12)  on 
adherence  to  the  recommended  maximum  growth  rates  of  net  expenditure,  the 
implementation  of  the  set  of  reforms  and  investments  underpinning  the  extension  of 

recommendation 

from 

Council Recommendation of 8 July 2025 allowing Finland to deviate from the maximum growth rate 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://eur-lex.europa.eu/eli/C/2025/3966/oj). 
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). 
Point 2 and Annex II ("Set of reforms  and investments that underpins an extension of the  adjustment 
period to seven years") of the Recommendation of 21 January 2025 continue to apply. 
Communication from the Commission to the European Parliament, the Council, the European Central 
Bank,  the  European  Economic  and  Social  Committee,  the  Committee  of  Regions  and  the  European 
Investment Bank, 2026 European Semester – Spring Package, COM(2026) 200 final. 
Communication  from  the  Commission,  'Accommodating  increased  defence  expenditure  within  the 
Stability and Growth Pact’, Brussels, 19.3.2025, C(2025) 2000 final. 
Council Recommendation of 8 July 2025 allowing Finland to deviate from the maximum growth rate 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://eur-lex.europa.eu/eli/C/2025/3966/oj). 
The  2026  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. 

(7) 

(8) 

(9) 

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the adjustment period and the implementation of reforms and investments responding 
to  the  main  challenges  identified  in  the  European  Semester  country-specific 
recommendations. The report on action taken under the excessive deficit procedure is 
integrated in the Annual Progress Report. 

(10)  Real  GDP  growth  in  2025  was  0.2%  and  HICP  inflation  stood  at  1.8%.  The 
Commission  Spring  2026  Forecast  projects  real  GDP  to  grow  by  0.8%  in  2026  and 
1.4% in 2027, and HICP inflation to stand at 2.4% in 2026 and 1.9% in 2027. 
(11)  Based  on  data  provided  by  Eurostat  (13),  Finland’s  general  government  deficit 
decreased from  4.4% of  GDP in  2024 to 3.4% of GDP in  2025. The decrease in  the 
deficit in 2025 mainly reflects the impact of revenue-increasing measures such as the 
increase  in  the  VAT  rate  implemented  in  late  2024  and  modest  expenditure  growth. 
Based on policy measures known by the cut-off date of the forecast, the Commission 
Spring 2026 Forecast projects a deficit of 4.5% of GDP in 2026 and 4.6% of GDP in 
2027.  The  increase  in  2026  mainly  reflects  higher  government  investment  related  to 
the  delivery  of  F53  fighter  jets,  partially  postponed  from  2025,  and  higher  interest 
payments. 

(12)  Based  on  the  Commission’s  estimates,  the  fiscal  stance  (14),  which  includes  both 
nationally  and  EU  financed  expenditure,  was  contractionary,  by  1.5%  of  GDP,  in 
2025. It is projected to be expansionary, by 0.7% of GDP, in 2026, and broadly neutral 
in 2027. 

(13)  Based on data provided by Eurostat (15), Finland’s general government debt increased 
from  82.4%  of  GDP  at  the  end  of  2024  to  88.5%  of  GDP  at  the  end  of  2025.  The 
increase in the debt ratio in 2025 mainly reflects a persistent government deficit and a 
large positive stock-flow adjustment, and a modest growth in nominal GDP. Based on 
policy  measures  known  at  the  cut-off  date  of  the  forecast,  the  Commission  Spring 
2026 Forecast projects the debt-to-GDP ratio to increase to 91.2% by the end of 2026 
and  to  further  increase  to  93.1%  by  the  end  of  2027.  The  increase  in  2026  mainly 
reflects  a  higher  government  deficit,  which  is  only  partially  offset  by  faster  nominal 
GDP growth, while the stock-flow adjustment plays a marginal role. 

(14)  Based  on  the  Eurostat  data  (16),  total  general  government  defence  expenditure  in 
Finland  amounted  to  1.7%  of  GDP  in  2025,  corresponding  to  an  increase  of  0.5 
percentage  points  of  GDP  compared  to  the  reference  year  2021.  According  to  the 
Commission  Spring  2026  Forecast,  it  is  projected  at  2.6%  of  GDP  in  2026, 
corresponding to an increase of 1.4 percentage points of GDP compared to 2021. 

(15)  The  Union  continues  to  face  risks  of  energy  supply  disruptions  and  elevated  price 
volatility,  exacerbated  by  geopolitical  tensions  which  affect  global  oil  and  gas 
markets.  Experience  from  the  2022–2023  energy  crisis  has  shown  that  broad  and 
untargeted  measures  entail  large  fiscal  costs  and  are  socially  and  economically 

13 
14 

15 
16 

Eurostat-Euro Indicators, 22.04.2026. 
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. 
Eurostat-Euro Indicators, 22.04.2026. 
Eurostat, government expenditure by classification of functions of government (COFOG). 

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inefficient. Since the outbreak of the war in the Middle East in February 2026, Finland 
has  not  adopted  new  fiscal  policy  measures  to  mitigate  the  impact  of  high  energy 
prices on households and firms (17). 

(16)  Based  on  the  Commission’s  calculations,  net  expenditure  in  Finland  fell  by  0.7%  in 
2025  and  increased  by  2.6%  cumulatively  over  2024  and  2025.  The  net  expenditure 
growth  in  2025  is  below  the  maximum  growth  rate  recommended  by  the  Council  in 
January 2025. When considering 2024 and 2025 together, the cumulative growth rate 
of net expenditure is also below the recommended maximum growth rate. 

(17)  Based  on  the  Commission’s  calculations,  net  expenditure  in  Finland  is  projected  to 
grow by 4.1% in 2026, and 3.3% cumulatively over 2025 and 2026. The projected net 
expenditure growth in 2026 is above the maximum growth rate recommended by the 
Council  in  January  2026,  corresponding  to  a  deviation  of  1.5%  of  GDP  in  annual 
terms.  When  considering  2025  and  2026  together,  the  projected  cumulative  growth 
rate  of  net  expenditure  is  also  above  the  recommended  maximum  growth  rate, 
corresponding  to  a  deviation  of  0.5%  of  GDP  in  cumulative  terms.  However,  the 
projected  deviation  is  within  the  flexibility  of  the  national  escape  clause  based  on 
current projections for defence spending. 

(18)  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. Taking into account the information provided 
by  Finland  in  its  Annual  Progress  Report,  the  Commission  finds  that  the 
implementation  of  the  key  steps  of  these  reforms  and  investments  that  were  due  by 
30 April 2026 seems to be broadly on track. As regards the correction of deficits of the 
wellbeing  services  counties,  although  expenditure  growth  has  moderated,  the 
accumulated deficits of some counties are considered too large to be corrected by the 
end  of  2026  without  jeopardising  service  provision.  The  government  has  therefore 
presented a proposal to extend the deadline to the end of 2029 for those regions with 
credible plans to address the deficit. The Commission considers that, overall, Finland 
has  complied  with  its  commitments  in  a  satisfactory  manner  (18).  Finland  faces 
persistent  fiscal  sustainability  challenges.  In  2025,  the  general  government  deficit 
reached  3.4%  of  GDP  and  government  debt  rose  to  88.5%  of  GDP.  Although  the 
government  adopted  sizeable  consolidation  measures  in  2023  and  2024  and  further 
measures  are  included  in  the  2026  budget,  public  debt  is  not  expected  to  stabilise 
without additional interventions.  Public expenditure, at  57.7% of GDP, remained the 
highest in the Union in 2024. Improving the efficiency of public spending is crucial to 
regain  fiscal  space,  preserve  room  for  necessary  public  investment  and  address 
expenditure pressures related to population ageing. Spending reviews can help identify 
avenues to increase the effectiveness of public expenditure. Annual targeted spending 
reviews  are  expected  to  be  published  for  the  first  time  in  2026,  and  a  new 
comprehensive review is planned ahead of the 2027 elections. Finland would benefit 
from maintaining the practice of producing regular and detailed spending reviews with 
clear  and  actionable  recommendations,  and  from  systematically  taking  their  results 
into  account  in  the  budget  process.  This  is  particularly  relevant  for  the  social 
protection system, where expenditure amounted to 26% of GDP in 2024, well above 

17 
18 

This reflects the situation at the cut-off date of the Commission’s Spring 2026 Forecast (4 May 2026). 
Communication from the Commission to the European Parliament, the Council, the European Central 
Bank,  the  European  Economic  and  Social  Committee,  the  Committee  of  Regions  and  the  European 
Investment Bank, 2026 European Semester – Spring Package, COM(2026) 200 final. 

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the  Union  average  of  19%  of  GDP.  Finland’s  social  protection  system  is 
comprehensive  but  complex  and  could  potentially  disincentivise  work.  Since  2023, 
several  reforms  have  been  adopted  to  simplify  and  improve  the  efficiency  of  the 
system  and  strengthen  work  incentives,  including  the  launch  of  the  general  social 
security benefit and the comprehensive reform of social assistance, both taking effect 
in  2026.  While  these  two  reforms  are  expected  to  improve  efficiency  and  work 
incentives, their impact on fiscal sustainability is still uncertain. At the same time, the 
risk  of  poverty  or  social  exclusion  has  increased,  and  impact  assessments  show  that 
recent  reforms  appear  to  have  affected  vulnerable  groups  more  than  expected. 
Addressing  the  needs  of  vulnerable  groups  whilst  improving  spending  efficiency 
deserves particular attention. 

(19)  The systematic, meaningful and timely 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 Union’s funding 
instruments, as well as in the context of the European Semester. 

(20)  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+) in Finland, is above EU average in terms 
of  payments,  although  the  project  selection  rate  remains  below  EU  average.  It  is 
important  to  keep  current  momentum  and  ensure  the  swift  delivery  of  investments, 
while  maximising  the  impact  of  investments  on  the  ground.  It  is  essential  to  ensure 
that the new investments identified by Finland in its mid-term review of the cohesion 
policy  funds,  notably  those  linked  to  the  five  priorities  identified  in  the  Mid-Term 
Review  Regulation  (19),  are  deployed  rapidly  and  effectively.  The  geopolitical 
situation has also negatively affected Finland’s socio-economic outlook, especially in 
its eastern border regions, and strengthening the regions’ resilience and attractiveness 
would be important. 

(21)  Finland  faces  several  challenges  related 

to  competitiveness,  decarbonisation, 

employment, and the implementation of the reform of social and healthcare services. 

(22)  Finland is among the Union’s strongest innovation performers, supported by a highly 
skilled  population,  a  large  pool  of  ICT  specialists,  widespread  use  of  digital 
technologies  by  firms,  strong  international  research  collaboration,  venture  capital 
activity and a dynamic start-up ecosystem, notably in deep-tech. R&D expenditure has 
continued  to  increase  towards  the  national  target  of  4%  of  GDP  by  2030.  However, 
this  strong  innovation  performance  has  not  translated  into  stronger  productivity 
growth,  which  has  remained  weak  since  the  decline  of  the  electronics  sector  in  the 
early 2010s. In order for innovation to contribute more effectively to growth, research 
results  need  to  be  commercialised  and  diffused  more  widely  across  the  economy. 
Cooperation  between  businesses  and  academia 
to 
commercialise  innovation.  In  Finland,  collaboration  between  innovation-active  firms 
and  universities  and  research  institutions  has  declined  over  time,  while  business 
funding of higher education R&D has stagnated. SMEs in particular face difficulties in 
cooperating  with  universities  and  research  organisations  and  in  accessing  relevant 
funding  instruments.  Support  for  innovation  activities  other  than  R&D  has  also 

important  channel 

is  an 

19 

Regulation  (EU)  2025/1914  of  the  European  Parliament  and  of  the  Council  of  18 September 2025 
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. 

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weakened,  which  may  hamper  the  market  uptake  of  innovation.  While  additional 
funding  for  collaboration  between  companies  and  research  organisations  has 
increased, further stepping up joint industry-university projects would help strengthen 
knowledge  transfer.  Improving  the  commercialisation  of  innovation  also  requires 
stronger  entrepreneurship  skills  and  support  for  researchers.  Although  Finland  has 
is  still  no 
introduced  entrepreneurship  education  at  different 
comprehensive strategy to strengthen researchers’ entrepreneurial capabilities. Overall, 
while  respecting  the  limited  fiscal  space,  Finland  would  benefit  from  maintaining 
favourable conditions for the R&D ecosystems to thrive, also by ensuring strategic use 
of regional and local innovation strategies. 

levels, 

there 

(23)  Finland has a dynamic start-up ecosystem. While venture capital investment per GDP 
is above the EU average, scaling up remains a persistent challenge as domestic funds 
are often too small to lead or co-invest in later-stage funding rounds. Bank lending is 
broadly available, but this is not the right instrument to finance start-ups expansion. As 
a result, innovative firms – especially those in capital-intensive sectors – may struggle 
to  secure  growth  financing  and  could  relocate  abroad  or  seek  funding  in  foreign 
markets. Although access to finance is generally adequate and, among other measures, 
a  recent  strategy  review  of  the  state-owned  investment  company  TESI  has  helped 
address gaps in large-scale funding, further action is needed to ensure sufficient capital 
flows  to  high-innovation  firms.  Broadening  access  to  scale-up  financing  would 
support firm growth, innovation diffusion and job creation as well as boost aggregate 
productivity  growth.  These  policies  could  usefully  include:  i)  expanding  retail 
investors participation in growth markets, such as by enhancing the attractiveness and 
flexibility of OST equity savings accounts to channel household savings towards high-
growth companies; ii) streamlining cross-border investment procedures for investors; 
iii)  introducing  targeted  tax  incentives  for  investments  in  scale-ups  and  high-growth 
companies  by  reforming  the  tax  treatment  of  venture  capital;  and  iv)  reforming  the 
taxation of dividends from unlisted companies. 

(24)  Finland is  a small,  open economy  that faces economic security challenges  especially 
due  to  its  reliance  on  global  value  chains.  In  terms  of  securing  its  critical  economic 
flows,  it  is  important  for  Finland  to  continue  developing  its  capabilities  to  prevent, 
react  and  adjust  to  possible  disruptions,  including  cyber  and  hybrid  dimensions  and 
critical  infrastructure  that  are  vital  for  the  economy.  A  high  share  of  enterprises  in 
Finland  has  reported  ICT  security  incidents  with  consequences.  Furthermore,  the 
series  of  incidents  affecting  subsea  critical  infrastructure  in  the  Baltic  Sea  Region 
demonstrate  the  vulnerability  of  the  critical  infrastructure  for  carrying  data,  gas,  and 
electricity. Finland would benefit from supporting strategic value chains and economic 
flows through measures such as the protection of critical infrastructure and upholding 
cutting-edge cybersecurity. 

(25)  Finland  has  legislated  its  2035  target  for  carbon  neutrality  into  law.  Achieving  the 
target requires accelerating progress on the reduction of net carbon emissions. Finland 
has  acted  decisively  to  reduce  emissions  from  energy  production,  while  major 
investment has taken place to speed up the decarbonisation of industry.  

(26)  Continued  efforts  towards  the  decarbonisation  of  industry  are  not  only  important  to 
reduce  emissions,  but  also  as  a  source  of  competitiveness.  Clean  industrial 
development is at the core of Finland’s future business model. Finland has the lowest 
electricity prices in the EU, which provides a significant advantage for industries that 
have already replaced the use of fossil fuels. This goes hand in hand with stepped-up 
investment  in  green  technologies  and  the  circular  economy.  While  Finland  is  a 

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frontrunner  in  the  development  of  green  technologies  such  as  onshore  wind  power, 
sustainable  energy  systems,  battery  infrastructure  and  green  hydrogen,  further 
investment is needed to develop these technologies into marketable sectors supporting 
Finland’s future economy. To reduce the dependence on imports of key materials and 
industrial inputs, Finland needs to improve its circular material use rate and resource 
productivity, which remain  among  the lowest  in  the EU.  Ensuring  the availability of 
green skills will be crucial to support the green transition in industry. 

in  most  recent  years.  Meeting  Finland’s  2030 

(27)  The transport sector’s role in  achieving  Finland’s climate targets  is  crucial,  given its 
significant potential for further emissions reductions. Following a sustained period of 
declining emissions the latest figures indicate a reversal of this trend, with emissions 
increasing 
the 
decarbonisation of transport requires accelerating investment in areas including private 
vehicle  electrification  and  zero-emission  mobility,  public  transport  connections  to 
reduce car-dependency, and decarbonising long-haul transportation, as well as reforms 
to  further  incentivise  this  transition.  Such  measures  can  deliver  a  competitive 
advantage for Finland while supporting decarbonisation of the sector in a socially fair 
and inclusive way. 

targets  for 

(28) 

Increased pressures on forest  and emissions  from  drained peatlands  contribute to  the 
erosion of the carbon sink. Finland’s forests traditionally acted as a major carbon sink 
but  recent  developments  have  declined  the  sinks  significantly.  Measures  have  been 
proposed  to  increase  forest  growth  and  to  strengthen  the  resilience  of  forests. 
However, these measures are limited in scope and are expected to take a long time to 
have an impact. Forest growth and resilience is needed to ensure that natural sinks are 
enhanced in the medium and long term in order to be compatible with the achievement 
of Finland's carbon-neutrality target. Besides harvesting, forest growth rates have also 
reduced as a result of forest age and climate-change related reasons including droughts 
and historically high  temperatures. Moreover, the gap between planned net  removals 
and Finland’s LULUCF target for 2030 is the second-largest projected shortfall among 
EU  Member  States  however  projections  include  large  uncertainty.  Improving  the 
carbon  sink  requires  strengthened  sustainable  land  management  practices  and 
reinforced  climate  resilience  investments.  Decisive  further  action  is  needed  to 
strengthen the carbon sink and to keep Finland’s carbon-neutrality target achievable. 

(29)  The  unemployment  rate  increased  to  9.7%  in  2025,  partly  due  to  increased  labour 
force  participation,  while  the  employment  rate  fell  to  76.3%.  The  long-term 
unemployment  rate  rose  to  2.4%  in  2025,  exceeding  the  EU  average.  The  youth 
unemployment rate reached 21.8% in 2025, considerably above the EU average, with 
the percentage of young people neither in  employment nor in  education  and training 
rising to 11.0%. Finland has introduced several measures to activate the labour force, 
including the reform of the social security system and the establishment of municipal 
employment  areas.  However,  national  statistics  indicate  that  participation  in  active 
labour  market  policies  has  declined  since  2022.  Municipalities  face  high  costs  from 
unemployment  benefit  payments  as  well  as  the  provision  of  public  employment 
services,  with  the  demand  for  both  being  exceptionally  high  during  the  cyclical 
downturn.  Efforts  to  improve  the  targeting  of  active  labour  market  policies  towards 
groups  with  higher  need  for  services,  such  as  the  youth  and  long-term  unemployed, 
would  help  to  improve  spending  efficiency  and  better  support  transitions  to  work  in 
the exceptional labour market situation. 

(30) 

In light of the crucial role of human capital in enhancing the Union’s competitiveness 
and  strategic  autonomy,  in  2026  the  Council  recommended  that  Member  States  take 

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action  to  urgently  address  human  capital-related  structural  challenges  in  the  areas  of 
skills  and  education,  which  hamper  competitiveness.  The  2026  country-specific 
recommendations  addressed  to  Finland  can  contribute  to  the  implementation  of  the 
Council Recommendation on human capital in the Union. 

(31)  Strengthening the supply of skilled  workers, including  through formal education and 
adult upskilling and reskilling,  would benefit Finland’s productivity, competitiveness 
and economic growth. In 2025, the tertiary educational attainment rate in Finland fell 
to  38.2%,  below  the  EU  average  of  44.8%  and  far  behind  the  Finnish  ambition  of 
reaching  50%  by  2030.  At  the  same  time,  the  unemployment  rate  for  people  with 
lower secondary education or less reached 22.9%, highlighting that skills shortages are 
a severe barrier to employment. Despite high enrolment rates in science, technology, 
engineering,  and  mathematics,  labour  shortages  continue  to  emerge  in  several  high-
skilled professions. Expanding the higher education offer closely aligned with labour 
market  demand  and  increasing  the  number  of  tertiary  graduates  are  crucial  for 
addressing skills shortages in the long term. 

(32)  The  reform  of  the  social  and  healthcare  services,  which  introduced  the  new  service 
delivery  system  in  the  beginning  of  2023,  has  slowed  the  growth  in  costs  and 
improved the equitable access to primary healthcare services. Nevertheless, disparities 
in  financial  sustainability  and  service  delivery  persist  between  wellbeing  services 
counties.  Self-reported  unmet  medical  needs  remain  among  the  highest  in  the  union. 
At  the  same  time,  the  ageing  population  challenges  the  resilience  and  fiscal 
sustainability of Finland’s social and healthcare sector, including elderly care system. 
Strengthening steering of the social and healthcare services and the funding model for 
the wellbeing services counties, along with integration of the various IT systems and 
leveraging  data  and  AI,  could  support  efforts  addressing  unmet  needs,  reducing 
disparities  and  further  reducing  the  inefficiencies  in  the  service  delivery  system. 
Addressing  these  challenges  would  also  contribute  to  supporting  upward  social 
convergence, in line with the Commission services’ second-stage country analysis of 
the Social Convergence Framework (20). 

(33) 

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  2026,  the  Council  recommended  that  the  euro-area  Member  States  take 
action, including through their RRPs, to implement the 2026 Recommendation on the 
economic  policy  of  the  euro  area.  For  Finland,  the  recommendation  (1)  helps 
implement  the  first,  the second,  the  third  and  the  fifth  recommendations  on  the  euro 
area,  recommendation  (2)  helps  implement  the  fourth  recommendation  on economic 
policy  of  the  euro  area,  recommendation  (3)  and  (4)  help  implement  the  seventh 
recommendation  on  the  euro  area,  and  the  recommendation  (5)  helps  implement  the 
fifth recommendation on the euro area. 

HEREBY RECOMMENDS that Finland take action in 2026 and 2027 to:  

1. 

20 

Adhere  to  the  maximum  growth  rates  of  net  expenditure  recommended  by  the 
Council  on  20 January 2026,  with  a  view  to  bringing  an  end  to  the  situation  of  an 
excessive deficit, while making use of the flexibility under the national escape clause 
for  higher  defence  expenditure.  Reinforce  defence  spending  and  readiness  while 
ensuring  spending  efficiency  and  gradually  adapting  the  budget  to  sustain 

SWD(2026)122  –  Second-stage  country  analysis  on  social  convergence  in  line  with  the  Social 
Convergence Framework (SCF), 2026. 

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structurally higher defence spending. Ensure that any measures taken to mitigate the 
impact of the hike in energy prices resulting from the crisis are temporary, targeted at 
protecting  vulnerable  households  or  at  addressing  the  needs  of  energy-intensive 
firms, preserve incentives for energy savings while ensuring that their fiscal cost is 
compatible with the commitments under the EU fiscal framework. 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  carrying  out  regular  and  detailed  spending  reviews  with  clear  and 
actionable  recommendations  to  be  considered  in  the  budget  process,  including 
reviews of the social security system to support the long-term sustainability of public 
finances, while addressing the needs of vulnerable groups. 

Ensure continuity of reforms and investments implemented under the Recovery and 
Resilience  Facility.  Sustain  implementation  momentum  under  cohesion  policy 
programmes building, where appropriate, on the reallocation to strategic priorities in 
the mid-term review and the flexibilities provided in the cohesion policy framework. 
Address  the  unique  socio-economic,  security  and  civil  preparedness  challenges 
particularly affecting regions on the EU's external eastern border. 

Support the R&D ecosystem 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. Broaden access to scale-up financing for innovative start-ups and high-
growth  firms  and  strengthen  the  equity  financing  ecosystem.  Strengthen  economic 
security, including in critical infrastructure and cyber security. 

Reduce  carbon  emissions  by  boosting  public  and  private  investment  in  the 
decarbonisation of industry and transport (including through electrification), in green 
technologies and circular economy solutions and by strengthening the sustainable use 
of land and forest resources. 

Improve the targeting of active labour market policies. Address skills shortages and 
mismatches  by  reskilling  and  upskilling  the  workforce  and  widening  the  higher 
education  offer  for  the  skills  most  in  demand  in  the  labour  market.  Continue 
improving the efficiency of the social and healthcare services while pursuing efforts 
to enhance access to services, including elderly care. 

2. 

3. 

4. 

5. 

Done at Brussels, 

For the Council 
The President 

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