A fresh report from the European Commission shows that Finland must quickly and decisively address its ballooning state debt, the country's likely next premier said on Wednesday.
Former finance minister Petteri Orpo (NCP), who is leading efforts to form a new Finnish government, said that the EU study makes it clear that Finland's debt situation is more dire than those of its northern European neighbours.
He said that he did not want Finland to be compared in this regard to ”southern European countries that have traditionally had a different attitude” toward taking on debt, but rather should behave in line with the other Nordic countries and Germany, for instance.
Finland, France and Italy fail to meet debt reduction value
Valdis Dombrovskis, the European Commission vice-president for economic issues, said on Wednesday that the EU executive is paying special attention to the 16 member countries that have a deficit of more than three percent or where the public debt exceeds the reference value of 60 percent.
Last year, public debt exceeded the limit allowed by the EU in 13 member states. Three of these countries – Finland, France and Italy – did not comply with the debt reduction reference value agreed within the EU.
Compared to the previous year, the debt ratio of public finances decreased in all member states except Finland, the commission states in its report.
The commission presented country-specific recommendations as part of its economic spring package.
Dombrovskis said however that at this point these countries' economic situation does not warrant the application of excessive deficit procedures. That would mean that the EU executive would order member countries to reduce their public debt and deficit. In extreme cases, failure to follow the rules can lead to fines.
EU countries have been allowed more leeway to deviate from the rules of the Stability and Growth Pact (SGP) due to the coronavirus crisis and the war in Ukraine. However, stricter measures may be in store in 2024, when the EU returns to more conventional economic management.
"Member countries should take this into account when implementing their budgets for this year and when preparing for next year's budget," Dombrovskis said.
Four national recommendations for Finland
The commission also released the 2023 country reports, which outline actions to address economic and social challenges.
The Commission proposed four measures for Finland to improve its economic situation:
1. Finland must cancel the current energy subsidies by the end of the year in order to achieve savings in public finances. The Commission encourages Finland to pursue a prudent fiscal policy and to use EU funds to promote the green transition and digitisation. Social security must be enhanced, and people must be encouraged to accept work.
2. Finland must continue implementing its recovery plan and use EU funds to strengthen recovery and resilience.
3. Finland must correct its labour and talent shortage by investing in retraining and by improving the supply of higher education in fields that are in demand.
4. Finland must reduce its dependence on fossil fuels and speed up the use of renewable energy sources. The Commission expressed the hope that Finland will improve licensing procedures to facilitate public and private investments.