European Commission voices its grave concerns over Finnish economy di Virve Kähkönen, Tuomas Niskakangas e Aleksi Teivainen
The European Commission is prepared to reprimand Finland for its non-compliance with the fiscal rules of the European Union.
Sources within the European Union revealed to Helsingin Sanomat on Tuesday that Finland will be reprimanded for its failure to comply with the three per cent fiscal deficit threshold prescribed by the European Union for the second year in succession.
The budget of a country shows a deficit when public expenses – the expenses of local and central administrations – exceed public revenues. The European Union in its assessments compares the deficit against the gross domestic product of the member state in question.
Prime Minister-designate Juha Sipilä (Centre) reminded yesterday that the warning issued by the European Commission was hardly a surprise. “The warning has no impact whatsoever on our plans,” he insisted on Tuesday evening.
He acknowledged, however, that the gravity of the economic situation in Finland is greater than is generally thought. “If we go on like this, we’ll follow in the footsteps of Greece. We must now introduce adjustment measures, but we’ll surely pull through,” he said.
Prime Minister Alexander Stubb (NCP) similarly estimated that the warning issued by the European Commission will be a serious warning sign. “Our economy isn’t currently growing, the employment situation is difficult, our budget shows a deficit and the public economy is in a poor state,” he listed.
The fiscal deficit of Finland rose to 3.2 per cent of gross domestic product last year and is, according to the European Commission, expected to creep up to 3.3 per cent this year. The public debt of Finland has similarly breached the threshold of 60 per cent of gross domestic product prescribed by the European Union.
The European Commission is set to issue its reprimand to Finland while publishing its country-specific recommendations for adjustment later today.
Finland is expected to be the only member states to receive a reprimand from the European Commission. The reprimand will also be significant in light of the fact that the country has been among the most hawkish advocates of fiscal austerity in the European Union.
The European Commission is expected to decide on the measures it will take with respect to Finland this morning after failing to do so on Tuesday.
The measures are unlikely to be harsh because Finland has only exceeded the thresholds prescribed by the European Union narrowly and because the European Union has been lenient with respect to previous transgressions by its member states. In addition, the European Commission is likely to offer the next Government of Finland an opportunity to take action before resorting to firmer measures.
The country may not be placed under special supervision by the European Commission if it manages to lay out credible structural reforms in time.
The European Commission has the right to initiate a so-called excessive deficit procedure if a member state is deemed to violate the fiscal rules of the European Union. It can also impose fines if a member state fails to take action to stabilise its economy – but has yet to do so for any member state.
Finland is unlikely to be placed under special supervision due to the ongoing coalition negotiations, with sources within the European Union revealing on Tuesday that the commission expects to receive a detailed summary of the adjustment measures Finland will introduce by late June.
The European Commission also expects France, Spain and Portugal to pierce the three per cent threshold prescribed by the European Union this year. Finland, however, has also fallen behind other member states in terms of economic growth.
Stubb estimated on Tuesday that the reprimand issued by the European Commission will increase the pressure to decide on cost cuts as soon as possible.