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Finland Gets Flak From European Commission for Skyrocketing Debt

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Euros - Sputnik International, 1920, 25.05.2023
Helsinki's debt-to-GDP ratio has been rising steadily since the 00s. In 2022, Finland become the only country in the EU where it increased further. With the country entering recession, the debt problem poses an extra question for the future government that is yet in the works.
Finland's ballooning state debt has prompted a reaction from the European Commission, which in its recent report called on the Nordic country to address it quickly and decisively.
According to former Finnish Finance Minister Petteri Orpo of the liberal-conservative National Coalition Party, who is leading efforts to form a new Finnish government, the EU study made it clear that Finland's situation, with a debt-to-GDP ratio of 73 percent, is much more dire than that of its Nordic peers.
He said that he didn't want to compare Finland to southern European countries, which, he argued, "have traditionally had a different attitude" toward debt, insisting that Finland should be in line with the other Nordic countries and Germany.
Last year, public debt exceeded the limit allowed by the EU in 13 member states. Furthermore, three of these countries – Finland, France and Italy – failed to comply with the debt reduction target agreed upon within the EU. Finland notably became the only country in the entire bloc where the debt ratio of public finances increased last year.
Valdis Dombrovskis, the European Commission's vice-president for economic issues, said the bloc was 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.
Dombrovskis furthermore ventured that these countries' economic situation doesn't warrant the excessive deficit procedures, which implies that the EU executive may potentially order member countries to reduce their public debt and deficit. Failure to do so may in worst cases incur further fines. EU member states have been allowed more breathing room to deviate from the general rules of the Stability and Growth Pact (SGP) amid the COVID-19 crisis and the conflict in Ukraine. However, stricter measures may be in store in 2024, when the bloc is expected to return to more conservative economic management.
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The European Commission issued country-specific tips to Finland on how to reduce the debt, which includes canceling the country's massive energy subsidies in order to save public finances, reducing its dependence on fossil fuels and speeding up the use of renewable energy sources as well as correcting its labour and talent shortage.
Petteri Orpo, the winner of the Finnish election and PM apparent, is a fiscal conservative who has pledged to cut unemployment benefits and other welfare programs. He specifically ran on the pledge to reduce the public debt, facilitate tax cuts and boost economic growth.
Finland's debt-to-GDP ratio has been rising steadily for the past two decades, after dropping to 34.7 percent in 2008, the lowest point in decades. With the country having entered technical recession, the debt problem poses an extra question for the future government that is yet in the making.
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