Finland Times

 

European Commission President Jose Manuel Barroso gives a press conference on country specific recommendations for 2014 on June2 , 2014 at the EU Headquarters in Brussels. The EU hands down its recommendations on how member countries manage their economies on Monday, a week after anti-EU populists, riding a wave of anger against Brussels and austerity, scored a stunning election breakthrough. Photo AFP-Lehtikuva.

The European Commission on Monday projected that Finland would be struggling to keep up with its structural deficit target.

 

According to the forecast, the debt ratio in 2015 is likely to exceed the Stability and Growth Pact requirements, with the commission estimating the gross debt at 61.2 per cent of the GDP.

 

This year, according to the commission, the debt ratio will remain within the limits, meaning the debt-to-GDP ratio will remain under the reference value of 60 per cent.

 

The country’s government debt-to-GDP ratio will continue to rise until 2017, after which it will begin to decline, projected the EC.

 

The commission, however, recognises that the breach is temporary and, therefore, it has not recommended any specific additional measure to remedy the situation.

 

The commission’s observations are in line with the estimates published recently by the National Audit of Finland (VTV).

 

Earlier on may 22, the VTV in a report warned that Finland’s stagnant economic growth may result in a breach of the economic rules set by the European Union.

 

Although Finland complied with the European Stability and Growth Pact last year, the weak economic growth generates a big risk, which may lead to breach of the rules stipulated in the pact in the near future, said the VTV report.

 

However, the Finnish Ministry of Finance estimated in its Economic Outlook made in April that the government debt would approach the EU threshold at 59.8 per cent in 2014, and would surpass it in 2015 at 61 per cent.

 

File photo Lehtikuva.

The VTV pointed out that the public expenditures made by both the previous and current cabinets were really huge, adding that the cabinets failed to pay enough attention to the sliding GDP of the country.

 

In addition, sluggish economic performance caused by unsolved structural problems is also a threat, which might bring Finland to the third consecutive year of recession.

 

The Finnish government launched a cost-saving package in March to cut a total of 2.3 billion euros (about 3.17 billion U.S. dollars) by 2018, attempting to put the public finances back on track.

 

The Stability and Growth Pact is an agreement signed by 28 member states of the EU, aiming to facilitate and maintain the stability of the Economic and Monetary Union. Violation of the common rules could bring about a warning or even sanctions by the European Commission.  

 

News agency Xinhua adds: The European Commission Monday recommended that the EU Council of Ministers close the Excessive Deficit Procedure (EDP) for 6 countries, suggesting the overall number of countries that missed the austerity target will drop to 11. 

 

At the moment there is an EDP ongoing for 17 EU member states. This means all EU countries except Bulgaria, Germany, Estonia, Italy, Hungary, Latvia, Lithuania, Luxembourg, Romania, Finland and Sweden are subject to an EDP. If the council follows the commission’s recommendations for closing the EDP for Austria, Belgium, Czech Republic, Denmark, The Netherlands and Slovakia, the overall number of countries in EDP will drop to 11.

 

The recommendations will be discussed and endorsed by EU leaders and ministers in June and formally adopted by EU finance ministers in July, as part of the European Semester, the EU’s calendar for economic policy coordination.

 

A decision on closing an EDP is based on a “durable correction” of the excessive deficit.

 

The EDP is a rules-based process established in the Treaty on the Functioning of the European Union to ensure that member states correct gross fiscal policy errors. 

 

There are two key reference values to open an EDP: one for the general government deficit (3 per cent of GDP) and one for gross government debt (60 per cent of GDP). 

 

To ensure the correction of excessive deficits, member states in EDP are subject to recommendations that are to be respected by a certain deadline, usually every six months but three months in case of a serious breach.