Fiscal policy monitoring report 2025
In the current security environment, it is particularly important to safeguard the sustainability of public finances. The Government’s objective of strengthening public finances is therefore justified, but it is unlikely to be achieved. Public finances must be strengthened beyond parliamentary terms.
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Observations of the fiscal policy monitoring function concerning the Government's measures
- The Government’s objective is to stabilise the debt ratio and reduce the deficit to 1% of GDP by 2027, but these objectives will not be achieved.
- The Government has decided on an adjustment package of EUR 10 billion. However, at the same time, it has taken measures that weaken the balance of general government finances.
- Of the new EUR 1 billion adjustment package decided in autumn 2025, EUR 547 million will reduce the general government deficit in 2027, and the permanent impact on the deficit will be even smaller.
- The Government will permanently increase defence expenditure.
- The general government debt ratio will stabilise particularly as a result of a EUR 1 billion one-off additional revenue transfer from the State Pension Fund of Finland in 2027. This has no impact on the general government net debt.
Conclusions by the fiscal policy monitoring function
- It is necessary to continue to strengthen public finances beyond parliamentary terms.
- It is positive that a parliamentary agreement on the so-called debt brake was reached in autumn 2025.
- The strengthening should be assessed comprehensively, taking into account all expenditure and revenue categories and structural measures.
- Increasing defence spending is justified, but it is important to draw up a plan as soon as possible for financing it and for re-prioritising expenditure.
- Sustainable development of public finances is a prerequisite for ensuring external security.
Briefly
A significant reason for the increase in the general government debt ratio is the rapid growth in expenditure categories that do not promote long-term growth. These include pension expenditure, in particular.
In the current security environment, it is particularly important to safeguard the sustainability of public finances. The Government’s fiscal policy aims to strengthen general government finances, but the objectives will not be achieved. In addition to the adjustment measures, the Government also takes measures that weaken the balance of public finances, such as the investment programme. In addition, economic growth has been weaker than expected.
Public finances must be strengthened on a long-term basis beyond parliamentary terms.
Increasing defence spending is justified, but it is important to draw up a plan as soon as possible for financing it and for re-prioritising expenditure. Strengthening public finances requires a multi-annual approach extending beyond parliamentary terms. It is positive that a parliamentary agreement on the so-called debt brake was reached in autumn 2025. However, the new national framework is complex, which may make it more difficult to achieve the positive effects.
More than
88%
general government debt ratio in 2027
Contact persons
Matti Okko
Director, Monitoring and Oversight
Management
Matthias Strifler
Senior Economist, PhD
Fiscal policy audit
