Government launches parliamentary debate on debt brake
On Wednesday 18 June, Prime Minister Petteri Orpo held a parliamentary debate on strengthening Finland's debt sustainability. The debate has to do with the state of general government finances in Finland and the new fiscal rules.
According to Orpo, the parties in Parliament have a broad consensus on the Nordic welfare society. In a country with an ageing population, the financing of extensive public services and social security must be managed responsibly so that Finland can meet the pledge made to its citizens. The outlook for the wellbeing services counties and the need to increase defence expenditure mean that the consolidation of general government finances must also continue in the coming parliamentary terms.
“This debate is the beginning of the possibility for the political parties to agree on a target for curbing indebtedness across parliamentary terms. I would like to thank the parties for the good-natured debate. Trust in Finland’s economy relies on the capacity to balance general government finances and the political commitment to do so,” says Prime Minister Orpo.
Orpo says that the common goal should be to reduce the debt ratio until Finland is on par with the other Nordic countries. At the beginning of the government term, a target will be set for the budgetary position of sectors accumulating general government debt (i.e. combined central and local government debt), which will ensure that progress can be made towards the targeted debt ratio. After a set transition period, this would mean bringing down the debt ratio by an average of one percentage point each year. Due to growing defence expenditure, the budgetary position target would exceptionally be set in accordance with the EU fiscal rules during the next government term.
Orpo stressed that each Government would decide on measures to reduce borrowing in its Government Programme and its first General Government Fiscal Plan. An independent fiscal policy auditor will assess whether the measures taken to achieve the targets are credible and whether the Government is meeting the targets it has set. If the auditor finds that the target is not being achieved, the Government will be obliged to propose corrective measures or explain why the necessary measures are not being taken.
Based on the revised EU fiscal rules, the Ministry of Finance has prepared the necessary amendments to national legislation. The national fiscal policy rules are being reformed in line with the Government Programme. The legislative proposal will be sent out for comments during the summer holiday season and will be submitted to Parliament during the autumn session. The new EU fiscal rules must be implemented at the national level from the beginning of 2026. The aim is to continue the parliamentary discussion as the preparations proceed.
“We cannot continue to increase the debt. Reducing the debt ratio is a project that will take several government terms. It will take us a long time to even get close to the Nordic level. However, I think it is very important that we have set an ambitious goal – this also sends an important signal to those assessing Finland’s economy,” says Minister of Finance Riikka Purra.
Inquiries:
Mikko Martikkala, Special Adviser to the Prime Minister,
Prime Minister's Office, Tel: +358-295 161 171
Marketta Henriksson, Senior Financial Adviser, Ministry of Finance, Tel: +358-295 530 441
Email addresses: [email protected]
Press release in English was updated on 18 June at 19.00.