EU Commission to open disciplinary budget steps against Finland for excessive deficit

BRUSSELS, Nov 25 (Reuters) - The European Commission proposed on Tuesday to start disciplinary steps against Finland for running too high a budget deficit, that cannot be full explained by only higher defence spending.

Under European Union rules, governments cannot run budget deficits higher than 3% of GDP. If they do, EU finance ministers, on a recommendation from the Commission, set a deadline for its reduction. Repeated failure to comply could result in fines.

Finland had a budget gap of 4.4% of GDP in 2024, which is expected to rise to 4.5% of GDP this year, remain at 4.0% next year and ease only to 3.9% in 2027, unless policies change.

Because of the threat of a Russian attack, the Commission has allowed all EU countries to spend an extra 1.5% of GDP on defence without being included in the excessive deficit calculation -- in what the EU calls the national escape clause. But despite that exemption, Finland's deficit was still too high, the Commission said.

"In Finland's situation, the deficit in excess of 3% of GDP in 2025 can only be partly explained by the increase in defence spending and the flexibility granted under the national escape clause. Therefore ... the Commission will consider proposing to open an excessive deficit procedure for Finland," the Commission said.

Germany, which is to have a deficit if 3.1% this year, 4.0% in 2026 and 3.8% in 2027, is also above the 3% limit, but the Commission said all of the excess was explained by increased defence expenditure, so no disciplinary steps would follow.

(Reporting by Jan Strupczewski)