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Europe 2020 in Finland

The Country-specific Recommendations are documents prepared by the European Commission for each country, analysing its economic situation and providing recommendations on measures it should adopt over the coming 18 months. They are tailored to the particular issues the Member State is facing and cover a broad range of topics: the state of public finances, reforms of pension systems, measures to create jobs and to fight unemployment, education and innovation challenges, etc. The final adoption of Country-specific Recommendations prepared by the Commission is done at the highest level by national leaders in the European Council.

Country overview

Finland has made substantial progress on measures taken to address the 2012 CSRs, including by implementing the planned fiscal consolidation measures. Comprehensive reforms of the municipal structure, healthcare and social services have been prepared, the youth guarantee has been extended, access to early retirement has been reduced, the national competition authority has been reformed and temporary tax incentives have been offered to support research and investments. All of these reforms must now be effectively implemented.

One of Finland’s main policy challenges is the loss in competitiveness over the course of the last decade, during which its current account went from a surplus into a deficit. Over the past five years it lost 23% of its share in world exports. In April 2013 the Commission's in-depth review of Finland found that the country was experiencing macroeconomic imbalances.

In the short term, the main challenge is to attract new investments to the Finnish economy, in order to improve employment and productivity and to replace the industries that have declined over recent years. The economy should take more advantage of the country’s excellent research system to create innovative products and services and diversify towards less energy intensive sectors. Agreement between social partners on wage developments should also take due account of recent and prospective competitiveness developments.

A longer term challenge is presented by Finland's ageing population. To address this it will be important to improve labour market participation (particularly of older workers, long-term unemployed and the young) and the sustainability of pension and healthcare systems. In the case of healthcare systems, efficiency could be strengthened by continuing to pursue the restructuring of the municipal system.

2013 European Commission's recommendations for Finland in brief

The Commission has issued five country specific recommendations (CSRs) to Finland to help it improve its economic performance. These are in the areas of:

  1. Sustainable public finances
    Finland's public finances are currently strong, but their longer term sustainability is threatened by demographic change. Finland is amongst the Member States projected to have the biggest proportional increase in expenditure on health-care and long-term care over the next fifty years. Pension expenditure is also forecast to increase at more than twice the EU average by 2060. It is therefore important that the costs of ageing are regularly assessed and that maximum efficiency is sought.
  2. Productivity and cost savings in public services
    Finland has a large number of independent local municipalities compared to its population size, which are increasingly under pressure to deliver social and health-care services to an ageing population. To offer more effective and cost-efficient service for citizens the Finnish Government should follow through with reforms to the municipal structure.
  3. Labour market participation, particularly of older workers
    Demographic projections show that the working age population in Finland will decline by over 5% in this decade, which could have a significant impact on the economy's growth potential. Extending working lives would address this problem and contribute to improving the adequacy and sustainability of pensions. The Finnish Government has already introduced some good measures to tackle youth and long-term unemployment and these must now be properly implemented.
  4. Competition in product and service markets
    Regulatory barriers in Finland's product and service markets are limiting competition in some sectors and keeping prices high. The Finnish Government has made some positive changes to competition legislation and institutions in the past year, but to improve the situation for businesses and consumers, more action is still needed, particularly to strengthen competition law fines.
  5. Innovation and productivity in the private sector

     

    To remain globally competitive Finnish businesses must focus on strengthening their innovation capacity, ensuring that wages do not rise out of line with productivity and moving towards less energy intensive sectors. Although the level of investment in research and development in Finland is high this is not being effectively translated into new innovative products and services, which would help to boost the economy. To improve this, the Government should implement measures to improve the innovation environment. Wages are a significant cost for businesses and it is therefore important that the social partners in Finland reach a new labour market agreement that balances wage growth with productivity. The high energy intensity of Finnish industries also represents a considerable cost, which could be reduced if the economy diversified towards less energy intensive sectors.

See how Finland compares with other EU Member States in key areas

2013 European Semester Documents


European Semester Documents