Finland, ranked the world's happiest nation for eight years and traditionally one of the European Union’s most fiscally disciplined countries, has just received a wake-up call from Brussels.

The European Commission, the bloc's executive arm, last week ordered Helsinki to devise a credible plan to resolve the country's budget deficit, which has crossed the EU’s limit of 3% of gross domestic product (GDP).

The Commission said Finland's deficit was projected to reach 4.5% of GDP in 2025, while the country's debt burden was set to hit 90% of GDP next year, up by nearly half since 2019.

The Nordic nation, whose annual economy is worth €300 billion ($349 billion), has now been formally placed under the EU's Excessive Deficit Procedure. This could lead to financial sanctions, including large fines, suspension of EU funds and stricter fiscal oversight by Brussels.

Since the 2008/09 global financial crisis, Finland has struggled with fiscal discipline. The collapse of mobile phone maker Nokia, once the engine of growth, left the economy without a clear driver.

That challenge was deepened in recent years by high welfare costs, a huge increase in defense spending and the economic shock of severing energy and trade ties with neighbor Russia over the war in Ukraine.

In 2021, before Russian tanks rolled into Ukraine, bilateral trade between Moscow and Helsinki reached €12.71 billion and made up 4.3% of the Finnish economy. By the first three quarters of this year, trade had fallen by nearly 93%.

The collapse was compounded by Finland’s decision to close its eastern border in late 2023, citing security concerns and Moscow's weaponized migration tactics. The move halted cross‑border shopping and tourism almost overnight, hitting Finnish border regions especially hard.

According to the Bank of Finland, the country's central bank, more than 2,000 Finnish firms exported to Russia in 2019. By the end of 2023, that number had dropped to around 100.

Jarkko Kivisto, adviser to the Bank of Finland's forecasting division, told DW that it's hard to measure the direct impact of the collapse in Finnish-Russian trade on the deficit.

"We don’t have an estimate for this effect," Kivisto told DW, adding that the impact had been "indirect through weaker economic activity and lower value added, as well as missing tax revenues from Russian tourism."

[GUSNOTE: RUSSIA HAS NOT THREATENED FINLAND IN ANY WAY OR FORM... RUSSIA'S MILITARY OPERATION IS LIMITED TO THE DONBASS AND NOVORUSSYA... AND DONALD TRUMP TEAM IS TRYING HARD TO MAKE PEACE TO PREVENT A "RUSSIAN VICTORY" — ON TERMS WHICH ARE NOT SATISFACTORY TO RUSSIA... AND CERTAINLY EMBARRASSING FOR THE EU. FINLAND HAD TO REMAIN NEUTRAL AND ALL WOULD BE SWEET....]

Faced with its own threats from the Kremlin, from disinformation campaigns to airspace violations, Finland has sharply raised defense spending from €5.1 billion in 2022 to over €6.2 billion in 2024, now exceeding 2.3% of GDP.

The NATO member has pledged to push military spending toward 3% by 2029, which would make it one of the highest spenders in Europe.

Asked whether the fallout from the Ukraine war would have tipped Finland's deficit over the edge, forcing additional EU scrutiny, Lauri Holappa, Executive Director of the Finnish Centre for New Economic Analysis (UTAK), told DW: "Maybe. It's possible."

"Without the invasion, you can argue that we could have used those inputs [defense spending] on more productive things," added Holappa.

The combination of military spending, collapse of bilateral trade and near-total loss of Russian tourism would have forced the Finnish government to take on additional debt — at a time when the debt burden was already climbing sharply.

Before the war, about a third of Finland’s energy supply came from Russia, leaving the country highly exposed when supplies were cut. 

"The largest effect came from the higher energy prices as Finland was quite dependent on energy inputs from Russia," Heil Simola, senior economist at the Bank of Finland's Institute for Emerging Economies (BOFIT), told DW.

https://www.dw.com/en/finland-russia-war-ukraine-eu-budget-deficit-spending-trade-nato/a-74917409

MAKE A DEAL PRONTO BEFORE THE SHIT (WW3) HITS THE FAN:

NO NATO IN "UKRAINE" (WHAT'S LEFT OF IT)

THE DONBASS REPUBLICS ARE NOW BACK IN THE RUSSIAN FOLD — AS THEY USED TO BE PRIOR 1922. THE RUSSIANS WON'T ABANDON THESE AGAIN.

THESE WILL ALSO INCLUDE ODESSA, KHERSON AND KHARKIV.....

CRIMEA IS RUSSIAN — AS IT USED TO BE PRIOR 1954

TRANSNISTRIA TO BE PART OF THE RUSSIAN FEDERATION.

RESTORE THE RIGHTS OF THE RUSSIAN SPEAKING PEOPLE OF "UKRAINE" (WHAT'S LEFT OF IT)

RESTITUTE THE ORTHODOX CHURCH PROPERTIES AND RIGHTS

RELEASE THE OPPOSITION MEMBERS FROM PRISON

A MEMORANDUM OF NON-AGGRESSION BETWEEN RUSSIA AND THE USA.

A MEMORANDUM OF NON-AGGRESSION BETWEEN RUSSIA AND THE EU.....

EASY.

THE WEST KNOWS IT.

YOURDEMOCRACY.NET RECORDS HISTORY AS IT SHOULD BE — NOT AS THE WESTERN MEDIA WRONGLY REPORTS IT — SINCE 2005.

         Gus Leonisky

         POLITICAL CARTOONIST SINCE 1951.