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Finance Committee: Joining the EU recovery package is in Finland's interest

Published 5/5/2021 2:25 PM
Modified 5/7/2021 10:12 AM
Sign of the Finance Committee

Finance Committee: Joining the EU recovery package is in Finland's interest

​In its report, the Finance Committee proposes that Parliament approves the Council decision on the European Union's own resources system of 2020. To be adopted, the proposal must be supported by at least two-thirds of the votes cast in a plenary session. 

The Committee also proposes that Parliament adopts eight statements. In the first statement, the Committee proposes that Parliament requires the recovery instrument to be considered an exceptional and one-off solution, that the arrangement does not serve as a precedent and that Finland will not accept a repetition of or the arrangement becoming permanent.

Two dissensions were appended to the report.

The own resources decision contains the usual provisions on the criteria for financing the EU budget. In addition, the own resources decision includes provisions for exceptional and temporary additional appropriations to address the consequences of the covid-19 crisis. 

Next, the matter will be discussed in a plenary session of Parliament in a so-called single reading.​

EU recovery instrument

The Finance Committee supports the decision on the own resources package, which authorizes the European Commission to borrow EUR 750 billion to finance the recovery instrument. According to the Committee's assessment, it is not in Finland's interest to opt out of the recovery package, as the  absence of any country could lead to the project failing. In that case, the probability of a deep crisis would be high and the probable economic loss for Finland would be significant. The Committee also draws attention to the fact that other countries that were critical of the Recovery Fund were reluctant to overthrow the solution, even though the financing solution was not optimal.

According to expers heard by the Committee, it was also considered possible that Finland opting out of the recovery fund would not necessarily overthrow the package. In this way, Finland could achieve at least the same or even a  better result  by national means than with EU funding. However, the committee agrees with the government's assessment and believes that such a solution would significantly deplete our country's political capital. Opting out could become costly in the future if Finland no longer received support for its own positions when deciding on matters where unanimity is not required. Requiring special treatment would also weaken Finland's chances of receiving support if it itself faces major financial or other shocks.

The Committee also points out that the EU is a political community whose internal solidarity affects the EU's credibility in the rest of the world and the financial markets. Despite the shortcomings and problems of the Recovery Fund, Finland also has an economic interest in participating in the proposed arrangement as Finland is an open, export-driven, small economy with close economic ties to the rest of Europe.

The Committee believes that the recovery package will not in itself create a fiscal union, but that, for example, transfers without strict conditionality could reduce incentives for structural reforms. The Committee notes that similar decisions will continue to require unanimity.

The common policy will continue to be decided within the framework of the existing institutions, and in this context no new institutions will be created to implement fiscal policy at EU level. The Committee notes that it is essential for a small Member State such as Finland that these principles be adhered to in future solutions and that the solution does not in any way set a precedent. Finland should also not favour arrangements that have difficult-to-predict features of financial solidarity. The Committee also considers it essential to consistently adhere to the rule of law.​

Multiannual financial framework and economic implications for Finland

Finland's share of payments under the financial framework will increase from EUR 16 billion in the previous period to EUR 16.7 billion at 2018 prices. The increase is thus about 700 million euros, or about 4 percent.

The Committee is pleased that the negotiations on membership fees for the new funding period were successful and that Finland's membership fees will increase quite moderately in a situation where the UK's departure from the EU caused significantly higher membership fee increases for most net contributors. Finland's relative net payment position will even decrease slightly, and Finland will maintain its position as one of the smallest net contributors.

However, Finland's contribution will be affected by future changes to the own resources system, and the committee considers it very important that the effects of the changes be carefully examined before they are adopted. It is important that changes to the new own resources system continue to require a unanimous decision by the Council and ratification by the Member States.​

Finland's maximum exposure and related risks

The committee is satisfied that the own resources decision has clarified the amount and criteria of  Finland’s  maximum liability. Possible new own resources may also reduce Finland's national EU contributions. However, in line with the government's proposal, the Committee emphasizes that Finland's potential responsibilities are significant.

It is impossible to predict the limits of Finland's future debt sustainability. However, to assess levels of magnitude, the short term realisation of tens of billions of euros in domestic or European liabilities would be a challenge. The Government estimates the probability of this happening as low, however. When assessing liabilities, they need to be offset by the positive effects of Finland's EU membership.