Finnish Finance Minister Riikka Purra (Finns) on Tuesday warned that Finland would likely be subject to the EU's Excessive Debt Procedure (EDP) early next year.
To back up the assertion, Purra pointed to the European Commission's economic forecast suggesting that Finland's state debt would exceed a cap of 90-percent of GDP as early as next year.
It projected that Finland's public debt would rise to 92.3 of GDP by 2027.
"Finland will be subject to the Excessive Debt Procedure from the beginning of the year," Purra told MPs in an address on Tuesday. "This seems very clear, based on the figures."
According to Purra, when public debt breaches the 90 percent threshold, the EU will require the next government to address the issue and lower its debt ratio by at least one percentage point annually.
The finance ministry is scheduled to issue its own economic forecast before Christmas, which will provide more details about developments in the country's state debt.
In the summer, the finance ministry announced that Finland was avoiding an EDP, because a good deal of its debt was triggered by increased defence spending.
Purra: Weak revenue development to blame
However, according to Purra, Finland's economic problems are structural.
"Defence spending does not explain our current deficit, but rather the weak development of revenue in relation to other growing expenditures, like rapidly growing social welfare expenditures and [benefit] transfer payments," she said.
The EDP mechanism is designed to ensure that member states comply with the EU's deficit and debt rules — and avoiding it has been one of the government's often used justifications for budget cuts and adjustments.
However, there are few direct consequences in the procedure, and a large proportion of EU states have been subject to EDP's monitoring at some point.
Countries that face the procedure need to draw up a plan about how they intend to remedy the situation to be in compliance with the rules.
If it does become subject to the procedure, Finland would need to issue reports about its public finances and its progress in the matter more frequently than it currently does.
If a member state fails to comply, they can be subject to sanctions, but the threshold for that is very high.
On the other hand, an EDP categorisation can potentially trigger reputational damage.
