Finland's Beating Heart: Navigating the Labyrinth of Finland's 2025 and 2026 Budgets
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Oh Boy!
It's Finnish Finance Minister Annika Hurskainen's seventh day on the job, and she's already had her hands full: numerous meetings, international conferences, and reorganizing her own political party. Now, for the first time, she's diving headfirst into the nitty-gritty: The tax estimate reveals a gloomy prediction right off the bat - the Finnish government will collect less tax revenue than anticipated in the fall. However, this aligns roughly with the figures from the coalition negotiations, explains the novice politician. No surprises, but also no cause for celebration.
Hurskainen, the rookie in the finance world, is under no illusion; she can't afford to waste a minute with a lengthy learning curve. A plethora of vital black-red initiatives to revamp the struggling economy depend on her swift and efficient management. The budget, as she has already promised, is a top priority. She intends to hit the ground running from the get-go.
On her to-do list:
Budget I: Under the Spotlight in the Cabinet in June
Finland's Political Highlights at a Glance
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The Finnish government has been operating with a temporary budget for almost half a year. Despite running relatively smoothly, the scope for fresh projects from the coalition agreement is limited. Consequently, time is of the essence for the 2025 budget. Hurskainen plans to present it to the cabinet on June 25th, and bring it before the Finnish Parliament for consultation before the summer break, with the resolution scheduled for September. Talk about an ambitious timeline!
Although her financial experts have learned from the tax estimate that they will only have to contend with a 0.5 billion deficit compared to the fall's estimate, the real bargaining begins now. With ministers eager to lay down the groundwork in this fledgling legislature, Hurskainen will need to hone her skills in saying "No." Despite the historical debt possibilities, there are gaps in the budget, and she will be tasked with trimming wish lists.
Budget II: The Main Event
Hurskainen is also aiming to have her second budget drawn up before the summer break - and that's sure to be one heck of a challenge. The budget for 2026 needs to be finalized by the end of the year. The finance minister must demonstrate her ability to take the reins without the aid of her predecessor's preparatory work. Based on the tax estimate, she will have to plan with around 9.7 billion euros less than initially expected - bracing herself for some serious fund shuffling.
One crucial aspect complicating matters is that the projects from the coalition agreement come with a built-in financing reserve. That means: It's already known that there's not enough cash for everything. Hurskainen will need to negotiate with her cabinet colleagues on what should be prioritized, and what might have to be put on hold.
So, what gives? Why is there a financial shortfall, despite the recent relaxation of the debt brake for defense spending and the availability of a 500 billion debt fund for infrastructure? This mainly boils down to a stipulation the Greens have negotiated in: The infrastructure billions may only be used for added investments. Hurskainen is already preparing herself for the role of the bearer of bad news, with a stash of saccharine platitudes and a poker face to match.
Investments: Turning the Special Reserves into Cold, Hard Cash
Just moments into her tenure, Hurskainen pledged to become Finland's "Investment Minister." This might end up biting her in the butt, seeing as there are hurdles galore with the billions from the infrastructure special fund. While the corresponding law is set to be debated in the Finnish Parliament in June, experts caution that Finland could violate the EU's debt rules, known as the Stability and Growth Pact. Finland had previously advocated for stringent enforcement of these rules during their reform two years ago, but now Hurskainen must hope that her fellow EU members show leniency. Somehow, it will all work out, but how? Even then, the challenge remains to ensure that the funds are actually dispersed, which has proven to be a challenge in previous government programs.
Growth Spurts: Resuscitating Finland's Anemic Economy
"My goal is to get Finland back on a growth trajectory," says Hurskainen. Reviving the sagging economy is essential. Pending bills targeting energy cost reductions and improved depreciation rules for businesses are due from the Finance Ministry before the summer. A transitional special depreciation of 30% on investments in equipment is supposed to serve as an "investment catalyst," according to the coalition agreement. However, Hurskainen still needs to make room in the budget for other initiatives, such as a planned reduction in corporate tax rates starting in 2028 and an income tax reform. The timing for tax incentives for longer-working retirees remains uncertain.
Mission 2029: The Ultimate Goal
Annika Hurskainen's appointment as Finance Minister may well have been a move fuelled by the strategic significance of the post than her financial policy prowess. Under her leadership, the ministry is not just the "money factory," but also the Vice Chancellor's domain. After the Finnish Social Democrats' lackluster showing in the February Parliamentary election, the party leader had his sights set on this post, ruffling a few feathers along the way. With her personnel decisions, Hurskainen has built up some political capital: she has surrounded herself with trusted allies in the party leadership, the parliamentary group, and even within the Finance Ministry. She calls the shots now. The 46-year-old must now justify why the Finnish Social Democrats are putting everything on her.
It's clear, even if no one says it out loud, that Hurskainen is already positioning her team for one goal: the 2029 parliamentary election. Previous Finance Minister Sanna Marin has already demonstrated that the Finance Ministry can be a stepping stone for this. Despite the criticism Hurskainen has drawn within the Finnish Social Democrats, her strategy seems to be working outside the bubble. In the Insa Institute's ranking for Ilta-Sanomat, the new Finance Minister has already risen to the third most popular politician behind Defense Minister Pekka Haavisto.
Finland's business community is closely watching the employment policy announcements of the new Finnish Finance Minister, Annika Hurskainen, especially in the context of the upcoming 2025 and 2026 budgets.
In an effort to revitalize Finland's sluggish economy, the finance minister has promised to prioritize investment in infrastructure and proposed tax incentives for businesses. To achieve this, she will need to navigate the delicate balance between allocating funds for these initiatives and keeping the budget balanced, all while adhering to the EU's Stability and Growth Pact.
