A 1,000 billion euro cake: This is how Finland wants to distribute EU money

Minister for Europe and Ownership Joakim Strand (r) sits in the lobby of a fine hotel in Brussels.

Strand, who became a minister in June, has come to Brussels to lobby for Finland’s views on the EU’s future multiannual budget (MFF) for the years 2028–2034.

The Commission is supposed to issue a proposal on the new financial framework by July. Finally, the budget is approved by the member states at the end of the year or at the beginning of next year.

In Brussels, Strand gets to tell Finland’s views directly to the budget commissioner Peter Serafinille.

The Europe Minister says that, as a net payer, Finland does not want to increase the EU’s multi-year budget from the current level of just over 1,000 billion euros.

“However, we are ready to discuss Ukraine and defense,” says Strand.

According to the minister, the priority in all EU funding should be strengthening the Union’s competitiveness, respecting the rule of law and supporting Ukraine.

Respecting the rule of law means that a member state cannot use EU money if it tramples on democracy.

Strand says that he constantly lobbies for Finland’s line to other EU countries, especially to the future EU presidencies Denmark and Ireland, during whose term the future financial framework will be sealed.

The minister says that Finland wants to invest within the budget above all in factors that strengthen competitiveness, such as reforming the internal market and research, development and innovation.

According to Strand, the prerequisite for the EU’s competitiveness is that global companies concentrate their research, development and innovation activities in Europe as much as possible.

“We would of course like to go to Finland and the Nordic countries,” says Strand.

Strengthening the overall security of the EU is also important for Finland.

Money for agriculture

The truth is, however, that traditional agricultural and regional development money takes the vast majority, i.e. more than 60 percent, of the budget of more than 1,000 billion euros.

Strand admits that it is not easy to change priorities within the budget, when southern European countries want to keep their agricultural money and eastern European countries their regional development money.

It is also problematic for Finland that in recent years, under the guise of crises, state aid regulation has been relaxed in the EU: subsidies favoring large countries distort competition in the EU and inoculate the exporting country Finland.

According to Strand, “there is realism” that state subsidies will continue in some form.

However, the minister reminds that if, for example, the economy of Germany, which is suffering from an economic downturn, recovers with the help of subsidies, it will also benefit Finland.

Net payer

The size of the current EU budget (2021–2027) is EUR 1074.3 billion, excluding the EUR 750 billion recovery package.

About 31 percent of the money goes to support agriculture, 30 percent to support less developed regions, and about 32 percent to other blocks, such as the internal market, innovation and the promotion of the digital economy.

About 7 percent of the EU budget goes to administrative costs.

In this framework period, Finland is the net payer of the EU with 4.9 billion euros.

According to the Government’s calculations, Finland pays 17.6 billion euros into the current financial framework and receives 12.7 billion euros back through the various blocks of the budget.

The Finnish government, struggling with a growing debt and deficit, is currently seeking support from the EU for the view that defense spending should not be counted as part of the EU member states’ three percent deficit target.

The EU’s fiscal policy rules state that the deficit of public entities may be no more than three percent and the debt ratio 60 percent in relation to the gross domestic product.

Finland will not reach these goals, and the threat is that Finland will be subject to stricter financial control by the Commission, i.e. the so-called “observation category”, if spending does not change, or the deficit rules are interpreted more loosely.

Debt to defense

In relation to the EU’s defense and support for Ukraine, talk about the EU’s common debt has increased.

It is recorded in the government program that the 750 billion euro collective debt package taken to recover from the corona was a one-off, but the pressure to take on a new collective debt in the EU is growing.

Prime minister Petteri Orpo (kok) has already flashedthat the EU could take on joint debt to finance defense spending.

Ylen Ykkösaamu Orpo recently elaborated that a common debt could be possible if the money is used where Europe is defended, i.e. on the borders against Russia. Correspondingly, the EU’s major defense industrial countries hope that European weapons would be bought with a joint debt, which would strengthen the EU’s defense industry.

Joint debt is not an easy matter within the Orpo (kok) board. Especially among basic Finns, the topic arouses anger.

The minister of the RKP also sets his words carefully.

“The Prime Minister brought up this idea and I consider it a good opening for the future,” says Strand.

The European minister says that he is in principle open to a new common financial instrument, if it is not an actual joint debt, but an instrument in which each country takes on debt in a common pot.

“I am open to a new funding pattern, as long as it is used sensibly, i.e. directed to where Europe is now being defended,” says Strand.

However, the minister does not warm to the idea that, at the same time, EU countries would be obliged to buy their weapons mainly from Europe in the future.

“I don’t want to talk about obligation.”

According to Strand, the question is more broadly about how Europe’s competitiveness can be strengthened at all levels so that the European defense industry would also be the best in the world.