Greece polices deficits as Germany breaches limits

A country that needed three international bailouts now chairs the body that polices eurozone spending. Kyriakos Pierrakakis, Greece's finance minister, was elected Eurogroup president in December 2025, the first from a former crisis country. He now presides over meetings where France, Austria, and Finland present plans to bring their deficits under control.

Greece posted a +1.7% of GDP budget surplus in 2025, while its debt fell eight percentage points to 146.1% of GDP (Eurostat). Germany ran a -3.7% deficit, according to the Commission's Spring 2026 forecast. Finland posted -3.4% in 2025 (Statistics Finland), and the Commission projects that will widen to -4.5% this year.

Both Germany and Finland breach the Maastricht Treaty's 3% deficit ceiling, the limit EU countries set in 1992 as the price of sharing a currency. Across the bloc, thirteen member states now exceed it, and nine face the EU's formal correction process.

Germany's Exemption, Finland's Squeeze

Germany's deficit is larger than Finland's, yet Germany avoided formal proceedings entirely. Finland was placed under them in January 2026.

The difference comes down to a carve-out called the National Escape Clause. It lets countries subtract up to 1.5 percentage points of GDP in defence spending from their deficit calculations. Fifteen countries activated it. Strip out Germany's defence bill, and its adjusted deficit drops to roughly 2.9%, just under the ceiling.

Finland activated the same clause but can't make the maths work. Its deficit comes from ageing-driven welfare costs and growth of just 0.2% in 2025, not mainly from defence. The Bundesbank warns that even Germany's adjusted deficit will exceed 3% in 2026 and 2027, heading toward 5%. The exemption buys time, not a fix.

Cutting Benefits to Pay for Guns

Finland's defence spending is heading toward €14–15 billion annually by 2029, roughly double today's level. To make room, the government has cut unemployment benefits, housing allowances, and vocational education (SAK). VAT rose to 25.5%. Long-term homelessness jumped 29% last year, the first increase in a decade.

Commissioner Dombrovskis visited Helsinki and declared Finland was taking "effective action" (Finnish Ministry of Finance). In EU fiscal law, that phrase means following the prescribed spending path, not actually hitting the deficit target. ETLA, Finland's independent economic research institute, says the country will miss every one of its own fiscal goals: not 1% deficit by 2027, not balance by 2031. The OECD and the IMF agree the trajectory looks insufficient.

The Bailout Countries Balance the Books

Greece, Portugal, Ireland, and Cyprus all ran surpluses in 2025 (Eurostat). These countries endured bailouts, imposed cuts, and institutional humiliation through the 2010s. The forced restructuring built fiscal habits that now show in the numbers. In June 2026, the Commission took Greece off its high-risk watchlist for economic imbalances entirely.

The EU has never fined a country for running excessive deficits. The closest case: an €18.9 million penalty on Spain in 2015 for falsifying statistics, not for overspending. In 2003, France and Germany blocked sanctions against themselves at the Council. Finance ministers vote on each other's penalties. That design flaw hasn't changed.

Finland is cutting housing support and freezing benefits to stay on the prescribed path. Germany created a €500 billion off-budget infrastructure fund and got an exemption. Both countries are following the rules. Only one is shrinking its safety net to do so.