Under EU rules, governments cannot run budget deficits of more than 3% of national output

International News via Reuters:

The European Commission on Tuesday proposed disciplinary action against Finland for running too high a budget deficit that cannot be fully explained by higher defence spending.

Under EU rules, governments cannot run budget deficits of more than 3% of national output. If they do, finance ministers, on a recommendation from the Commission, set a deadline for its reduction. Repeated failure to comply could result in fines.

Because of the perceived threat of a Russian attack, the Commission has allowed all European Union member states to spend an extra 1.5% of GDP on defence without it being included in the excessive deficit calculation.

Despite what the EU calls the national escape clause, Finland’s 2025 deficit was still too high, the Commission said.

“Therefore … the Commission will consider proposing to open an excessive deficit procedure for Finland,” it added.

Finland, which is grappling with economic stagnation, rising joblessness and strained public finances, had a budget gap of 4.4% of GDP in 2024. This is expected to rise to 4.5% of GDP this year, remain at 4.0% next year and ease only to 3.9% in 2027, unless policies change.

“The Commission’s assessment did not come as a surprise, as Finland’s public finances have continued to deteriorate,” the country’s finance minister Riikka Purra said in a statement, adding that the work to adjust public finances would continue over several parliamentary terms.

Finnish Prime Minister Petteri Orpo said on X the economy is sluggish mainly as a result of Russia’s war in Ukraine.

The export-dependent economy has struggled since the phone business of Nokia, once Europe’s most valuable company, collapsed in 2014. More recently, sanctions on neighbouring Russia have hit exports and tourism, while global trade uncertainty is also having an impact.

Germany, which is set to have a deficit of 3.1% this year, 4.0% in 2026 and 3.8% in 2027, is also above the 3% limit, but the Commission said all of the excess was explained by increased defence spending, so no disciplinary steps would follow.

Reporting by Jan Strupczewski and Essi Lehto, editing by Anna Ringstrom and Alexander Smith

Japan’s U.N. ambassador, Kazuyuki Yamazaki, was responding on Monday to a letter China’s U.N. Ambassador Fu Cong wrote on Friday to U.N. Secretary-General Antonio Guterres

International News via Reuters:

Japan has dismissed a Chinese letter to the United Nations accusing Tokyo of threatening armed intervention over Taiwan as “inconsistent with the facts and unsubstantiated”.

Japan’s U.N. ambassador, Kazuyuki Yamazaki, was responding on Monday to a letter China’s U.N. Ambassador Fu Cong wrote on Friday to U.N. Secretary-General Antonio Guterres.

Fu accused Japanese Prime Minister Sanae Takaichi of “a grave violation of international law” and diplomatic norms when she said in parliament this month that a Chinese attack on Taiwan could trigger a military response from Tokyo.

Yamazaki, in his letter, also addressed to Guterres, said Japan’s fundamental policy was of “passive defense.”

“Therefore, China’s assertion that Japan would exercise the right of self-defense even in the absence of an armed attack is erroneous,” he said.

Fu’s letter was the strongest Chinese criticism yet of Takaichi, a conservative nationalist who took office last month, pointing to the worst bilateral tensions between China and Japan in years.

China says Takaichi’s remark had “severely damaged” trade cooperation, while concerts of Japanese musicians in China have been abruptly canceled.

On Tuesday, Takaichi said she had spoken to U.S. President Donald Trump in what was their first phone call since the diplomatic bust-up with China, and that the U.S. leader had told her she could call him any time.

Takaichi also said Trump explained to her the recent state of U.S.-China relations, including his phone call with Chinese President Xi Jinping on Monday.

Trump has not commented publicly on the dispute between Japan – a key U.S. security ally – and rival superpower China, a silence that analysts say will be concerning to some officials in Tokyo.

China claims Taiwan, which sits just over 100 km (60 miles) from Japanese territory, and has not ruled out using force to take control of it. The island’s government rejects Beijing’s claim and says only Taiwan’s people can decide their future.

Reporting by David Brunnstrom and Jasper Ward; editing by Mark Heinrich