Finland Credit Rating Downgraded to AA by Fitch on Rising Debt

Fitch Ratings downgraded Finland's long-term sovereign credit rating from AA+ to AA, marking its lowest level in nearly three decades, due to rising public debt, persistent budget deficits, and insufficient fiscal consolidation efforts. The country's debt ratio is expected to reach 86.3% of GDP in 2025, significantly above the median for AA-rated countries, driven by high government spending, demographic pressures, increased social and defense costs, and weak economic growth. Despite the downgrade, Fitch maintained a stable economic outlook but expressed skepticism about the effectiveness and timing of proposed fiscal consolidation measures, which are unlikely to stabilize the debt-to-GDP ratio in the medium term. Finnish leaders acknowledged the downgrade as a serious signal, with Prime Minister Petteri Orpo and Finance Minister Riikka Purra emphasizing the need for additional fiscal measures to address deteriorating public finances. The downgrade also sparked concern in European bond markets, prompting investors to reassess fiscal vulnerabilities across the eurozone, particularly in peripheral countries like Italy, Spain, and Portugal, although Finland’s strong institutions and NATO membership continue to support market confidence. Overall, Fitch’s decision highlights growing challenges for Finland’s fiscal sustainability amid demographic and geopolitical pressures, as well as broader implications for eurozone financial stability.