Watching bond market developments in 2025 many may have recalled the quote by James Carville’s – who was an advisor to President Bill Clinton in the 1990’s – about reincarnation. When saying he “wanted to come back as the bond market so as to intimidate everybody” he highlighted the idea that irrational or excessive economic policies would ultimately be contained by market discipline.
In 2025 the United Stated shifted its trade policy towards protectionism and significantly raised import tariffs. Although a damaging escalation of a global trade war was avoided, markets reacted strongly in April to the potential effects of such escalation and its expected impact on the global economy. Whether or not policymakers were intimidated by the bond market remains a speculation. Nevertheless, amid a relatively favourable outcome, the bond market and major currency interest rates remained broadly stable for the remainder of 2025.
This provided a supportive backdrop for European government bond issuance, which reached about EUR 580 billion in net and EUR 1.4 trillion in gross terms in the euro area. Monetary policymakers saw no imminent threat to inflation either side of the Atlantic – both the European Central and the Federal Reserve kept their policy rates stable and even introduced some cuts. However, global uncertainties and mounting government expenditure pressures led to steeper yield curves in European government bonds, including Finland’s.
Challenges and responses
Due to weak economic performance Fitch Ratings downgraded Finland’s long-term issuer credit rating to ‘AA’ from ‘AA+’ in July 2025 – still the third-highest level on an eight-tier investment‑grade scale. Other major credit rating agencies maintained Finland’s rating one notch higher, at AA+/Aa1 with a stable outlook. Several peer European sovereign issuers also faced rating downgrades during the year.
In 2025, Finland’s parliamentary parties reached an agreement on national rules to control the debt‑to‑GDP ratio.
In 2025, Finland’s parliamentary parties reached an agreement on national rules to control the debt‑to‑GDP ratio. This national framework—discussed by Marketta Henriksson in Chapter 3 of this Debt Management Annual Review—sets fiscal targets not only for the upcoming parliamentary term but also for the following one, covering a total of eight years. Nevertheless, the European Commission indicated that it intends to place Finland under the Excessive Deficit Procedure due to budget deficits in 2024 and 2025, in addition to the nine countries already subject to the procedure.
Aging continues to weigh on Finland’s public finances and has recently affected economic growth, as Mauri Kotamäki writes in his article. However, the accumulation of pension assets and the slowing pace of demographic deterioration, together with supply-side labour market reforms, will mitigate the challenge and support Finland’s relative strength compared with other Western countries.
Finland is no stranger to economic challenges. Mika Arola highlights the 150 years of history of government debt issuance in his article. Throughout this period, Finland has repeatedly overcome difficult times while maintaining its credibility as an issuer to support economic success.
Finland remains an equitable, modern, and affluent welfare state – and a top performer in sustainable development.
Despite medium‑term challenges to economic growth, Finland remains an equitable, modern, and affluent welfare state, as Jukka Hoffrén concludes in Chapter 6. Finland has achieved a high share of renewable energy, significant reductions in greenhouse gas emissions, and strong public safety—for example, a continued decline in traffic fatalities. All of this contributes to Finland’s leading performance in sustainable development.
Issuance strategy
In 2025, the Republic of Finland successfully raised EUR 47.3 billion in capital markets, covering the budgetary borrowing needs and ensuring central government liquidity. In 2026, the scope of the funding programme is expected to be similar to last year. The gross borrowing requirement, including short‑term funding, is currently estimated at EUR 44.2 billion. Given this similarity, the funding strategy and operations are expected to largely mirror those of 2025. Euro benchmark bonds remain the core of our funding strategy in addition to short-terms funding via treasury bills and potential bond issuance in currencies other than the Euro.
Ensuring that Republic of Finland Government Bonds (RFGBs) remain attractive to investors continues to be our long-term goal. We believe that Finland’s high credit rating, commitment to good governance, and strong track record in sustainable development will support our bonds and benefit investors in the years ahead.
