Finland said on Tuesday that it would breach public debt limits set by the European Union for the first time since joining the bloc in 1995, as the country's recession deepened.
"The Finnish economy has proven weaker than we previously anticipated," Bank of Finland director Erkki Liikanen wrote in a new economic report which forecasts a public debt level of 60.3 percent of GDP in 2014, slightly above the 60 percent level agreed in the Maastricht Treaty.
Once considered among a model that eurozone laggards should aspire to, Finland was among the most outspoken in calling for debt limits to be adhered to.
However, in the past two years, its economy has shrunk, hard hit by a decline in the paper and electronic industries, an ageing demographic and rising unemployment which reached 8.5 percent in April.
The crisis in the Ukraine and the weak ruble have also affected the Nordic economy which is heavily dependent on trade with neighbouring Russia.
Since the heady days of Nokia's domination of the world mobile phone market in the late 2000s, Finland has also seen a sharp decline in its industrial fortunes, despite a relatively strong software and IT sector.
"Major structural changes in industry have considerably weakened the foundations of the Finnish economy," according to Liikanen.
Until now, Finland has been one of the few eurozone countries not to have breached the 60 percent debt ceiling, which the economic watchdog OECD has described as a "straitjacket" that is holding back the Nordic nation from economic recovery.
In 2013, the Finnish economy contracted by 1.4 percent, and the central bank did not expect any change this year, in contrast to government predictions of a return to growth.
The coalition government has introduced a raft of strict austerity measures, but despite higher taxes and sweeping cuts to welfare payments the national debt has continued to rise amid calls from some analysts for lower taxes and increased spending.