HELSINKI, Finland: Finland is facing economic stagnation, rising unemployment, and strained public finances, yet it has still been named the world's happiest country for the eighth consecutive year in the annual World Happiness Report.

Experts say a large part of that success stems from the country's strong welfare model — a system now under pressure as the government seeks to contain rising social costs linked to an aging population.

Economic challenges are increasingly visible across the country. Still, after 1,000 days without work, 33-year-old Juho-Pekka Palomaa refuses to let the national mood darken. "I've been grateful that Finland has had a safety net and social security that supported me financially," he said while protesting unemployment benefits outside parliament with a bring-your-own-food gathering.

"Maybe I'm not unhappier than before. But I don't feel there's much I can do to change my situation." A former video producer, Palomaa says he has submitted countless applications and completed 11 unsuccessful job interviews. He also feels the government is making cuts in the wrong places. "Benefits have been reduced, but pensions — which seem almost sacred — remain untouched," he said.

Finland's struggles are not new. The export-driven economy has never fully recovered from the collapse of Nokia's phone business in 2014 after it failed to adapt to touchscreen technology. Sanctions on Russia, its large neighbor, have further hurt exports and tourism, while global trade uncertainty continues to weigh on growth. The Bank of Finland expects growth of only 0.3 percent this year, slightly below last year's 0.4 percent. The unemployment rate is among the highest in the European Union at nearly 10 percent, with youth unemployment more than double that at 21.2 percent.

The European Commission is now expected to decide whether Finland should be placed under an "Excessive Deficit Procedure," after forecasts showed deficits exceeding the EU's 3 percent limit for the next three years. Finland has recorded annual budget deficits every year since the 2009 global financial crisis. Last year's deficit of 4.4 percent was the second-highest in 25 years, surpassed only by 2020 during the COVID pandemic.

The worsening public finances have already led to cuts in unemployment and housing benefits, as well as reductions in some healthcare services. "I'm honestly terrified for younger people," said 54-year-old Hanna Taimio, another unemployed Finn at Palomaa's gathering. "All these cutbacks feel frightening."

The right-wing coalition government, in office since 2023, says its priority is stabilizing public finances and reducing national debt. Employment Minister Matias Marttinen described the jobless rate as "an awful situation," but defended policies that make employee dismissals easier, arguing that reducing employers' risk will ultimately increase hiring.

Critics disagree, saying austerity has worsened consumer confidence and economic conditions. Lauri Holappa of the Finnish Centre for New Economic Analysis said simulations suggest the consolidation measures may have even accelerated the rise in public debt. The finance ministry now expects national debt to reach 90 percent of GDP by 2030 — more than double its level 15 years ago.

Yet despite the financial anxiety, Finland continues to score high on well-being. Happiness Report editor John Helliwell says resilience and constructive problem-solving matter more than economic performance. "Finland scores extremely high on resilience," he said. Early data from Gallup shows no notable change in Finns' reported happiness.