This chapter examines how EU cohesion policy and national programmes support Finland’s eastern and south-eastern border regions as they confront structural challenges intensified by the geopolitical situation. It outlines the distribution of ERDF, ESF+ and JTF funding, of which the eight border regions receive 68%, and explains how regional and national strategies aim to boost resilience through innovation, skills, energy transition and economic diversification. The chapter reviews regional responses, including targeted support measures (e.g., Imatra), energy-grid modernisation needs, and emerging opportunities in renewable energy and industrial development. It also highlights extensive inter-regional cooperation, municipal adaptation efforts, and joint projects addressing security, infrastructure, and economic renewal. Overall, the chapter shows that while EU and national instruments play a critical role, long-term progress requires stronger governance, coordination, and investment across levels of government.
Transition Strategies for Finland’s Eastern and South‑Eastern Border Regions
Abstract
Finland receives European Union funding for the programme “Innovation and skills in Finland 2021-2027” through three main instruments, totalling EUR 1.94 billion. The European Regional Development Fund (ERDF) provides EUR 870 million, focusing on competitiveness and innovation. The European Social Fund Plus (ESF+) contributes EUR 604 million, targeting labour market inclusion and skills development. The Just Transition Fund (JTF), newly introduced in this period, offers EUR 466 million to support regions transitioning from carbon-intensive industries. EUR 1.62 billion of the Finland´s total EU funding for the above programme has been allocated to regional decision-making (Table 4.1)1.
These funding mechanisms address Finland's specific challenges, including low population density in northern areas, economic dependence on traditional industries, and the urgent need for energy transition. The strategic focus ensures resources are allocated to regions with the most pressing needs while promoting balanced development across the country.
The eight border regions receive 68% of mainland Finland´s EU funding allocated to regional decision making, reflecting these regions' structural challenges. Kainuu receives the highest per capita funding at EUR 151 per inhabitant, followed by Lapland at EUR 148 and South Savo at EUR 146 per inhabitant. North Karelia also receive a significant allocation, at EUR 129 per inhabitant. This distribution pattern emphasises support for regions facing significant development challenges while maintaining growth initiatives in more developed areas.
The allocation strategy supports both immediate regional needs and long-term national development goals. Cities play a crucial role in implementing EU-funded projects, with different approaches evident between northern and southern regions. While cities in Northern and Eastern Finland focus on addressing structural challenges and promoting sustainability, those in Western and Southern Finland emphasise technological advancement and private sector co‑operation.
Note: The eight eastern and southeastern border regions analysed in this project are marked with *.
Source: Työ- ja elinkeinoministeriö (2022). Uudistuva ja osaava Suomi 2021–2027. EU:n alue- ja rakennepolitiikan ohjelma (Innovation and skills in Finland 2021–2027. EU regional and structural policy programme) Version 1.2. Helsinki.
Eastern Finland’s vision and regional programmes: foundations for growth and resilience
The northern and eastern Programs were already described earlier in the report (in Chapter 1). In addition to them, it is worth noting that in 2023 the Vision for Eastern Finland (“Itäinen Suomi - uusi suunta”) established comprehensive strategic objectives focusing on regional development, energy independence, workforce development, connectivity, and tourism revival. The vision aimed to build regional resilience and promote economic revitalisation through diversification of the economic base, support for SMEs, and attraction of innovative investment. The vision’s influence is evident in the draft Eastern Finland Programme. While the vision and the two draft Programmes can be seen as providing the national strategic framework, implementation has faced challenges mainly due to resource and governance constraints.
Regional response strategies and their integration with national framework
With support from the EU and central government, the eight border regions have developed responses to address the changes in their operational environment. An interesting example is the Imatra region's EUR 4 million support package, implemented through state support instrument. This targeted intervention has shown some positive results (Box 4.1).
In South Karelia, development has included investments in research and innovation, such as the biomaterial research center at LUT University in Lappeenranta, funded through regional and EU structural funds. The region has fostered co‑operation with local universities, including LUT and XAMK, focusing on renewable energy technologies and advanced digital solutions.
Addressing workforce challenges has been another cornerstone of adaptation strategies. For example, in Kainuu, vocational training programmes have focused on skills for sustainable forestry and circular economy practices, leveraging the region's strong forestry sector. In Lapland, efforts have included reskilling initiatives tailored to the growing mining and sustainable tourism industries, with support from the Arctic Smartness concept. Structural fund programmes have facilitated these transitions to new industries and sectors.
Imatra faced significant economic challenges due to structural changes, particularly in the forest industry, and geopolitical tensions affecting cross-border trade. In response, the Finnish government applied the Abrupt Structural Change (Äkillinen rakennemuutos, ÄRM) model, which provides targeted support to regions facing sudden economic disruptions.
In 2024, the Finnish government allocated 4 million euros to mitigate the effects of structural change in Imatra, especially after the Stora Enso workforce reduction. The funding consists of 2 million euros in national support and 2 million euros from the European Regional Development Fund (ERDF). The decision was taken at national level and was not part of a co‑ordinated initiative at EU level.
The funding aims to support local economic resilience by promoting business development, strengthening small and medium-sized enterprises (SMEs) and supporting the adaptation of the workforce. Key measures include investment in skills development, support for business transition and targeted economic diversification strategies.
While the national response has provided critical financial support, ensuring long-term economic stability in Imatra will require continued strategic planning and collaboration between local, regional and national stakeholders.
Note: The Sudden Structural Change Support (ÄRM support) is allocated based on specific criteria and does not cover all regions equally.
Source: City of Imatra (2022), Government support for investments for companies in the Imatra region, https://www.imatra.fi/en/news/2022-06-16_government-support-for-investments-for-companies-in-the-imatra-region; Valtioneuvosto (2022), Valtioneuvosto päätti lisäpanostuksista Itäiseen Suomeen [Government decided on additional investments in Eastern Finland], https://valtioneuvosto.fi/-/1410877/valtioneuvosto-paatti-lisapanostuksista-itaiseen-suomeen.
The integration of regional strategies into the national framework has encountered challenges. Limited formal recognition at the national level has created uncertainty about long-term support for regional initiatives. Resource constraints and competing regional priorities have further complicated implementation efforts.
To address such challenges, authorities have implemented the Traffic Light Model to prioritise initiatives: green (ready and funded), yellow (under study), and red (not yet feasible). While this model has improved project prioritisation, political delays have hindered progress, even for green-status projects. Moreover, the absence of clear follow-up strategies for yellow and red projects has limited its effectiveness as a long‑term planning tool.
To unlock the full potential of the model, stronger political commitment, better co‑ordination, and targeted funding are essential. Without these measures, the traffic light model risks being underutilised, despite its strategic importance for the development of Eastern Finland’s border regions.
Future resilience and growth
The modernisation and extension of Finland’s national grid (kantaverkko) is essential for strengthening regional resilience, particularly in eastern and northern Finland, where energy supply challenges have intensified following the closure of the Russian border (Box 4.2). In addition to enhancing reliability, investments in the national grid will play a key role in integrating new energy production into the system.
Expanding energy production is also crucial for supporting the growth of energy-intensive industries. Battery manufacturing and other emerging sectors depend on a stable and secure electricity supply to ensure competitiveness. At the same time, ageing infrastructure requires urgent attention, as failure to upgrade the grid will lead to rising maintenance costs and reduced transmission efficiency.
This modernisation and extension would align with Finland’s broader objectives of fostering sustainability and achieving carbon neutrality by 2035. By facilitating the integration of renewable energy sources, the improved grid would not only reduce reliance on fossil fuels but also open opportunities for green industrial investments, including in sectors such as hydrogen production. This shift could make eastern Finland an important player in renewable energy innovation while also addressing energy security concerns.
However, the success of this transformation depends on substantial national investment and sustained political commitment. While Fingrid, the national grid operator, has demonstrated readiness to expand grid capacity through targeted projects, such as reinforcing key transmission lines, the lack of immediate demand and specific regional plans poses challenges. Strategic prioritisation and close collaboration between national, regional, and local stakeholders will be critical to ensure the grid’s modernisation supports regional development objectives effectively.
Beyond technical improvements, the modernisation and extension effort also carries significant symbolic value. It underscores the importance of equitable regional development and highlights the role of energy infrastructure in bridging gaps between Finland’s eastern regions and its more industrialised south and west. This transformation could offer an opportunity to future-proof the region’s economy while contributing to Finland’s leadership in sustainable energy solutions.
Regional economic diversification efforts focus on developing new growth sectors while strengthening existing industries. Examples of such developments are ongoing projects to expand energy clusters in eastern Finland. At the same time, investments in digital infrastructure continue to support remote working and enhance service delivery, including the expansion of high-speed internet access and the development of smart service platforms, particularly in rural areas. The transformation of Finnish border regions requires sustained commitment to both immediate crisis response and long-term development goals. Success depends on several factors, including effective co‑ordination between different levels of government, the efficient implementation of development initiatives, the ability to measure progress and adapt strategies as needed, and the availability of stable financial support.
The modernisation and extension of eastern Finland's energy grid is pivotal for supporting the region's economic resilience, industrial growth, and energy transition efforts. Fingrid, Finland's national transmission system operator, is working to address infrastructure challenges and facilitate the integration of renewable energy sources.
While Fingrid has expressed readiness to expand the grid further, substantial investments in eastern Finland are contingent on clear demand and regional planning. A proposed legislative reform would allow smaller grid companies to invest in infrastructure upgrades to support a potential increase to 400 kV capacity, with Fingrid completing the work. However, the estimated cost of significant expansion to eastern Finland could exceed EUR 1 billion, raising concerns among southern Finland firms about financial implications.
Fingrid has also argued that eastern Finland’s current 110 kV grid has unused capacity, which has reduced the immediate technical need for higher-voltage grids. However, regional growth, renewable energy integration, and national energy security are prompting discussions on future expansion.
One significant planned project is the Lake Line reinforcement, a 400+110 kV transmission line between Nuojuankangas and Huutokoski, expected to be completed by 2026. This will enhance north–south electricity transmission and support potential industrial and renewable energy projects.
Renewable energy projects, including wind power, present opportunities but face hurdles. Eastern Finland’s wind power potential is being explored, with preparations for up to 300 GW of production capacity. However, radar and surveillance challenges add roughly EUR 1 million in costs per turbine. Expanding the grid in the east could reduce price fluctuations by compensating for low wind conditions in western regions and alleviate stress on the south and west, where grid capacity is near full.
Eastern Finland’s grid upgrades will also depend on the materialisation of industrial projects, which have historically faced delays or cancellations, complicating planning efforts. Careful financial planning, stakeholder collaboration, and a strategic focus on renewable energy will be critical for the successful development of the energy grid in eastern Finland.
Source: Fingrid (2023), Main Grid Development Plan 2024-2033, https://www.fingrid.fi/globalassets/dokumentit/fi/kantaverkko/kantaverkon-kehittaminen/fingrid_kehittamissuunnitelma_26_eng.pdf.
Cross-regional collaboration
The border regions participate in multiple advisory boards, reflecting a broad commitment to co‑ordinated development efforts (see Table 4.2).
An example of this kind of regional collaboration is the joint smart specialisation strategy2 developed jointly by eastern and northern Finland (Lapland, Central Ostrobothnia, Northern Ostrobothnia, North Karelia, Kainuu, North Savo, and South Savo). This strategy prioritises clean solutions, digitalisation, and sustainable service production3.
Regions actively collaborate in advocacy, particularly in response to geopolitical shifts. The northern and eastern Finland regions have emphasised the impacts of Russia’s aggression against Ukraine on regional competitiveness, investments, and logistics. They have called for EU policies that account for the eastern border’s unique challenges, particularly in transport infrastructure, which is now integral to Finland’s security and NATO commitments. They also advocate for targeted funding to support the green transition, digitalisation, and strategic self-sufficiency in critical raw materials and agriculture. Similar demands are echoed at the national level, where the regions stress the need for EU-backed investments in accessibility, food security, and energy infrastructure. Additionally, they highlight workforce challenges, urging support for foreign labour integration, and regional R&D funding to foster innovation across all areas.
Note: * Also, Central Ostrobothnia; ** Also Helsinki–Uusimaa, Päijät-Häme and Southwest Finland (Varsinais-Suomi). While Kymenlaakso is not “officially” part of the Eastern Finland coalition, it has been involved after the war in some of the activities and is also noted in documents of the national government,
Other regional coalitions advance similar priorities. The northern Finland (NF) regions argue for a dedicated Northern Strategy, recognising their geopolitical importance for security, international connectivity, and supply chains. Eastern Finland (EF) regions, in turn, call for a comprehensive hub network to enhance national security of supply, including multi-modal transport terminals and sustainable logistics solutions. They advocate for the hydrogen economy and wind energy development, as well as compensation for regions restricted from wind power investments due to defence constraints. Additionally, they push for stronger tourism promotion through Visit Finland to counteract losses caused by the war in Ukraine. They argue that eastern Finland, most affected by geopolitical shifts, requires an ambitious growth package and enhanced security resources at the EU border. EF regions also propose strengthening regional and municipal financing through state aid reforms that account for long distances, sparse populations, and fragmented regional structures.
The EF regions, together with Kymenlaakso, have put forward detailed proposals for the government’s East Finland Strategy. Their key recommendations focus on attracting investment, expanding the electricity grid, and improving regional accessibility, particularly rail transport. Specific suggested measures include EUR 100 million pilot project enabling Finnvera to provide direct loans to Eastern Finnish companies, upgrading the main electricity grid (400 kV) across key routes, and earmarking green investment funds for projects in the region.
In contrast, the southern Finland (SF) regions present a different perspective, arguing that eastern and northern Finland have historically received disproportionate EU and national funding. They claim that this has put southern Finland at a disadvantage in global competition and call for a complete overhaul of the regional development financing model to ensure fairer distribution of resources.
Municipal efforts and inter-municipal alliances
Municipalities play a key role in public service provision and public investment in Finland, making their efforts essential to regional development. Border municipalities, such as Tohmajärvi (North Karelia), Imatra (South Karelia), and Virolahti (Kymenlaakso) – which each host a border station and were previously among the most economically and functionally connected to Russia – have shown remarkable resilience despite border closures and economic sanctions:
In Tohmajärvi, the Niirala border station was one of Finland’s busiest crossings before the war. Despite the border closure, the municipality remains committed to developing business activities in the area, offering plots for trade, industry, and logistics, along with a reserved site for a large retail unit.
The City of Imatra, which had strong cross-border ties with Svetogorsk, does not explicitly reference Russia in its municipal strategies. However, the town’s Vitality Programme suggests a strategic shift, focusing on strengthening international activities that benefit the local economy and enhancing co‑operation with the Border Guard and the Border and Sea Guard School.
In Virolahti, home to the Vaalimaa border station, the municipal strategy was updated to reflect the impact of the war and border closure. The end of Russian tourism has severely affected the local economy, forcing the municipality to reorganise services and adjust to new financial realities.
An example of joint municipal efforts is the “More effective co‑operation in the region of Finnish Eastern border cities and municipalities 2023-2025” -project4, managed by the City of Kuhmo and funded by the Kainuu Regional Council under the AKKE framework. This project supports municipalities along Finland’s eastern border (see Figure 4.1) in adapting to the geopolitical shifts caused by the war in Ukraine. The project includes municipalities such as Savukoski, Salla, Kuusamo, Suomussalmi, Kuhmo, Lieksa, Ilomantsi, Tohmajärvi, and Kitee, with others like Rautjärvi and Parikkala joining later. With a budget of EUR 318 000, the two-year project is set to conclude in August 2025, though discussions on its continuation are already underway.
A key priority of the project is raising the profile of border municipalities in regional development discussions, particularly in energy infrastructure, security, and economic resilience. Participants stress the need for clean energy investment to attract industry and support long-term sustainability. However, restrictions on wind energy near the border – as has been discussed in this report – remain a challenge. As discussed above, strengthening the electricity grid is also seen as critical for enabling clean energy production and ensuring Finland’s energy security.
The project also emphasises comprehensive security, recognising that a populated and economically active border region is vital for national defence. Declining populations and economic stagnation pose security risks, making regional resilience a strategic priority, particularly in the context of Finland’s NATO membership. The initiative promotes preparedness, strengthens local governance, and enhances inter-municipal co‑operation.
Another focus is activating inter-municipal and cross-sector collaboration, particularly in securing EU funding. The border closure has reinforced the need for municipalities to diversify their economies and build new partnerships at national and European levels.
One of the project’s key achievements is the establishment of the Kuhmo Border Forum, first held in spring 2024. Bringing together policymakers, municipal leaders, and stakeholders, the forum provides a platform for strategic discussions on the future of Finland’s eastern regions. Now institutionalised as an annual event, the next forum will take place in Kuusamo in 2025. These gatherings ensure that the unique challenges of border municipalities remain central to national policy debates.
As the project nears completion, participating municipalities are exploring ways to sustain and expand it. Future efforts may involve deeper integration with EU programmes such as Interreg Aurora and Interreg Europe, which could provide greater financial support and enhance cross-border co‑operation. Lessons from other EU border regions, including the Baltic States and Poland, will also inform future strategies.
Note: Municipalities taking part in the “Vaikuttavampaa yhteistyötä rajakaupungeissa ja -kunnissa” project.
Source: Kainuu Regional Council.
EU cohesion funding plays a critical role in supporting economic resilience and structural transitions in Finland’s eastern border regions. During the 2021–2027 programming period, Finland receives EUR 1.94 billion through the European Regional Development Fund (ERDF), the European Social Fund Plus (ESF+), and the Just Transition Fund (JTF). EUR 1.62 billion of the EU funds has been allocated to the regional decision making. The eight border regions receive 68% of mainland Finland’s EU funds allocated to regional decision making, reflecting their structural disadvantages and the need for targeted development interventions.
Regional policy frameworks guide economic revitalisation efforts but face implementation challenges. The 2023 Vision for Eastern Finland and the 2025 Northern and Eastern Finland Programmes set strategic goals for regional development. Resource limitations and governance constraints may hinder effective implementation, however. Stronger co‑ordination between regional and national authorities is needed to ensure that funding is efficiently allocated and projects are successfully executed.
← 1. All Finnish regions except Uusimaa, Southwest Finland, Tavastia and Päijät-Häme have received JTF funding, please see Table below).
← 2. Lapin liitto (2023), Shared Smart Specialisation Strategy for East and North Finland, https://www.lapinliitto.fi/wp-content/uploads/2023/12/IP-Suomi-A%CC%88ES-taitto-210x210mm_ENG_verkkojulkaisu.pdf.
← 3. A thematic funding programme for the forest bioeconomy was launched in February 2025 as part of the Eastern Finland Programme’s activities. Successful implementation requires cross-regional collaboration. The funding call is managed by the North Karelia Regional Council: https://www.biotalous.fi/pohjois-karjalan-maakuntaliitto-metsabiotalouden-uudet-avaukset-haku-auki-10-2-10-6-2025/.
← 4. City of Kuhmo (2023), https://kuhmo10.oncloudos.com/cgi/DREQUEST.PHP?page=meetingitem&id=2023411-10.