Keep an eye on Finland…

Further to the suggestion mentioned in Mick’s post earlier on today ( “letting” the Republic, Greece and Portugal default), two developing political factors are worth bearing in mind:

Europe’s top-rated economies like Germany and Finland need to stop paying for the fiscal sins of the euro region’s weakest members if the bloc is ever to have a “fair system” , Finnish President Tarja Halonen said. “The good girls, like Finland and Germany, are not the payers for the future,” Halonen, 67, said on Tuesday in New York in an interview with Bloomberg Television.

“European citizens expect that there will be also a fair system inside the European Union and in the euro, and that’s why we have to have quite hard discipline.”

Ms Merkel’s CDU, earlier on this week, suffered an horrendous defeat in the state of Baden-Württemberg, with her party being ousted from power for the first time in 58 years. She herself has blamed the defeat on the Japanese nuclear disaster, which was obviously a factor, but the weakening of the CDU’s position predated that tragedy and can be at least partly put down to the perception that she has been “too soft” when dealing with the EU financing crisis. If a General Election were to be held tomorrow, opinion polls are showing that Ms Merkel’s coalition would lose to an alliance of Social Democrats and Greens.

But back to Finland:

Though Europe’s leaders on March 12 agreed to boost the region’s bailout facility, they remain divided on how to do so in practice. Finnish Prime Minister Mari Kiviniemi said March 9 her government wants the euro area to target stricter economic goals rather than allow “joint liability”. “We are ready to protect the euro ,” Halonen, Finland’s first female president, said in the interview. Still, “everybody has to look after their own economy and follow the rules,” she said

Which is a notable hardening of their stance relative to the traditional Finnish attititude in such matters and can be largely explained by events and opinion polls surrounding the upcoming national election on April 17th:

The leader of the populist True Finns party, vying for a key role in the next Finnish government, has said he would demand to renegotiate a package of EU measures to tackle the euro zone debt crisis.

“Considering the current preliminary information… we will not accept it,” Timo Soini told Reuters in a telephone interview.

“We are not happy with socialising debts. It would again transfer more power from the national level to the European Union.”

The True Finns have been gaining popularity ahead of an April 17 general election and if they emerge as the biggest party, they could complicate European Union efforts to complete a deal to address the euro crisis.
“Our aim is to awaken Finnish people to vote for a result that means this package will have to be renegotiated,” Soini said.

The True Finns are present running second in the polls and whilst it is unlikely they could feature in any governing coalition, the other parties are becoming very cautious indeed about publicly pushing too strongly the joys of helping out any further countries in the name of EU solidarity. More practically, Finland has now dissolved its parliament ahead of the elections and can’t make any formal decisions on EU measures until the beginning of May at the earliest.

Coupled with what is bound to be a much more reticent Ms Merkel in the near future, this more defensive attitude from the Finnish political mainstream doesn’t bode at well for any package of measures to strengthen the Euro and, by logical consequence, the reduction of the pain presently being suffered in the Republic.