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.

  • Henry94

    Of course he is quite right, The Finns nor anyone else should contribute not a cent to Ireland’s bank debt. Nor should the Irish. The private debts of banks are a matter for the banks and their creditors.

  • lover not a fighter

    The bankers act as if everyday is April fools day. Tis time to tell them their joke has worn thin and their debts are nobodys joke but their own !

  • Mick Fealty

    I love the pristine nature of your proposition Henry, and it’s hard to disagree with it in principle. The problem is the ECB (and the FF govt) started on an emergency form of action that has hardened (by default I suspect) into a medium to long term strategy. And won that looks unfit for the sheer size of the problem ahead.

    Even if much of the damage is not yet done (German taxpayers money is now propping the banks up rather than the absconded bondholders), it requires not another unilateral Irish action (which could leave the country dealing with the IMF ala Argentina), but Europe to get its head round the fact that this situation is going to have to rolled back in somehow.

    As Arthur Beesley, from Pete’s earlier post, notes:

    In all likelihood, Mr Noonan will have to provide something substantial on the fiscal front to get better terms. While he may see potential here in overlooked elements of the programme for government, he needs to avoid being accused of presenting something old as something new.

    He might quietly raise the question of burden-sharing with senior bond investors, something promoted with aplomb by some of his ministerial colleagues. Yet there is still no appetite for that in Europe, where leaders felt the heat of an existential threat to the euro only months ago.

    One can certainly sympathise with the Finns and the Germans. But they opted into the Euro without the regulatory safeguards it clearly needs. Turning their back on the problem won’t make it go away.

    From an Irish point of view, all the “Something must be done” and “Down with this sort of thing” and “Careful now” placards won’t work either. “Going forward” or “Going Backward”, “We are where we are”.

  • Mack

    Ireland faces tough choices and has a very serious problem.

    We can either try to solve this with Europe’s help, and let’s be realistic – that doesn’t appear to be forthcoming, at least at the moment. Or by ourselves.

    There is a fair bit of misinformation here. Germany and Finland aren’t being asked to pay for Ireland – in fact Ireland would like to borrow from both at a reasonable rate – but on still profitable for both (and will if suitable help is forthcoming pay it back in full). In addition we would like to impose losses on private creditors to private insituitions (listening to Richard Bruton today it sounds like that will happen in the cases of Anglo and INBS).

    Given hammering dished out to Ms. Merkel and these comments from Finland, I would hope that Mr. Honohan in the Irish Central Bank is instructing his staff to surreptitiously prepare for the reintroduction of the punt…

  • @ Mack

    “I would hope that Mr. Honohan in the Irish Central Bank is instructing his staff to surreptitiously prepare for the reintroduction of the punt…”

    I agree wholeheartedly . . . cigar?