April 18th, 2011
06:48 PM GMT
As a rule, Finnish elections don't tend to generate much international excitement – but last night’s election victory by the eurosceptic party True Finns has turned that rule on its head.
A normally stolid member of the eurozone with billions of dollars of exposure to bailout funds and loan facilities, the new-look Finland could potentially scupper any further bailouts and plunge the euro project into a new crisis.
Here's why: Bailouts - like the EU bailout of Portugal, expected in June - require the agreement of all 17 members. And Finland, unlike its eurozone partners, has to put all requests for bailouts to a majority vote in parliament.
That’s very bad news for Portugal, which just last month became the third eurozone member to ask the EU and IMF for a bailout.
I'm told senior EU officials had already been drawing up contingency plans in the event of a eurosceptic result in Finland - but it seems to me there’s little they can do given that all such decisions require unanimous support.
For a small country of just 5.5 million people, Finland has significant exposure: liabilities of $12.7 billion in loan guarantees to Eurozone bail-out funds and contributions of $2.44 billion a year to the EU budget.
The Finnish results come on the day officials at the IMF, European Commission and ECB begin talks with Portugal to set the terms of its bailout. They’re meeting the finance minister in the capital Lisbon after a fact-finding mission last week.
But could Finland’s election result challenge the very existence of the bailout structure. And is it really working anyway?
On Friday, Ireland’s government was downgraded to just above junk status by Moodys. This morning its banks were downgraded too. It raises the question of whether these bailouts –- which are now by no means guaranteed –- are really the answer to Europe’s debt crisis.
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