April 18th, 2011
06:48 PM GMT
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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.

soundoff (10 Responses)
  1. Spock_rhp, Miami, FL

    Bailing out without significant restructuring is hopeless. What Greece, Portugal, and Ireland need is to either devalue their currency [which euro membership prohibits], or for every worker's wage and all transfer payments in each of the entire countries to be reduced by 15 to 30 percent.

    This is exactly the medicine that Iceland took [although their devaluation was more like 50 percent] and economic growth in Iceland has already resumed.

    The remainder of the required restructuring is to exchange debt for equity. Since 'equity' in a country isn't a real prospect, what is needed is the equivalent of a fire sale on real assets in the three countries. Indebted properties and companies owned by the government would be sold at auction, with government issued euro bonds as payment in full. [Ireland, for example, effectively owns all five of the Irish banks and all of the properties they have foreclosed on, or will foreclose on].

    April 18, 2011 at 11:45 pm |
  2. beaujam90

    Finland had become the most racist country on Earth.

    April 19, 2011 at 3:55 am |
  3. Mullet

    Finns learned the hard way in the eighties about boosting economic growth with massive loans. As the end result, the early nineties saw a huge devaluation, mass unemployment, record amounts of foreclosures and bailouts of Finnish banks. This caused painful budget cuts from all aspects – as they said at the time, the cheese grater model. Some of the cuts were rather painful, and there is evidence that the nation is currently seeing the effects of e.g. decreased funds in youth counseling.

    At that time, the nation had to pay its own bailout. It should not be hard to see why paying for the mistakes of others does not fit into the sense of justice of a lot of Finns.

    April 19, 2011 at 11:04 am |
  4. Mukku

    beaujam90: Please read again your 6th grade schoolbooks. You just confound Finland with Florida and Alabama. It was NOT Finland that brought black slaves from Africa…

    April 23, 2011 at 3:06 am |
  5. Thomas

    beaujam90, most idiotic comment ever.

    Go Finns!

    April 24, 2011 at 2:37 pm |
  6. Aleksi

    This should prove interesting. I'm sure that Finland will go through with it anyway. Even the True Finns party is divided in opinion. Enjoy the political show everyone!

    beaujam90: The lack of economic support is hard to right off as racist. Did you know, Tsarist Russia abolished serfdom before the US abolished slavery? Interesting, eh.

    April 27, 2011 at 3:52 pm |
  7. John Carton

    Welcome to Finland, this is how True Finns behave http://www.youtube.com/watch?v=LMMakFNTbB4

    April 28, 2011 at 12:18 am |
  8. Honosoomi

    May 9, 2011 at 2:29 pm |
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