Finnish voters may prove as great a threat to the euro region’s retooled bailout plan as German taxpayers.
Support for the anti-euro True Finns party has soared as an April 17 election nears. It’s the fastest-growing movement in the northernmost euro member, with opinion-poll backing to rival the nation’s biggest opposition party. Voters are rallying to its argument that Europe shouldn’t have rescued Greece or Ireland, and Finland should veto more cash for the bailout fund.
“How come they can’t see the euro doesn’t work?” Timo Soini, leader of the True Finns, said in a Feb. 24 phone interview. “If a melon and an apple each wear the same size baseball cap, everyone can see that just doesn’t work.”
The party’s success comes as opposition mounts among Europe’s AAA rated nations to a revamp of aid packages, to be debated at a March 24-25 summit prior to seeking approval from the 17 euro-area parliaments. Portugal’s 10-year yield has climbed to 7.58 percent from 6.93 percent at the start of the month as investors fret that the rescue mechanism won’t be big enough, last long enough or would charge recipients too much.
Europe’s leaders need to strengthen the bailout fund amid speculation that Portugal may need assistance to repay its debts. Greece has been relying on a 110 billion-euro ($151 billion) bailout since May, while Ireland agreed to its 85 billion-euro rescue loan in November. German Chancellor Angela Merkel’s bloc lost a Hamburg regional election on Feb. 20 as voters recoiled at having their taxes pay for Greek overspending.
“Some citizens may feel frustration because of the poor economic policies of the Greeks and the Irish, especially since Finland has kept its finances in good order throughout the difficult times,” Prime Minister Mari Kiviniemi said in an e-mailed reply to questions.
Finland pays 20 basis points more than Germany to borrow for 10 years, the second-smallest yield premium in the euro area after the Netherlands. Greece’s premium is about 870, while Ireland’s is 616. Portugal’s spread has climbed to more than 440, up from 370 at the start of the year.
The European Central Bank has kept its benchmark interest rate at a record-low 1 percent since May 2009 even as growth picks up in Germany and other trade-surplus countries with smaller debt burdens. Inflation in the 17 nations sharing the euro was at a two-year high of 2.3 percent in January, exceeding the Frankfurt-based central bank’s limit, according to data published by the European Union’s statistics office today.
The EU will next month decide whether the European Financial Stability Facility, a rescue fund started in August with 440 billion euros in capital, should be allowed to buy government bonds directly, finance purchases by governments of their own debt, and how much funding should be available.
“We’re very critical,” of the facility, Soini of the True Finns said. “It infringes on national sovereignty on many counts, agreeing on budget deficit goals or pre-approval of budgets.”
His party’s support rose to 16.9 percent in a poll published by broadcaster YLE last week, up from 6.3 percent a year ago. Finland’s three biggest parties, by contrast, have all slid in popularity in polls. The True Finns this month shared 17.9 percent support with the opposition Social Democrats in a Feb. 17 poll by newspaper Helsingin Sanomat. The same poll had Finance Minister Jyrki Katainen’s National Coalition Party at 20.2 percent, and Kiviniemi’s Center Party at 18.2 percent.
“The polls show the True Finns will be the clear winners in the election,” said Sami Borg, director of the Finnish Social Science Data Archive at the University of Tampere. “Their success makes them a force to be reckoned with.”
No Cheaper Funds
The March EU summit will also aim to forge a deal on the permanent European Stability Mechanism that’s due to take effect in July 2013, when the EFSF expires. That discussion may be shaped by the success of efforts to strengthen the EFSF.
Katainen has already signaled his government is opposed to allowing more lenient terms for Ireland, which is requesting a cut in the interest rate it pays for emergency funds.
“There is an understanding in Europe and the euro area that the requirements can’t be eased,” Katainen told Helsinki-based broadcaster YLE on Feb. 25. In a Feb. 19 interview with the same station, he said his government “cannot guarantee that the new parliament will agree” to extend the bailout fund’s scope.
The True Finns want a smaller euro area shared by AAA countries such as Finland, Germany and France. Nations on Europe’s periphery have the “wrong” currency, Soini said.
‘Like a Cake’
Advance voting for the April 17 elections starts April 6. Though one in six Finns supports the True Finns, Soini’s plans to divide the bloc aren’t really feasible, said David Mackie, chief European economist at JPMorgan Chase & Co. in London.
“The way I tend to think about EMU, it’s a bit like if you’ve made a cake: you may not like the cake that you’ve made, but you can’t say I’d like to just go back to my starting ingredients, because you’ve created something new,” Mackie said. “You’ve got a huge amount of financial integration here, which is going to be very disruptive to unravel.”