The leader of Finland’s euro-skeptic True Finns, Timo Soini, backtracked on signals he may be willing to discuss a rescue plan for Portugal amid signs his party won’t compromise on its opposition to European bailouts.
“We can’t vote for this and we won’t,” Soini said yesterday in an interview in Helsinki after a presentation of the party’s responses to questions from Finance Minister Jyrki Katainen, who is leading government talks after his National Coalition won the most votes in the April 17 election.
The True Finns, which became Finland’s third-largest party last month, has taken government talks “seriously” and still hopes to be part of a ruling coalition once differences over Portugal’s bailout have been set aside, Soini said at yesterday’s press briefing. The Social Democrats, Finland’s second-biggest party after the election, signaled yesterday it may agree to a bailout while the opposition Green Party reiterated its support for Europe’s rescue measures.
“News flow from other parties in Finland suggests that there will be sufficient support in parliament for Portugal’s package, which is on balance positive,” said Martin Blum, co-head of asset management at Ithuba Capital AG in Vienna. “Also, it’s not clear what the ultimate government in Finland will look like, with the True Finns’ stance on Europe’s monetary union suggesting a diminishing chance for them to be in the government.”
Katainen pledged in his campaign not to form government with parties opposed to bailout measures. He is due to provide an update on the progress of coalition talks later today.
“If Finland can find a majority that can push this through and a government is formed after that, then that will be a different situation,” Soini said in the interview. His party would have a “clear conscience” in such a scenario, he said.
The spread between Portuguese two-year bonds and German bunds of the same maturity narrowed nine basis points to 1,013 today. The 10-year spread was little changed at 639. A basis point is 0.01 percentage point. Finland’s 10-year debt yields 27 basis points more than bunds, the second-smallest spread in the euro region after Dutch bonds.
“Portugal’s spreads will tighten a bit today,” said Blum.
Soini on April 30 told Finnish broadcaster YLE that he would be open to negotiations on bailing out Portugal, which last month became the third euro member to seek aid after Greece and Ireland. The True Finns’ second in command, party secretary Ossi Sandvik, told Bloomberg last week compromise is “certain,” signaling it may accept a Portuguese rescue in exchange for agreements on job creation.
Finns are split in their view on bailouts, according to a TNS Gallup Oy survey published today by Helsingin Sanomat. Thirty-eight percent back financial aid, 36 percent are opposed and a quarter undecided. The poll had a margin of error of about 3 percentage points.
Soini’s shift shows he’s struggling to persuade his party members and voters to accept any compromise now that government talks have started, according to Ville Pitkaenen, a political scientist at the University of Turku.
“This underscores the cross currents within the True Finns. Soini has to listen to his party and take their views into account, he can’t push forward alone,” Pitkaenen said by phone yesterday. “Even if he were ready to agree on some compromise on the Portugal bailout, he may not get his party to agree.”
Support for the True Finns rose by almost 15 percentage points to 19 percent in last month’s election, after Soini promised to prevent taxpayer funds contributing to more bailouts. Katainen’s pro-Europe National Coalition won 20.4 percent and the Social Democrats had 19.1 percent support.
“We will now see how big a hindrance” the True Finns’ stance on European policy “is to government talks,” Soini said at the press conference. “I hope we’ll get a majority government when this Portugal question has been resolved. That may not be within the next two days, but within a month maybe.”
It’s up to Katainen to decide whether the True Finns can join government, he said.
Katainen will meet representatives from all parties today, starting with his own at 9 a.m. local time, to discuss their responses to his questions on Finland’s economy, foreign policy and European economic issues.
The Social Democrats yesterday said Finland’s next government needs to be “active” in helping to stabilize Europe’s economy and in preventing future crises. The party also reiterated demands that investors share losses and wants banks to raise capital requirements to guard against future losses. The Green Party said yesterday it will continue to back bailouts.
Soini said his party can’t support the Portuguese bailout, the permanent stability mechanism or increasing Finland’s payments to the temporary rescue vehicle, while signaling he may yet join a government that backs a rescue.
“The True Finns statement was exceptionally vague and doesn’t make it any easier to form a government,” Sami Borg, director of the Finnish Social Science Data Archive at the University of Tampere, said by phone. “Soini will have to persuade his flock, but the pressure to keep the campaign promises is still there. The next move is Katainen’s.”
European leaders need to agree the details of how to bring the region’s 440 billion-euro ($651 billion) rescue facility to its full capacity, while negotiating terms of a loan to Portugal. The country has a 5 billion-euro bond repayment due on June 15.
Officials from the International Monetary Fund, European Commission and European Central Bank have been in Lisbon to draw up a rescue package that the European Commission has estimated at about 80 billion euros.
Europe’s permanent rescue plan “is a step toward federation” that “doesn’t work,” Soini said, predicting that Greece will need to restructure its debts and that “others” in the euro region will follow.