Finland will throw its support behind the bailouts that are necessary to save the 17-nation currency bloc from splintering, while standing firm on its opposition to common bonds, Prime Minister Jyrki Katainen said.
Rescues “are difficult in all countries, Finland is no exception,” Katainen said in an interview in Helsinki yesterday. “We’ve taken part in all bailouts and we will continue to act responsibly. We’re looking for ways that don’t increase joint liability, but we do want to resolve the crisis.”
Finland, which has sided with Germany in its opposition to joint liability, has demanded collateral against emergency loans that don’t give it senior creditor status. Katainen’s government, which has sought to defend the cost of bailouts to voters at home, has insisted that rescue loans come with strict terms such as austerity and burden sharing for bondholders.
Greece, Ireland and Portugal are relying on financial rescues amid surging bond yields, while Spain has requested as much as 100 billion euros ($126 billion) to keep its banking industry afloat. Spain and Italy, the countries currently most vulnerable to contagion from the almost three-year-old crisis, have yet to decide whether to seek sovereign bailouts.
The euro rose 0.7 percent against the dollar to 1.2588 as of 12:51 p.m. in London, its highest since July 4.
Finland’s collateral demands, and its record of complying with the European Union’s 3 percent deficit rule since 1996, have left it the only Aaa rated euro nation at Moody’s Investors Service with a stable outlook. Finns showed their reluctance to continue helping indebted euro peers when they gave the euro-skeptic “The Finns” party 19 percent of the vote in the 2011 election, making it the country’s third-biggest group.
Forty-nine percent of Finns don’t want their government to contribute to more bailouts, according to a Helsingin Sanomat poll this month, up from 39 percent in July. Sixty-three percent say Finland should keep the euro. The poll, conducted by TNS Gallup Oy, had a margin of error of three percentage points.
Finland is working in several ways to end the crisis, Katainen said. Nations could sell bonds backed by assets to help lower borrowing costs, he said.
“We’ve been active in seeking solutions to the Italian and Spanish situations,” Katainen said, referring to talks with his Italian counterpart Mario Monti on how to develop the monetary union. Katainen will also meet Spain’s Prime Minister Mariano Rajoy on Sept. 11, the Spanish government said on Aug. 24.
The European Central Bank is working to design a bond-buying plan that will help countries lower their borrowing costs if they accept economic-reform conditions and if Europe’s bailout fund, the European Financial Stability Facility, buys their debt on the primary market.
ECB Executive Board member Joerg Asmussen said the International Monetary Fund should be involved in setting conditions for countries applying for the bond-buying aid. Katainen declined to comment on the ECB’s plans, citing the bank’s independence and saying it has “acted well.”
Finland sold a new 10-year benchmark bond on Aug. 28 at a yield of 1.625 percent, down from 3.5 percent in February last year. The latest issue attracted bids for more than twice the 4 billion euros sold.
“The high demand reflects confidence in the Finnish economy,” Deputy Director Anu Sammallahti at the Treasury in Helsinki said after the bond was priced. “Investors see Finland as a safe haven.”
The government yesterday refused plans that might force it to shoulder the burden of other countries’ debts, saying it opposes EU proposals to force national governments to share resources set aside for bank bailouts, according to a statement by the Finance Ministry. Even so, other designs, including setting up the funds, are “very useful,” the ministry said.
The government also said it had reached an agreement on a budget that will narrow its deficit to 1 percent of gross domestic product next year as it raises taxes and cuts spending.
“We’re looking for a solution,” Katainen said. “We just don’t accept cutting corners, which pooling liabilities would be.”