Finland Eases Stance on ESM Bank Aid
Finnish Prime Minister Jyrki Katainen said any decision on using Europe’s rescue fund to recapitalize banks directly will be on a case-by-case basis, signaling Ireland and Spain may yet be able to tap the facility.
The comments follow remarks by German Chancellor Angela Merkel and French President Francois Hollande, who have sought to calm concern sparked by the German leader’s statements last week ruling out retroactive bank recapitalizations by the European Stability Mechanism.
“The ESM can be used in direct recapitalizations when the supervisor is up and running, fully functional and naturally when other conditionality is fulfilled,” Katainen said in an interview in Helsinki yesterday. Asked whether that excludes funds being made available to Spain and Ireland, Katainen said leaders meeting in Brussels last week “didn’t go over any countries. That will be done case by case. During next year when it’s fully functional, we can consider whether to use it.”
Katainen has spent much of the year trying to strike a conciliatory tone at crisis summits after Finland’s insistence on collateral -- pushed by his finance minister Jutta Urpilainen -- frayed relations with other euro-zone governments. Katainen, who heads a six-party coalition, said last week’s summit in Brussels was characterized by more unity than seen at previous talks, marking a step forward in crisis resolution efforts.
“We have every reason to be happy about what was discussed and decided at the summit,” Katainen said. “We have no reservations.”
Germany has indicated a renewed determination among Europe’s leaders to keep the euro zone intact and provide the support needed to prevent the crisis spreading.
Merkel said Oct. 21 that Ireland is a “special case,” comments that were echoed by Hollande on Oct. 22.
Confusion over how the ESM will be used flared on Sept. 25 after the finance ministers of Germany, the Netherlands and Finland issued a statement in which they said “legacy assets” would be excluded from the bailout facility. Wolfgang Schaeuble, Urpilainen and Jan Kees de Jager didn’t expand on what constitutes a legacy asset.
Katainen is leaving the door open to which countries can use the ESM after his finance minister, who heads Finland’s Social Democrats, said Sept. 27 the fund “shouldn’t be used to recapitalize banks to deal with existing and old problems.”
Katainen, who heads Finland’s pro-Europe National Coalition party, said officials will probably have completed the “legal framework by the end of the year” for a single bank supervisor. “The operationalization into a fully functional entity” will be finalized “during next year,” he said.
Europe’s plans to create a banking union dominated talks at the bloc’s 20th crisis-fighting summit on Oct. 18-19. Nations agreed to target Jan. 1 for making the European Central Bank Europe’s main financial supervisor, raising the prospect of direct aid to Spain’s banks during 2013.
The system will be phased in and could cover all 6,000 euro-area banks by Jan. 1, 2014. Leaders sidestepped questions of when and how Spain might secure further assistance. Instead, there was a pledge to ensure that the single supervisor won’t put countries outside the euro area at a disadvantage.
Finland must take part in crisis-fighting for its “own sake,” Katainen said in an election debate last night ahead of the country’s Oct. 28 municipal vote. He reiterated Finland’s opposition to pooling liability for sovereign debt.
“The Finnish welfare society is under severe threat,” he said. “No matter how much it irritates me to clean up the mess other countries have made, it’s still better to fix the European economy to ensure we fare better.”
To contact the reporter on this story: Kati Pohjanpalo in Helsinki at firstname.lastname@example.org
To contact the editor responsible for this story: Tasneem Brogger at email@example.com