Debt crisis: Poor accounting in Helsinki
26 August 2011
Finland set a dangerous precedent for Europe by requiring, for purely political reasons, that Greece guarantees the loan to redress its finances.
The disorder created by the guarantees for the Greek loan represents a major change from Finland’s traditional attitude within the Union [Helsinki agreed to participate in the bailout only if Greece supplied financial guarantees]. The confidence accorded to Finland, the compromises it has made, its image as a builder and supporter of the community it helped to build, all of this is undermined.
To envisage the revenge of the other EU countries in the political or economic fields is perhaps far-fetched, but on the international scene, it is important to know how each will interpret the actions of the others. Finland has lost its position of force: its weight is reduced, its image is tarnished and it has lost its ability to negotiate.
When Prime Minister Jyrki Katainen (of the conservative, National Coalition Party) goes to European summits to explain Finland’s goals, he will long be considered as the representative of a country that takes the best and leaves the rest. Finance Minister Jutta Urpilainen (Social Democrat) will be seen as the one who put the interests of her country ahead of those of the Euro Zone as a whole.
Of course, at times, a hard, egotistical line ignoring all other points of view can be defended by a country if it is in behalf of a major national interest. But in this case, the line was chosen solely for short-term political reasons. It was a promise made just to satisfy the people during [last spring’s] legislative election campaign and the formation of the government in order to prevent a victory by the [anti-EU] True Finn Party.
The state of mind of the Finnish ministers during the negotiations with Greece is easy to imagine: reason and justice on one side, politics on the other. In this situation it is possible that obtaining guarantees was, in the end, the best thing that could happen. But it doesn’t correspond to the requirements of unity within the European Union. Europe’s response was to be expected: it doesn’t work.
Less enthusiastic about the loan guarantees, the National Coalition Party can’t easily modify its position because that would ignite relations with the Social Democrats (SDP) and weaken the Prime Minister. Katainen did in fact demand the guarantees, including during a summit.
Now that German Chancellor Angela Merkel has rejected the deal between Helsinki and Athens, the government has time to choose an alternative. Yet it is impossible for Finland to withdraw financial support from Greece because that would open the door to other countries that don’t want to participate for domestic political reasons. It is difficult to back out when that represents a political setback at both the national and the international level.