Finland election could derail bailouts in Europe

By Pekka Sakki

A huge surge in support for a Finnish nationalist party that opposes eurozone bailouts is complicating Europe’s plans to rescue Portugal and other debt-ridden economies.

The sharp rise of the True Finns in Sunday’s nation election represents a watershed moment in Finnish politics, which have traditionally been dominated by the Social Democrats, the Center Party and the conservative National Coalition party.

It might also be a watershed moment for Europe’s bailout negotiations. A bailout rescue without Finland would severely undermine the eurozone’s pledge to do everything to defend the common currency and could create panic on financial markets.

Finland’s pro-European conservative party won Sunday’s election but its allies lost support so the Cabinet has to resign. Conservative leader Jyrki Katainen must now try to form a new coalition government either with the Social Democrats, who finished second, or the nationalist True Finns, who surged to third place.

Both those parties are skeptical of how Europe is handling its debt crisis, which has led to rescue packages for Greece and Ireland and another one being negotiated for Portugal.

True Finns leader Timo Soini, the biggest individual vote-winner in the election, suggested Monday that Finland should opt out of future bailout packages, decisions that require unanimity in the 17-member eurozone.

“Our money must not be splashed out on mechanisms that don’t work,” Soini told Finnish YLE radio.

“We won’t be dictating conditions for the rest of Europe but we will maintain the right for Finland to decide for itself on money matters,” he said. “Finnish cows must be milked in Finland and we shouldn’t send their milk for charity outside the borders of this country.”

If Finland votes against a Portuguese bailout program, the European Financial Stability Facility would be paralyzed; if it merely abstains, the remaining eurozone countries could in theory go ahead with a bailout without Finnish contributions.

However, that means other countries would have to make up for the lost guarantees, a scenario that would run into opposition in other well-off states like Germany, the Netherlands or Austria, where sentiment against the bailouts also runs high.

Germany warned that it expects the incoming Finnish government to respect any European treaties and euro deals agreed to by former Finnish governments.

Pia Ahrenkilde Hansen, a spokeswoman for the European Commission, said the EU’s executive branch did not expect a delay in the bailout of Portugal — which was due to be signed off by eurozone finance ministers in mid-May — because of the Finnish election results.

“The Finnish government has yet to be formed,” she said. “Nothing as far as we are concerned has changed.”

Chantal Hughes, another Commission spokeswoman, said the Commission was not considering a bailout package for Portugal without the aid of Finland.

Finland has pledged about —8 billion ($11.5 billion) in guarantees of a total —440 billion ($634 billion) in the eurozone’s main bailout fund. But those likely will increase significantly as the currency union completes a promised boost of the fund’s lending capacity.

Katainen’s conservative National Coalition Party won 20 percent of Sunday’s vote, giving it 44 seats in the 200-member Parliament, two more than the Social Democrats. The True Finns soared from six to 39 seats in preliminary results, while the Center Party lost 15 seats and said it will go into opposition.

“This is a historic change,” Soini said. “We have caused a rumble.”

In an editorial Monday, Finland’s leading daily Helsingin Sanomat said the new government would “most likely” be formed around the National Coalition and the Social Democrats. However, Mikael Jungner of the Social Democrats said it would be difficult to ignore the True Finns in coalition talks because of their massive gains.
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