Is Finland Preparing for Break-Up of Eurozone – or Not?
Erkki Tuomioja, Finland’s foreign minister: “We have to face openly the possibility of a euro-break up”.
Is Finland Preparing for Break-Up of Eurozone – or Not?
Stephen: They say that it’s the little things that make a difference. Here is a relatively small player in the Euro crisis, Finland, possibly playing a major role in the new financial system being strategically parlayed into the mainstream.
First, London’s respected Telegraph came out today with an exclusive interview with Finland’s Foreign Minister, Erkki Tuomioja, saying his country has to “face openly the possibility of a Euro break up”.
Then, with hours, CNBC interviewed Finland’s Minister for European Affairs and Foreign Trade, Alex Stubbs, contradicting his colleague and saying Finland was “100% committed to the Euro”.
My gut tells me this may be the new way things are being reported, as the new financial system is readied – and the public are, too. By having conflicting stories, you float the truth and the non-truth within the same government, so the truth still gets out; but the country saves face with the current powers that be… interesting strategy indeed.
Remember: it will be the little steps that come along that suddenly piece together to become a ‘grand staircase’ of change.
YES: Finland Prepares for Break-Up of Eurozone
By Ambrose Evans-Pritchard, in Helsinki, The Telegraph – August 17, 2102
Finland is preparing for the break-up of the eurozone, the country’s foreign minister warned today.
The Nordic state is battening down the hatches for a full-blown currency crisis as tensions in the eurozone mount and has said it will not tolerate further bail-out creep or fiscal union by stealth.
“We have to face openly the possibility of a euro-break up,” said Erkki Tuomioja, the country’s veteran foreign minister and a member of the Social Democratic Party, one of six that make up the country’s coalition government.
“It is not something that anybody — even the True Finns [eurosceptic party] — are advocating in Finland, let alone the government. But we have to be prepared,” he told The Daily Telegraph.
“Our officials, like everybody else and like every general staff, have some sort of operational plan for any eventuality.”
Mr Tuomioja’s intervention is the bluntest warning to date by a senior eurozone minister. As he discussed the crisis, the minister had a copy of the Economist on his desk. It had a picture of Angela Merkel, the German Chancellor, reading a fictitious report entitled “How to break up the euro”, with a caption: “Tempted, Angela?”
“This is what people are thinking about everywhere,” said Mr Tuomioja. “But there is a consensus that a eurozone break-up would cost more in the short-run or medium-run than managing the crisis.
“But let me add that the break-up of the euro does not mean the end of the European Union. It could make the EU function better,” he said, describing the dash for monetary union in the 1990s as a vaulting political leap in defiance of economic gravity. Finland has emerged as the toughest member of the eurozone’s creditor bloc as it tries to hold together a motley coalition. It has insisted on collateral from both Greece and Spain in exchange for rescue loans.
The coalition government is on thin ice as voters peel away to eurosceptic parties. The True Finns shattered the political order in last year’s election with 19pc support. “Taxpayers here are extremely angry,” said Timo Soini, the True Finn leader.
“There are no rules on how to leave the euro but it is only a matter of time. Either the south or the north will break away because this currency straitjacket is causing misery for millions and destroying Europe’s future.
“It is a total catastrophe. We are going to run out of money the way we are going. But nobody in Europe wants to be first to get out of the euro and take all the blame,” he said.
Like other member states, Finland has a veto that could be used to block any new bail-out measures. However, unlike some states, its parliament would have to approve each future measure of the eurozone rescue, including a full bail-out of Spain.
The issue of euro break-up may come to a head in October as EU-IMF Troika inspectors report back on Greek bail-out compliance. Pleas from Athens for two extra years to stretch out its austerity regime have run into fierce resistance from creditor powers.
“It is up to Greeks whether they want to stay in the euro,” said Mr Tuomioja. “We cannot force Greece out. We can cut off lending and that would lead to a default. Then we could speculate whether that would entail getting out of the euro. Nobody knows if it could be contained,” he said. Mr Tuomioja said Finland would block attempts to strip the European Stability Mechanism (ESM) or bail-out fund of its senior status at the top of the credit ladder, a move that could greatly complicate efforts to lure investors back into Spanish and Italian bonds. “The ESM loans have priority. That is a red line for us. We are very concerned that the rules of the ESM seem to be changing.”
He voiced deep suspicion of plans by a “gang of four” EU insiders — including the European Central Bank’s Mario Draghi — to ensnare member states into some form of fiscal union. “I don’t trust these people,” he said.
Mr Draghi said two weeks ago that the issue of seniority would be “addressed” as part of his twin-pronged plan for the ECB and ESM to buy bonds in concert. A number of EU leaders and officials claimed there had been a deal on the ESM’s seniority status at an EU summit in late June. Finland, Holland, and Germany all deny this.
The warnings on the ESM were echoed by Miapetra Kumpula-Natri, chairman of the Finnish parliament’s Grand Committee on Europe, who said bail-out fatigue is nearing its limit.
“Our law passed this summer says the ESM has the same priority as the IMF. There was a clear understanding on this. Any change would require a new law passed by the whole parliament, and this would be very difficult because the risks would be much higher.”
The issue of EU senior status has become an extremely sensitive one for markets after the ECB and EU creditors refused to share losses from Greece’s debt restructuring, in which pension funds, insurers, and banks lost 75pc.
Critics say the Greek deal set a fatal precedent, triggering further capital flight from Spain and Italy.
Mrs Kumpula-Natri said Finland can be pushed only so far. “There is a feeling on the street that there has to be a limit. I can’t say whether it is 10pc of GDP, or what. It’s not written. But it is obvious that a small country can’t help big countries eternally.”
Finland 100% Committed to the Euro: Finnish Euro Minister
By Matt Clinch, special to CNBC.com – August 17, 2012
Finland is “100 percent” committed to keeping the euro intact and is not looking at any “doomsday scenarios”, Alex Stubb the country’s minister for European affairs and foreign trade told CNBC Friday.
His remarks come after Finnish foreign minister, Erkki Tuomioja, said European leaders must prepare for a euro zone breakup in an interview with the UK’s Daily Telegraph newspaper.
“Scenario number one for the Finnish government is that the euro will continue,” Stubb, who is also the former foreign minister, told CNBC.
“We’ll have a stronger euro, a more stable euro and we’ll find tighter rules for the future so that these types of crises never happen again.”
He disagreed with comments made by Tuomioja who said Finnish officials have prepared for the breakup of the euro with an “operational plan for any eventuality.”
AAA-rated Finland has a veto that could be used to block new bailout measures. It has also negotiated collateral requirements when the ECB (European Central Bank) lends to Greece and Spain, which makes sure Finland recovers some of its loan funds.
“I don’t think we should be playing with fire here and suggesting the breakup of the euro or detaching some members from the euro zone,” Stubb said.
“I fundamentally disagreement with the statements that the breakup of the euro would not necessarily mean the breakup of the EU,” he said, in contrast to Tuomioja who suggested a breakup could make the EU stronger.
Stubb confirmed that Finland is trying its utmost to keep all countries in the euro zone and with the single currency, including Greece.
“I get the feeling that people think that the euro is some kind of an extraterrestrial currency, whereby it has some kind of seventeen strange member states in it,” he said.
“No, it is our currency and the aim is to make it the currency of all EU countries, save those who have an opt out.”
He argued patience in his government is not running out, explaining that fifteen years ago the northern member states, including Germany, had reached a challenging economic situation and that cycle is now happening to some of the southern states.
“I think the alternative course, of not helping out, not giving loans or guarantees, would be way too high,” he said.
He conceded that there is a lack of confidence among member states that needs to be addressed if they are too move forward.
“There is a lack of trust among members states right now, a lack of confidence. We need to rebuild that trust and in order to rebuild that trust,” he said.
“We need tighter rules for the future and I think the collateral requirements, which of course are a footnote in this whole game, is part and parcel of it.”
See the original CNBC report here: http://video.cnbc.com/gallery/?video=3000109802