Finland will not voluntarily leave the euro

COLUMN

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By Unto Hämäläinen
     
      The Agence France Presse news bureau reported erroneously in early July that Finland was making preparations to leave the euro.
      The news item was based on an interview given by Minister of Finance Jutta Urpilainen (SDP) to the financial journal Kauppalehti. AFP corrected the mistake quickly: in her interview, Urpilainen was not by any means speaking about a Finnish exit from the euro.
      The erroneous item managed to cause a good deal of trouble, and further eroded public confidence in the future of the euro.
     
I followed the furore during a holiday trip abroad. What surprised me most was that the international media was so uncritical in reporting the news.
      It simply could not be true. It sounded like a pure canard from the outset.
      Now, a month later, I am no longer quite as surprised that the news was taken so seriously around the world.
     
Attitudes toward Finland have changed, especially in the European media: Anything can be expected of the Finns. We are seen to be stubborn in the pursuit of our own self-interest. Demanding collateral and swaggering about our triple-A rated economy have yielded results.
      The domestic debate about leaving the euro has intensified and deepened in the late summer. There have even been studies and calculations on how many billions a withdrawal would cost and what other economic consequences there would be.
      Leaving the euro has become a real option, as if by stealth.
     
During my first week back at work I have tried to ascertain if there is any basis to talk about leaving the euro. There is not.
      I do not believe that Finland will voluntarily leave the euro.
      Nor do I believe that a withdrawal would even be seriously considered by our political leaders. This is not to say that the situation cannot change, if the whole system collapses.
     
It is all about politics. The only way that the withdrawal process from the euro could be launched would be if the government were to make an initiative on the matter. A decision would be made by Parliament, because Parliament decided to put Finland into the euro.
      There is no support within the government for leaving the euro. The two main parties, the National Coalition Party and the Social Democratic Party, hold the key position, and there is not a single minister, MP, or other influential politician in either party that would be in favour of such a move.
      The parties insist, as if with one voice, that the benefits of the euro outweigh the drawbacks. A withdrawal would be a daring leap into the unknown, it is believed.
     
It is also good to keep in mind the human side. Finland joined the euro in the spring of 1998 at the initiative of the government of Prime Minister Paavo Lipponen.
      Lipponen’s government comprised his own Social Democratic Party, the National Coalition Party, the Greens and the Left Alliance – all of which are partners in the present coalition as well. It would not seem credible for these parties to suddenly turn their coats.
      It would be especially difficult for the three key ministers. Prime Minister Jyrki Katainen (Nat. Coalition Party), 40, Minister of Finance Jutta Urpilainen (SDP), 37, and Minister for European Affairs and Foreign Trade Alexander Stubb (Nat. Coalition Party), 44, are all part of the generation who lived their liveliest youth in the 1990s. It was a time of a euro frenzy, and Katainen, Urpilainen, and Stubb were all caught up in it.
     
The three were born into a Finland which had a treaty of Friendship, Cooperation, and Mutual Assistance with the Soviet Union. They were in their 20s when they got a chance to enjoy the incredible feeling of liberation that was offered by Finland’s joining the EU and the euro. Everything seemed so blissful.
      The euro crisis will have caused the most serious euphoria to fade away, but they are not about to turn their coats – at least not yet. For Finland to withdraw from the euro would cause their dreams to collapse. In addition to everything else they would have to admit to being wrong. That is something that a politician will do only under extreme duress.
      It would be all the more difficult for decision-makers of the older generation, who were involved in decision-making already in the 1990s.
     
How would a flip-flop feel to European Commission Vice President Olli Rehn or Bank of Finland Governor Erkki Liikanen?
      When Finland joined the EU, Rehn was the most enthusiastic supporter of membership in the Centre Party. Liikanen was Finland’s Ambassador to the EU in Brussels.
      When Finland joined the euro Liikanen was a European Commissioner and Rehn was his closest assistant.
     
And what would President Sauli Niinistö say? He was the Minister of Finance in the Lipponen government when Finland joined the euro. Would it be possible for such a miracle to occur that Niinistö would exhibit self-criticism?
      There is only one politician among the top-level decision-makers who could say "I told you so" without embarassment.
      Minister for Foreign Affairs Erkki Tuomioja (SDP) voted in favour of both EU and euro membership in the 1990s, but had misgivings about both for a long time, and was among the last Social Democrats to come out in favour. However, Tuomioja has served as Foreign Minister for such a long time in the euro period that he would hardly be a credible euro-critic any more.
     
So Katainen’s government could not be the originator of a move to leave the euro. Would the opposition be capable of launching such a project?
      The Centre Party and the Finns Party do not have a common stand on the euro. Timo Soini and the rest of his Finns Party are calling for a withdrawal, but Juha Sipilä, the new chairman of the Centre Party, is not in favour of it.
      Naturally the opposition would be stronger if it were to speak with one voice. This would require the other party to turn its coat. Soini could not change his mind, but Sipilä might become a supporter of a withdrawal before the next parliamentary election. One could come to this conclusion from the fact that he called for the formation of a four-member working group to assess the advantages and disadvantages of the euro.
     
Setting up a working group is usually the first signal of a change of views, or more accurately, of a return to an earlier point of view. The Centre Party was once against joining the euro. Since then the Centre has been a supporter of the euro until this day.
      Of the members of Sipilä’s working group, Anneli Jäätteenmäki and Mari Kiviniemi have served as Prime Minister, and Mauri Pekkarinen has served as Minister of Economic Affairs during the euro period.
      Pekkarinen is the most influential figure in the working group, as he led a similar team already in 1997 when the Centre Party came out against joining the euro. Therefore, Pekkarinen could be sorely tempted to support a withdrawal from the euro.
     
Another factor speaking in favour of such a move would be political tactics. The Centre Party is competing for the same votes as the Finns Party. According to a poll taken by the Finnish Broadcasting Company (YLE), support for the Centre Party has fallen slightly during the summer, and that of the Finns Party has grown slightly.
      The Centre Party’s new leaders also know that Soini is trying to drive a wedge into the party. There are already a few in the Centre’s parliamentary group who are in favour of leaving.
      Esko Kiviranta from the southwest of Finland would seem to have been the first Centre Party MP to have recommended this. "Withdrawing from the euro would break the amassing of liability and minimise damage", he wrote in the letters to the editor of Helsingin Sanomat. Many influential Centre Party figures feel the same way.
     
The Centre Party leadership will also have to weigh the other side of the matter. What if the party were to seek to join the government after the next parliamentary elections? Would the Centre have to stick to its demand to leave the euro even at the risk of having its period in opposition extended?
      For the Centre Party another term in opposition would be the worst possible horror scenario.
     
Helsingin Sanomat / First published in print 12.8.2012


Previously in HS International Edition:
  Finance Ministry’s Sailas criticises "naivety" of euro policy (10.8.2012)
  British study suggests keeping eurozone intact is in Finland’s interests (6.8.2012)
  Estimate: Greek euro-exodus would cost Finland EUR 5.4 billion (1.8.2012)

UNTO HÄMÄLÄINEN / Helsingin Sanomat
unto.hamalainen@hs.fi