Finnish government sees no alternative to Greek aid package
Per capita contribution to loan EUR 300
The Finnish government is proposing to Parliament a supplementary budget of EUR 1.6 billion, with which Finland is to pay its share of the loan to help rescue Greece from its current financial crisis.
The sum amounts to EUR 300 for each individual Finn.
Parliamentary debate on the government’s second supplementary budget begins on Tuesday, and the government hopes to push it through as quickly as possible.
The ministers of finance of the euro countries and the International Monetary Fund agreed on Sunday that Greece would be provided with EUR 110 billion in loans over the next three years.
“If there were better ways than this, we would certainly have used them”, lamented Prime Minister Matti Vanhanen (Centre) in a press conference on Monday.
“In this way we minimise the risks that result from the unfortunate handling of the Greek economy”, he said.
According to Vanhanen, the government’s economic calculations indicate that a one percentage-point rise in interest rates would end up costing Finland much more than the loan package.
Minister of Finance Jyrki Katainen (Nat. Coalition Party) sharply criticised the Greek government for distorting economic figures for years.
Katainen insisted that the government had thoroughly assessed what is in the interest of the Finnish taxpayer.
The concern is that if Greece were to become insolvent, it would sharply increase the risk of a new recession in Europe.
“It was either a loan or a recession”, Katainen said, quoting a Finance Ministry official.
Katainen said that in the negotiations for the loan, Finland was among those countries taking the toughest line, and that Finland’s desires are being implemented.
Katainen added that not all of the money in the loan package is to be used, and the aim of the large package is to bring calm to financial markets. He also admitted that Finland has no guarantees that it will get back all of the money that it is lending Greece.
Neither Katainen nor Vanhanen wanted to ponder why EU countries such as the UK and Sweden, which are not part of the Eurozone, are not taking part in the bailout effort.
Katainen says that a legislative change is being proposed in the EU that would give member states the right to inspect economic information of another country if there is suspicion of wrongdoing.
Finland’s share of the package is nearly EUR 1.5 billion.
The supplementary budget includes another EUR 100 million in case some euro country were to withdraw from the effort.
Katainen says that such a move would be possible only with the consent of all Eurozone countries.
A precondition for this would be if the country would risk falling into a situation that is similar to or worse than that of Greece.
Meanwhile, Bank of Finland Governor Erkki Liikanen believes that the risk linked with the loan that Finland is offering Greece is small.
In a television interview on Tuesday morning Liikanen said that Greece would be “fairly sure” to pay the money back. He also pointed out that it is possible to stop the payment of the loans to Greece if the country fails to implement the austerity measures that are expected of it.
Liikanen said that the first two years of the three-year programme will be the most difficult for Greece as it cuts back on its public finances. However, he expects structural changes to bring new opportunities for growth.
Previously in HS International Edition:
Greek bailout sparks criticism in Finland (3.5.2010)
Finland wants Greece to pay adequate interest on any emergency loans (26.3.2010)
Rehn: Eurozone countries must decide on Greece aid this week (24.3.2010)