Government and opposition agree: no more Finnish guarantees to EFSF

print this

Finland does not plan to offer any more guarantees to the temporary European Financial Stability Facility (EFSF) in spite of the reduction in the EFSF’s credit rating.
      European Central Bank President Mario Draghi said on Monday that countries such as Finland, who have retained their highest AAA rating put out by Standard & Poors, should contribute more to strengthen the EFSF.
     
Minister of Finance Jutta Urpilainen (SDP) said on Tuesday that Finland will not pay more into the crisis fund. Finland’s contribution to EFSF’s EUR 440 billion in guarantees is EUR 14 billion.
      “The starting point has been that this capacity that is now in the temporary mechanism, the EFSF, will not be enough. The situation has changed: the permanent European Stability Mechanism (ESM) will take effect in the summer, and it will bring new capacity and a possibility to support the new crisis countries”, Urpilainen said.
     
On Monday the credit rating agency Standard & Poors downgraded the rating of the EFSF from AAA to AA+.
      The drop in the credit rating stemmed from the view that there are not enough AAA-rated countries backing up the EFSF.
      “The euro needs to be defended, but not under just any conditions. An important principle is that each country answers for its own economy and its own debts, and this principle needs to be adhered to”, Urpilainen says.
     
Finland’s political opposition is in agreement with the government on the matter. Both Centre Party chairwoman Mari Kiviniemi and Finns Party chairman Timo Soini reject increasing Finland’s share in the crisis funds.
      Kiviniemi said that France and Austria have made a mess of things, which led to their lower credit rating. “Other countries should not pay for it.
     
Germany has also rejected any increase in guarantees to the EFSF. France has also come out against pumping more money into the temporary mechanism.
      A lowered credit rating means that a country, or in this case, the EFSF, is not seen as reliable a credit risk as it used to be.
     
Markets on Tuesday did not react much to the reduction of the EFSF’s credit rating. Share prices actually went up on both Asian and European bourses.
      Spain, which faces serious economic difficulties, is getting new credit at a considerably lower interest rate than before.


Previously in HS International Edition:
  Finland retains S&P AAA rating (16.1.2012)
  Rehn: Financial crisis contaminates core of eurozone (25.11.2011)

See also:
  What will happen to the euro? (2.12.2011)

Helsingin Sanomat