Solution in sight to European Stability Mechanism dispute

Proposal to go before Parliament Friday

Jutta Urpilainen

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Reuters news agency reports that changes are being made to a draft treaty on the proposed European Stability Mechanism. The ESM is to be a permanent arrangement, and will replace the temporary European Financial Stability Facility (EFSF).
      The changes to the ESM voting system are to address concerns expressed by Finland, and make it possible for Finland to accept the proposal.
      "Finland proposed that when support is granted under an emergency procedure, we would create some kind of financial provisioning in the books of the ESM for this support," said a eurozone official quoted by Reuters.
      Helsingin Sanomat has learned that part of the proposed EUR 80 billion in initial capital should be set aside for use in the emergency procedure.
     
The move means that it would not be possible to decide on raising the capital of the ESM without the unanimous consent of the eurozone countries.
      The maximum capital of the ESM is EUR 700 billion, and Finland’s share is EUR 12.6 billion.
     
The governments of the eurozone countries agreed on the emergency procedure when they decided on the establishment of the ESM in December.
      The decision takes into account situations in which quick decisions are needed from the ESM to secure the stability of the economy and financial markets of the eurozone.
      To this end an emergency procedure has been added to the ESM treaty. The procedure would be implemented if the European Commission and the central banks of Europe find it necessary.
     
In the emergency procedure decisions for financing and for raising capital can be made by a qualified majority of 85 per cent. This would give three countries, Germany, France, and Italy, a veto over such decisions.
      In normal procedure a country of the eurozone could ask for help from the ESM in financing.
      After that, the Internaional Monetary Fund would make an assessment on the country’s debt-servicing capability, and together with the European Commission, it would decide on economic structural changes, which would be a condition for providing the financing.
     
In December the Grand Committee and the Constitutional Law Committee of the Finnish Parliament noted that it was the view of the Parliament that the proposed 85 per cent qualified majority rule would excessively limit Finland’s right to self-determination.
      Under the Finnish constitution, Parliament needs to have detailed advance information on commitments concerning the use of state funding.
     
Minister of Finance Jutta Urpilainen (SDP) will put forward the view of the government on the proposed changes to the treaty when she addresses the Grand Committee on Friday. Helsingin Sanomat was not able to reach Urpilainen for comment on Wednesday.
      On Monday Urpilainen will attend a meeting of eurozone ministers of finance, where she will announce whether or not Finland accepts the agreement.
     
Possible Finnish rejection of the deal would probably not affect the establishment of the ESM.
      The treaty takes effect when 90 per cent of the initial capital is paid. Finland’s share is 1.8 per cent.


Previously in HS International Edition:
  Finland sticks to consensus demand at euro summit (9.12.2011)
  Government and opposition agree: no more Finnish guarantees to EFSF (18.1.2012)
  PM: Finland needs to be part of ESM (12.12.2011)

Links:
  European Stability Mechanism (Wikipedia)

Helsingin Sanomat