Urpilainen: Finland needs to help capitalise Spain’s banks
Centre and Finns Party oppose Spain bailout
Minister of Finance Jutta Urpilainen (SDP) says that the struggling banks of Spain need to be helped with capital injections lest the financial crisis spread throughout Europe.
Urpilainen, who was taking part in a seminar in Kokkola on Saturday, said that it is important from Finland’s point of view to prevent a repetition of the financial crisis of 2008, when the Finnish economy shrank by eight per cent.
She would not speculate on how large Finland’s share of the bailout would be, because the amount of capital that the Spanish banks ultimately need is not known. She expects the assessment of the situation to take several weeks.
Under the government’s policy programme Finland would need to get guarantees for any bailout loans it provides through the European Financial Stability Facility (EFSF). However, the guarantee requirement does not technically apply to other forms of support.
The EFSF was set up as a temporary corporation to borrow money from the market on the strength of guarantees granted by the eurozone countries. The facility has already been used for helping Greece, Portugal, and Ireland.
Finland has committed itself to support EFSF capitalisation to the tune of EUR 13.97 billion.
Greece agreed to Finnish demands for collateral last year for its share of the Greek bailout after difficult negotiations. Now Urpilainen says that the agreement of the other euro countries to Finland’s guarantees “is the only possibility”.
If the loan is granted through the new European Stability Mechanism (ESM), which will be launched in July, Finland will not demand any guarantees.
Spain would prefer not to get its bailouts through the EFSF because of the harsh conditions set by the EU and the IMF.
Finland’s opposition Centre Party and Finns Party oppose participation in a bailout of Spain’s banks.
“Finland must not give Spain a single penny, nor does Finland have to”, said Finns Party chairman Timo Soini on Saturday, commenting on reports of a possible support package for Spain.
Soini emphasises that the government cannot take part in a Spanish support package without collateral if it wants to adhere to its own policy programme.
“If full collateral from Spain is not forthcoming, the old parties, the Eurocrats and the fellow-traveller media will have been caught in a lie”, Soini says.
The Centre Party’s new chairman Juha Sipilä also takes a suspicious view of helping Spain.
“Large countries cannot be helped collectively. This is the policy line of the Centre Party”, Sipilä said.
He added that Spain’s situation is critical, but in spite of that, he feels that serious thought needs to be given to whether or not the eurozone countries should continue to collectively support the countries in crisis. “Couldn’t the same sum of money be found in Spain?” Sipilä asks.
Soini commented on the scheduling of the measures, suspecting that the eurozone countries will try to postpone a decision on the Spanish bailout until after the upcoming elections in Greece.
Soini says that it is “childish” to think that the euro crisis could be solved through the bailout packages, and that the only working solution would be the dismantling of the eurozone.
“If the solution is a permanent bank union, it would mean that Finland would start to permanently provide for the countries of the south.”
Previously in HS International Edition:
Parliament passed nearly EUR 14 billion in loan guarantees (29.9.2011)
Lipponen defends Finnish demands for collateral for Greek loan guarantees (21.9.2011)
Urpilainen wants higher “firewall” to protect against debt crisis (28.3.2012)
Finnish Government is to correct its error in EFSF proposal (14.11.2011)
Finnish loan guarantee liability could double (19.10.2011)