Friday

18th Aug 2017

Finland threatens summit deal over bailout fund

Finland is rejecting a just-agreed deal on letting the eurozone's permanent bailout fund (ESM) buy government bonds on the open market, a change meant to lower Italy and Spain's borrowing costs.

Markets' post-summit euphoria was dealt a blow on Monday (2 July) after a senior Finnish official briefed journalists in Helsinki about the government's position.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • Finnish Prime Minister Jyrki Katainen - under fire at home for signing up to the summit deal (Photo: consilium.europa.eu)

"Finland finds it an inefficient way to stabilise markets," the source was quoted as saying by several news wires.

A report outlining the Finnish government's position delivered to the parliament on Monday said: "Due to intervention of Finland and, among others, the Netherlands, the possibility of ESM operations in the secondary markets was blocked."

Finnish Prime Minister Jyrki Katainen came under fire from opposition MPs claiming that he had overstepped his mandate in agreeing to the deal struck at last week's summit in Brussels. Under the agreement, the ESM may eventually recapitalise banks directly and buy up bonds.

"The information war has been frenzied and they could have got the wrong idea," Katainen said. He noted that all these novelties would not come into force before a single supervisory authority for eurozone banks is established (a German condition).

"In that case, it will be possible, if there is unanimous agreement, to capitalize banks directly. And in exchange, owners would lose their money and the (bailout fund) would gain holdings in the banks," he explained.

A spokesman for the EU commission on Monday explained that unanimity of the 17 countries in the eurozone - represented on the ESM board - is required for the changes to come into force.

Dutch opposition too

The Netherlands meanwhile also signalled it would oppose bond-purchasing action on the secondary markets where bonds are traded freely, as opposed to primary markets where buyers trade with governments directly.

“The Prime Minister said on 29 June he is not in favour of buying up bonds. Using the existing instruments to buy up bonds will be expensive and can only be done if there is unanimity. That means the Netherlands would need to vote in favour," Niels Redeker, a spokesman for the Dutch finance ministry said.

In last week's conclusions, eurozone leaders, including the Finnish and Dutch, said they had agreed to deploy the existing and future bailout funds "in a flexible and efficient manner in order to stabilise markets" for countries that are not bailed out but that are experience market pressure - a clear reference to Italy.

Under existing rules, the temporary bailout fund (EFSF) can be used to buy up bonds on secondary markets, following a request by a country which then signs up to a memorandum of understanding outlining the deadlines for the economic reforms it has to pursue.

The only concession Italy gained from Germany, who opposed any relaxation of those rules, was for the International Monetary Fund not to be involved.

But Finland and the Netherlands are sceptical that the bailout fund, which has only €240 billion left, out of which €100 are earmarked for Spain's banks, contain enough money to prop Italy. They also do not want to see the ESM - which is yet not in force and which should have €200bn lending power by the end of the year - bogged down in billions of expensive debt purchasing.

Finland on Greek collateral: 'It's not about the money'

Finnish minister Alexander Stubb has said his country's demand for Greek collateral is meant to defend the eurozone principle of financial responsibility. But he admitted that Finnish eurosceptics have played their part in the initiative.

EU cautious with German diesel plan

The European Commission welcomed the German carmakers' pledge to update software in diesel cars, but is waiting for details on how emissions will be reduced.

News in Brief

  1. Macedonia sacks top prosecutor over wiretap scandal
  2. ECB concerned stronger euro could derail economic recovery
  3. Mixed Irish reactions to post-Brexit border proposal
  4. European Union returns to 2 percent growth
  5. Russian power most feared in Europe
  6. Ireland continues to refuse €13 billion in back taxes from Apple
  7. UK unemployment lowest since 1975
  8. Europe facing 'explosive cocktail' in its backyard, report warns

Stakeholders' Highlights

  1. European Healthy Lifestyle AllianceDoes Genetics Explain Why So Few of Us Have an Ideal Cardiovascular Health?
  2. EU2017EEFuture-Themed Digital Painting Competition Welcomes Artists - Deadline 31 Aug
  3. ACCABusinesses Must Grip Ethics and Trust in the Digital Age
  4. European Jewish CongressEJC Welcomes European Court of Justice's Decision to Keep Hamas on Terror List
  5. UNICEFReport: Children on the Move From Africa Do Not First Aim to Go to Europe
  6. Centre Maurits CoppietersWe Need Democratic and Transparent Free Trade Agreements Says MEP Jordi Solé
  7. Counter BalanceOut for Summer, Ep. 2: EIB Promoting Development in Egypt - At What Cost?
  8. EU2017EELocal Leaders Push for Local and Regional Targets to Address Climate Change
  9. European Healthy Lifestyle AllianceMore Women Than Men Have Died From Heart Disease in Past 30 Years
  10. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  11. ACCAAnnounces Belt & Road Research at Shanghai Conference
  12. ECPAFood Waste in the Field Can Double Without Crop Protection. #WithOrWithout #Pesticides

Latest News

  1. UK’s childhood obesity strategy, a blueprint for EU countries?
  2. Death toll rising from Barcelona attack
  3. Austrian soldiers to stop migrants from Italy
  4. Chinese road to riches or road to ruin?
  5. UK seeks 'unprecedented' Irish border deal
  6. Merkel: No EU sanctions on migrant quota rebels
  7. UK keen to keep old EU customs deal
  8. Italy backs Libya as NGOs chased out of Mediterranean