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Finns keep faith in the euro despite rising bailout costs

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Published 27 July 2012, updated 27 August 2012

After dutifully abiding by EU fiscal rules, Finland's tiny population remains surprisingly unemotional about bailing out less disciplined eurozone members, and is mostly clinging on to its faith in the single currency project.

That faith has been tested as a succession of struggling nations make ever greater demands on the sounder economies in the currency bloc – Finland included - but it is not yet at breaking point.

"We had to sort out our own problems ourselves in the past. That's why people are asking, do we have to help others?" said Maija Siirala, a freelance dressmaker and alterations specialist.

Finland, one of only four eurozone countries still boasting an AAA credit rating, recovered from a financial crisis in the early 1990s without outside help, and the years of harsh austerity and debt repayments are part of the collective memory for many.

Now Finland must cough up €12.6 billion, which is equivalent to about 6% of GDP, for the European Stability Mechanism, the zone's permanent bailout fund.

"But I think yes, we still have to help others," Siirala adds without hesitation.

That is at least in part a recognition that Finland has benefited from membership of the eurozone.

Jussi Huotari, a man in his 30s working for a technology startup, criticised European officials for letting the crisis get out of hand, but said the euro had been "great for Finland" so far, and he had not been put off the idea of a currency union.

"The crisis has been mismanaged in an expensive way," he said. "But if Finland leaves the eurozone, I'd like to see another common currency with more similar economies. Something like a Deutsche euro, a euro for the 'North-of-the-Alps' countries or even a Scandinavian krona."

A ‘Fixit’ isn’t likely

While Finland demands collateral for its participation in European bailouts, economist Nouriel Roubini has said its best option is to exit the euro altogether, an idea he calls "Fixit".

Finland's recent history makes that unpalatable to most.

It adopted the euro as it was emerging from the shadow of the former Soviet Union, which dictated the country's foreign policy for decades after the second world war.

The Soviet Union's collapse triggered a spike in unemployment and inflation, as well as a wave of currency speculation that caused a spike in interest rates.

"The way I see it, a small country like Finland is always going to be controlled from the outside to some extent," said Timo Korkeamäki, professor of finance at the Hanken School of Economics. "If you're in the euro, at least you have more control than if you're just a small country with a small currency."

Another major advantage for Finnish businesses has been the lower cost of raising debt from financial markets now than when it had its own currency, the markka.

"It may not be such a big issue for large, international firms, but mid-sized and smaller firms now have better access to the global market compared to what they had in the markka-era," Korkeamaki said.

Björn Rosengren, chief executive of Finnish engineering firm Wartsila, said his company was benefiting from the euro as well as from its recent weakness.

"Going back would have much greater downside than the cost of being part of it," he said.

But Timo Soini, head of the anti-euro opposition group, the Finns Party, hopes the tide will turn in his favour. He has asked the finance ministry to study how Finland might exit the euro.

He can find some encouragement in opinion surveys.

A poll by MTV3 and the Aamulehti newspaper earlier this month showed over one-third of respondents wanted the weakest countries out of the eurozone, and 17% hoped Finland itself would exit.

A separate opinion poll last weekend showed 44% supporting a referendum on a possible exit from the eurozone, while 49% were against such a vote.

EurActiv.com with Reuters

COMMENTS

  • Is important vote however more important be well informed to vote right.
    Politic Opinion as God faith is dangerous.

    By :
    antonio cristovao
    - Posted on :
    27/07/2012
  • The right wing "True Finns" have got one thing right (if only one) and have said it; that is the TBTF banks have the right to succeed AND the right to FAIL.

    They correctly advocate NON interference in that right!!

    By :
    david tarbuck
    - Posted on :
    30/07/2012

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